Harriet Parfitt and Hana Ali, in our Charities & Education team, explain Statutory Inquiries and how Charities should go about navigating them.
The Charity Commission is a regulatory body in England and Wales that was set up to protect the public interest in charities (‘the Commission’).[1]
In recent months, the media has featured several reports of charities under investigation by the Commission.
In this article, we summarise why and how inquiries are carried out, and what your charity should do if it is brought to the attention of the Commission.
What is a statutory inquiry, and why are they carried out?
Where significant concerns about a charity arise, the Commission has the power under the Charities Act 2011 to open a statutory inquiry.
The primary role of an inquiry is to look at any alleged mismanagement or misconduct of charities, investigate these concerns, and, where necessary, to implement remedial action.
When will a statutory inquiry be opened?
The Commission provides some examples of when it may look to open an investigation, including circumstances where there is any: “indication of, or the potential for, misconduct and/or mismanagement; a significant breach of trust or non-compliance with charity law; significant risk to charity property, beneficiaries, employees, volunteers or the charity’s work; need to establish facts or to collect evidence and an inquiry is the most effective way of doing this; [or] need to safeguard public trust and confidence”.
How is an inquiry carried out?
According to the Commission, it will:
1. Establish the facts of the misconduct/mismanagement;*
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2. Quantify the risk to the charity;** and
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3. Decide on the action to be taken.
*An inquiry will not determine a finding of misconduct/mismanagement in the relevant charity, except where such maladministration is unequivocal at the time the inquiry is launched and the Commission is exercising its remedial powers.
**This includes the risk to its property (including reputation), beneficiaries, employees, volunteers or work.
What is the role of a trustee in an inquiry?
As the trustees of a charity are responsible for its management, inquiries typically focus on whether the trustees have fulfilled their duties.
Charity trustees, employees, officers, agents or any other interested parties must cooperate with the Commission’s inquiry as requested.
Trustees should also be aware of the likely impact of any potential action on the reputation of their charity – it is usual practice for the Commission to publish a statement confirming that an inquiry has been opened, in the interest of public awareness.
What might the outcome of an inquiry be?
The Commission typically has the jurisdiction to exercise the following powers:
Temporary protective powers
- Suspend a charity professional or trustee whilst the Commission considers their removal or disqualification.
- Vest the charity's property in the Official Custodian, or implement a freezing order on charity's property.
- Appoint an interim manager to deal with the charity's affairs.
- Issue a warning of breach of trust.
Permanent protective powers
- Remove a charity professional or trustee who "has been responsible for misconduct and/or mismanagement; or knew about it and failed to take any reasonable steps to oppose it; or who has contributed to or facilitated it".
- Establish a scheme for administration of the charity.
Should your organisation be affected by a Commission inquiry, or require any further advice about best practice to avoid any investigation, please do not hesitate to contact our Charities team at law@blandy.co.uk or call on 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
[1] Charities that are based or operate in Scotland or Northern Ireland come within the jurisdiction of the Office of the Scottish Charity Regulator or the Charity Commission for Northern Ireland.
