The Essentials of Compliance for Charities

Allegations of serious sexual misconduct have hit the charities sector hard.

The crises in the charity sector began in early February, with allegations that senior Oxfam staff had engaged the services of sex workers in Haiti, while supporting locals following the 2010 earthquake that devastated Port-au-Prince.

Some of the girls exploited by the aid workers were below the age of 16 years (the age of consent in Haiti is 18 years). Haitian police were not informed of the misconduct.

According to a confidential report seen by The Times[1], Oxfam allowed three men to resign and dismissed four others for gross misconduct after an inquiry into alleged sexual exploitation, downloading of pornography, bullying, and intimidation. One of those men was Roland van Hauwermeiren, the charity’s director in Haiti, who had been dismissed seven years previously for similar conduct (using sex workers in Liberia) by the British charity, Merlin (which has since merged with Save the Children)[2].

Save the Children has also become embroiled in a scandal of its own. Brendon Cox, the widower of the late Labour MP Jo Cox, has resigned from two charities he formed in his late wife’s name, ‘More in Common’ and the ‘Jo Cox Foundation’ after it emerged that he had been allowed to resign quietly following allegations of ‘inappropriate behaviour’. More recently, the charity has apologised to female employees who complained of inappropriate behaviour by the charity’s former chief executive, Justin Forsyth, admitting their claims were not properly dealt with at the time[3].

The domination of sexual harassment allegations within the charity sector over the past two weeks has put the charity sector as a whole in disrepute, which is unfortunate given the fact that an overwhelming majority of aid workers and charity trustees do their job with the utmost dignity and diligence. Many place themselves in life-threatening situations to help those in need and without organisations like Oxfam and Save the Children, thousands of people would die or live in misery every year.

However, the good work that charities do does not mean that its members can be excused for subverting basic human rights.

Many charities will be concerned about their compliance at this time, conscious of ensuring their reputation is maintained and the public and government trust them. To comply with regulations and rules, you must be confident you know what they are.

There are over 160,000 charities in the UK. Charity Commission (the Commission) oversees their compliance by ensuring all charities are registered and are run correctly by carrying out regular audits. It is the trustees’ duty to ensure the internal compliance of the charities and liaise with the Commission on such matters.

One of the Commission’s most important function is to look into allegations of misconduct or mismanagement by a charity and to take protective and/or remedial action.

Five key areas of compliance for non-profit organisations are:

1. compliance with the charity’s governing document;
2. compliance with the Charities Act 2011 and the Companies Act 2006;
3. compliance with UK employment legislation in respect of the charity’s employees and workers;
4. compliance with health and safety, GDPR and other essential EU law and UK laws, such as the law relating to contracts, commercial property and tax; and
5. compliance with the applicable fundraising law.

In addition, where representatives of the charity are working in other jurisdictions, the law of that particular country must also be followed.

Section 46 of the Charities Act 2011 provides the power for the Commission to “institute inquiries with regard to charities or a particular charity or class of charities, either generally or for particular purposes”.

The guidance[4] states that the Commission is most likely to open a section 46 inquiry in relation to a charity, or a particular class of charities, if the facts disclose or suggest:

• significant financial loss to a charity;
• indications of misconduct or mismanagement;
• serious harm to beneficiaries, particularly vulnerable beneficiaries;
• serious criminality or illegal activity (including fraud and money laundering);
• establishment of sham charities;
• deliberate use of a charity for significant private advantage;
• misuse of a charity for terrorist purposes (including charity links with, or support for, terrorism (whether financial or otherwise)), connections to proscribed organisations or misuse of a charity to foster criminal extremism;
• possible compromise of a charity’s independence;

other significant non-compliance, breaches of trust or abuse that impact significantly on public trust and confidence in a charity and charities generally
When investigating a non-profit organisation, the Commission has the power to collect evidence and witness statements. In some instances, this will allow the Commission to enter a premise and seize documents, laptops etc (provided it obtains a warrant from a Magistrate).

Depending on the outcome of its enquiry, the Commission can censure a charity which is being mismanaged or is found guilty of misconduct, including:

• publishing an official warning under section 75A of the Charities Act 2011 (the charity must be notified of this before the warning is published);
• suspend an employee, trustee, officer or agent of the charity for up to 12 months while they decide on whether to remove the person from their post permanently;
• appoint additional trustees to administer the charity;
• have the charity’s property vested with the official custodian for charities;
• appoint an interim manager or receiver;
• establish a scheme for the administration of the charity; or
• wind-up the charity.

Charities rely on their reputation and need the public to trust them. Most do an outstanding job of this and as a society, we owe non-profit organisations a great deal. However, because of the public funds provided to charities, both from government and private individuals, compliance with rules, regulations and policies is essential, not just for an individual organisation, but for the entire charity sector.

Saracens Solicitors is a multi-service law firm based in London’s West End. We have dedicated and highly experienced charity law solicitors who can advise on all legal matters relating to the charity sector. For more information, please call our office on 020 3588 3500.

[1] https://www.thetimes.co.uk/article/oxfam-s-shame-tdjbzxgmq

[2] https://www.theguardian.com/global-development/2018/feb/13/oxfam-disgraced-haiti-official-liberia-post-roland-van-hauwermeiren

[3] https://www.theguardian.com/society/2018/feb/20/save-the-children-apologises-to-female-employees-over-ex-boss

[4] https://www.gov.uk/government/publications/statutory-inquiries-into-charities-guidance-for-charities-cc46/statutory-inquiries-into-charities-guidance-for-charities