Charities monthly round-up – December 2024

Donating during Christmas?

The Christmas period is about giving as well as receiving. Research from the Charities Aid Foundation predicts that donations from the British public will reach £2.8 billion during the festive period. This figure aligns with last year’s contributions, highlighting the festive season as a pivotal time for charitable giving. The surge in donations is often driven by prominent campaigns such as Giving Tuesday.

Recognising this seasonal generosity, the Charity Commission (the Commission) has issued reminders to help donors give safely and avoid fraudulent appeals. Drawing on 2023 data from Action Fraud, the Commission highlighted that 484 incidents of charity-related fraud were reported during the holiday season, resulting in losses of £1.17 million.

Please stay vigilant this Christmas.

For more information on donations, contact Catherine Gibbons or Katie Crosbie.

JustGiving now accepts cryptocurrency

In an innovative move, JustGiving, one of the largest fundraising platforms in the UK, has started accepting cryptocurrency donations. This shift positions JustGiving as a pioneer among charity platforms, enabling supporters to contribute using digital currencies such as Bitcoin, Ethereum and Dogecoin. The initiative aims to attract a new demographic of tech-savvy donors and expand charitable giving opportunities in the digital age.

Cryptocurrency donations offer unique advantages, such as low transaction fees, not subject to capital gains and the potential to attract a global audience. However, they also present challenges, including market volatility, environmental concerns associated with cryptocurrency mining and donation transparency. Charities embracing this method must ensure they have robust policies to manage these risks and align with best practices for transparency and accountability.

For more information on crypto donations, contact Natalie Barbosa.

Trustees’ duties – A reminder

The recent publication of the Commission’s report on the Captain Tom Foundation inquiry is a critical reminder of the consequences trustees face when they fail to adhere to their fundamental duties. Among the lessons identified for the sector were:

1. The need to understand and manage conflicts of interest and loyalty

Conflicts of interest (when a trustee’s personal or professional interests interfere with their decision-making on behalf of the charity) and/or disputes of loyalty (when a trustee’s obligations to another entity or individual create a risk of partiality) can significantly impair a trustee’s ability to act in the best interests of their charity.

Trustees must:

• identify conflicts of interest and loyalty promptly;
• follow the provisions of their governing document (and any conflicts of interest policy) to manage such conflicts; and
• ensure private business affairs remain separate from their charitable responsibilities.

Failure to do the above risks damaging public trust in the sector. For a refresher on conflicts of interest, read the Commission’s 5-minute guide, or CC29.

2. The requirement to follow the rules in relation to trustee benefits and payments

One of the fundamental principles of charity governance is that trustees and connected persons (e.g. family members, their businesses or business partners) should not receive financial benefits unless authorised. Unauthorised payments or benefits can result in trustees being required to repay that money to the charity.

Trustees should:

• adhere to the legal requirements in their governing document and/or the Charities Act;
• ensure all payments to trustees or connected persons are supported by a written agreement;
• demonstrate that payments align with the charity’s best interests, conflicts have been managed and comply with their duty of care.

Failure to follow these rules can also lead to reputational damage and may trigger regulatory intervention, as seen in cases such as the Captain Tom Foundation. Trustees should read the Commission’s CC11 which provides further information on the rules around trustee benefits.

3. The importance of managing fundraising and reputational risks

Fundraising forms a core part of a charity’s interaction with its supporters and the public. Mismanagement in this area can harm the charity’s reputation and undermine donor trust.

Trustees, therefore, should:

• maintain effective oversight of fundraising activities, especially those involving third parties;
• ensure agreements with professional fundraisers or commercial participators comply with legal requirements; and
• be transparent about fundraising methods, including how donations are allocated.

Failure to uphold these principles not only risks financial loss but also long-term damage to the charity’s credibility. The public’s perception of how a charity manages its fundraising efforts directly impacts its ability to attract support. Charity fundraising guidance can be found in the CC20.

For more information on trustee duties, contact Phil Watts or Esther Campsall.

Financial controls in charities: Essential measures and common pitfalls

After opening 700 regulatory cases relating to poor financial controls, the Commission has updated its fraud and cybercrime guidance. Effective financial controls (which ensure that funds are used appropriately, safeguard against fraud and build trust with donors and the public) are essential in any charity and should include:

• Segregation of duties: Responsibilities such as authorising payments, recording transactions and reconciling accounts should be divided among different individuals to reduce risks of fraud or error.
• Approval processes: All expenditures must be authorised by designated trustees or staff and major expenses should be approved by the full board.
• Regular monitoring: Trustees should regularly review financial statements, budgets and forecasts to ensure alignment with the charity’s objectives.
• Bank account oversight: Access to bank accounts must be tightly controlled and dual authorisation should be required for transactions.
• Documented policies: Policies for procurement, expense claims and handling donations should be clear, documented and consistently followed.

By implementing robust financial controls and regularly reviewing them, charities can prevent the misuse of funds and maintain the confidence of donors, the public and the regulator. To learn more, read the Commission’s updated financial controls guidance and the updated guidance on how trustees can protect their charity from cybercrime.

For more information on charity’s financial controls, contact Edwina Turner or Sarah Tomlinson.

In other news:

1. National Insurance update:

In November we discussed the open letter which called out for help for the voluntary sector following the National Insurance increase which is estimated to cost the sector £1.4 billion a year. This was signed by over 7,000 charities! Unfortunately, Chancellor Rachel Reeves has stated the Government will only provide support to “departments and other public sector employers for additional employer National Insurance contributions costs”. This is disappointing news but for more information read our article in November’s issue.

2. Weston Charity Awards applications

Applications have now opened for the Weston Charity Awards 2025.

The Garfield Weston Foundation in collaboration with Pilotlight, are offering support packages worth over £22,000 for at least 22 frontline community, environment, welfare or youth charities based in Wales, Northern England and the Midlands.

For more information on the eligibility criteria and how to apply, please see here. Applications close at 5pm on Wednesday, 8 January 2025.

Employment update

Our employment team have published a number of interesting blog posts recently which might be of interest to readers:

• The charities team’s Esther Campsall, alongside Libby Hubbard explore how charity trustees may be protected by whistle-blowing legislation.
• Hazel Findlay discussed the Government’s new set of measures to crack down on rogue employers who shamelessly ‘repeatedly flout visa rules or commit serious employment breaches’.
• The timescale to bring an employment claim has been explored by Jackie Morris.

For more information, please contact Sarah Tomlinson. Sarah has specialised in charity governance law for over 20 years, with extensive experience of acting for charities in relation to all aspects of charity governance including the establishment of charities, mergers, amending governing documents, trading, trustee duties and responsibilities (including trustee training) regulatory issues, consents and property trusts. Sarah is regularly appointed by the Commission as an interim manager of charities that are subject to statutory inquiries and is Deputy Diocesan Registrar for the Diocese of Sheffield.