Regulatory crises and reputation: how charities can manage the risks

In April 2021, the Foreign Office halted funding for Oxfam following new allegations of sexual misconduct made against staff in the Democratic Republic of Congo. The decision came just two months after the Charity Commission returned Oxfam to standard regulatory oversight, having found that Oxfam had made significant improvements on safeguarding.

Meanwhile, in the education sector, thousands of allegations from students were published on the Everyone’s Invited website. The allegations have forced the Government to order Ofsted to undertake an immediate review of school safeguarding policies. For more information, please see our blog post, available to read here.

Oxfam’s 2011 scandal damaged both its reputation and financial viability. Thousands of regular donors cancelled their direct debits and the UK Government cut off funding until Oxfam could show that it met the necessary standards to be considered. In 2016/17 (before the Haiti allegations came to light), Oxfam received £31.7 million in taxpayer funding.

In 2018, the Charity Commission research found that charities had a mean score of 5.5 out of 10 on trust. Until 2016, the trust had been rated consistently at around 6.7 but that year, it dropped to 5.7. The Commission attributed this to controversies surrounding Kids Company and Oxfam – demonstrating the impact that regulatory crises can have on public trust in the whole sector, let alone in an individual charity.

Regulatory crises can easily crush a charity’s reputation and affect its chances of long-term survival, so charity leaders must be aware of the risks and know how to manage them. Whilst larger charities may have well-drafted and professional-looking policies, the key is to ensure that policies and procedures are effective and comply with the law at all times.

In this article, we look at several case studies around safeguarding and other regulatory risks before identifying some key lessons that can be learned.

Rigpa Fellowship
Rigpa Fellowship, a charity that runs a meditation centre in London, made national news when it appeared that trustees had ‘covered up’ allegations of abuse.

In August 2018, an independent inquiry confirmed that pupils had been “subjected to serious, physical, sexual and emotional abuse” by the director, and that “there were some senior individuals within the charity who were aware of at least some of these issues and failed to address them, leaving others at risk”.

The Charity Commission opened a statutory inquiry into the charity in November 2018. The Commission found that two trustees had also been aware and failed to report earlier allegations to the regulator as a serious incident. Both trustees had ‘either failed to recognise or sought to downplay the seriousness’ of the allegations. The Charity Commission disqualified one former trustee and removed another during the inquiry.

The Commission acknowledged that the current trustees have adopted new safeguarding policies and procedures which better safeguard the charity’s beneficiaries. The case demonstrates that how an organisation responds to a crisis can be as important as the crisis itself in terms of the long-term damage to reputation.

Royal National Institute of Blind People (RNIB)
In 2018, the Charity Commission launched an investigation into RNIB following safeguarding concerns at the RNIB’s Pears Centre for Specialised Learning, which operated as both a special school and a children’s home for disabled children. Following the conclusion of the inquiry, the Charity Commission gave RNIB an official warning and found comprehensive failures in governance and systemic shortcomings in safeguarding management.

The Charity Commission issued an alert on the same day it published its report into RNIB. Though the alert was put out to service-providing charities with an income of over £9 million, it contains helpful guidance for any charity. Measures recommended by the Charity Commission included establishing effective safeguarding policies and procedures and ensuring that trustees, staff and volunteers undergo regular training on these policies.

Both the RNIB and Oxfam cases demonstrate that regulatory failings can occur at charities of any size and reputation. These cases highlight the need for trustees and charity leaders to maintain effective oversight of the risks that their charity faces.

For more information about the Charity Commission’s alert and advice contained in it, please click here to read our ebriefing.

Love and Joy Ministries
Whilst both case studies above relate to safeguarding, all aspects of a charity’s operations can create a risk to their workforce, beneficiaries and the public.

Love and Joy Ministries, a religious charity in Liverpool was prosecuted by the HSE in 2014. A member of the church congregation was assisting a builder to lay insulation in the church auditorium. The charity had provided him with a harness but the lanyard on it was not long enough to carry out the work safely. The builder had bought a rope from B&Q and tied it to the harnesses to extend them. The rope was not strong enough to support a person and the volunteer fatally fell through the church ceiling void.

The charity had received a grant for £1,988 to insulate the roof space. The builder, who was also a member of the church congregation, never provided a quote and checks had not been made to see if he was competent to do the work. He was paid £588. Another builder had quoted £1,980 for the work and warned the charity that the ceiling space was dangerous.

Love and Joy Ministries were found guilty of breaching section 3 of the Health and Safety at Work Act 1974 (HSWA) and was fined £65,000 plus £135,000 costs. At sentencing, the judge commented that the charity had wanted the job done “on the cheap”. The fine, in this case, was reduced to reflect the charitable nature of the organisation and had the charity been a commercial entity, the fine would have been £250,000.

Key risks for charities
These cases are examples of worst-case scenarios, where things have gone very wrong. However, regulatory action is often taken in response to the creation of a risk of harm: no actual harm needs to have taken place.

Charities have certain characteristics which increase the risk of regulatory issues, and which make them particularly vulnerable to the consequences. For example:

• Charities are often reliant on volunteers, who may have less experience than a paid employee, receive less training, and be less familiar with the working environment.
• Charities frequently work with vulnerable people, which creates inherent risks in the activities they undertake.
• Charities often have a culture of budgeting elsewhere to spend on their charitable objects (cost-cutting can be an aggravating factor for many offences).
• Reputational damage can seriously affect funding streams.
• Where the charity is unincorporated, a health and safety prosecution would be brought against the individual trustees of the charity.

Many of those risks have been magnified by the Covid-19 pandemic, creating pressure on sources of funding, increasing costs, and making the direct supervision of operational employees more challenging, increasing the risk that policies and procedures are breached. 

Practical tips
In the alert following the RNIB case, the Charity Commission emphasised the importance of effective risk management to protect people. Their key messages on addressing risk were as follows:

• ensure there is a strategy for regular and effective communication with executives about the charity’s purposes, values, work and achievements;
• regularly review the charity’s process for identifying, prioritising, escalating and managing risks. Review the effectiveness of the charity’s approach to risk at least every year;
• review whether your charity’s governance and management committees have suitable terms of reference and membership, with suitably skilled people, and the extent to which they have effective oversight of the charity’s activities. Make sure there are clear lines of responsibility and reporting between all bodies involved; and
• ensure that there is a transparent, well-publicised, effective and timely process for making and handling a complaint. Handle any internal or external complaints constructively, impartially and effectively.

While the alert was addressed to larger charities with complex structure and delivering operation services, these messages are relevant to charities of all sizes and any areas of risk, whether that be safeguarding or health and safety. In considering how to address the concerns, charities may wish to consider the following steps:

• Providing training on regulatory issues to trustees and senior executives. By doing this, charities can set the tone at the top and ensure they have the skills and experience necessary to ensure effective oversight of all areas of risk. Whilst actions can be delegated, the responsibility remains with the trustees.
• In addition to ensuring that policies and procedures set out effective measures to address all areas of risk, regularly review the extent to which those measures are effective and actually implemented on a day-to-day basis. This requires regular audit and review, which must be more than a tick box exercise. 
• Consider carefully how to maintain an open culture, in which concerns and complaints are encouraged. Beneficiaries, employees and members of the public engaging with the charity can provide a useful insight into the effectiveness of policies and procedures. Complaints and concerns should be seen as an early warning signal allowing the charity to address emerging issues before they turn into a crisis.
• Where an incident does arise, it is important to seek early legal advice as soon as possible.
  
  

For more information

For further information, please contact Freya Cassia or another member of the regulatory team.

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