A number of different codes of practice have been published this year. These include NCVO's Charity Ethical Framework, the Charity Digital Code and the updated Code of Fundraising Practice. These codes provide key markers to be followed by those working in the charities sector.

NCVO Charity Ethical Framework

The Charity Ethical Principles have been developed throughout 2018 by the National Council for Voluntary Organisations alongside advisory support from within the sector. These principles were published in January 2019 and are complementary to existing codes of practice, particularly the Charity Governance Code. The 4 principles are "beneficiaries first", integrity, openness and the right to be safe. They provide an overarching framework and can act as a guide for charities in decision making, judgement and conduct. Trustees will be able to use the principles as an aid if they are faced with difficult decisions. The principles are for everyone and can be used by volunteers as well as trustees. Whilst the principles form only a guideline for charities, NCVO encourage all charities to actively consider all of the principles and how they can be integrated in their work. Charities following these principles can ensure that they are demonstrating the highest ethical standards expected from a charity.

Charity Digital Code

The Charity Digital Code launched in November 2018 and the development of the code was supported and funded by Lloyds Bank and the Co-Op. There are slightly different versions of the code for small and large charities, and it is made clear that even community groups not registered as charities can also use the code for guidance. Like every other sector, charities need to get involved in the digital age in order to utilise available technologies to increase impact and sustainability. Successfully deploying digital will allow organisations to consistently test, learn from and improve their procedures. The code is essentially a practice tool allowing organisations to identify any digital gaps they may have. There are 7 principles within the code, these are: leadership, user led, culture, strategy, skills, managing risk and ethics and adaptability. There is an expectation that leaders and trustees in the organisations demonstrate their own commitment and grow their own digital skills in order to promote and ensure digital is used at all levels of the organisation, but they should also bear in mind how the use of digital will fit with the ethical values of the organisation.

Code of Fundraising Practice

The new and improved Code of Fundraising Practice is due to come into effect in October 2019. The idea behind redeveloping this new code is to make it more user friendly both in terms of navigating the code and ease of understanding. The new code is set out in three parts: 1- standards which apply to all fundraising; 2- standards which apply to working with others; and 3- standards which apply to specific fundraising methods. The code outlines the key four values of fundraising: being legal, open, honest and respectful. These values support the standards of the code. The code is clear that it forms guidance as opposed to a legal handbook - relevant legislation will always override the code in the instance of a conflict between the two. The code makes use of the terminology 'must' and 'must not'. The Fundraising Regulator will apply the code in force at the time of the specific incident when considering complains made. Therefore, the old code could apply to complaints made beyond October if the actual incident occurred under the preceding version of the code.

Charity Futures: To the Core

A recent publication by the think tank Charity Futures considers charity sustainability and the core costs issue.

The report considers how charities increasingly feel pressured to appeal to donor desire by cutting their core costs. Donors are thought to be more likely to give money knowing that it is going directly towards the activities of the charity as opposed to contributing to running costs. While the natural response to this might be to cut core costs, the report argues that this would prevent potential added value and threaten the overall sustainability of the charitable organisation.

Guidance for Charities with a Connection to a Non-Charity

On 29 March 2019, the Charity Commission published its final guidance on charities with a connection to a non-charity. This brought significant improvements on the original draft consultation.

On 13 February 2018, the Charity Commission published a consultation on charities that are connected to non-charitable organisations. The draft went out for consultation for 13 weeks and closed on 15 May 2018. A total of 57 responses were received, including several organisations who responded on behalf of membership of a wider group. Then, on 29 March 2019, the final guidance was published to the public.

The new guidance does not set out any new rules or regulations. It draws together existing laws and regulations to establish 6 key principles to help ensure that trustees keep their charity's arrangements with a non-charity linked organisation in the charity's best interests and independence.

The principles are:

  • Recognise the risks
  • Don't further non-charitable purposes
  • Operate independently
  • Avoid unauthorised personal benefit and address conflict of interest
  • Maintain your charity's separate identity
  • Protect your charity

While the main points of the consultation guidance have been maintained, they have been reformulated into a different set of principles. Contextualised explanations and repeated emphasis on risk have been stripped out to simplify the guidance and enable it to be more accessible and achievable by smaller charities.

If you are a charity working with a non-charity, you should always consider the guidance in agreeing the terms of that relationship; and maintain a clear audit trail to demonstrate that this is the case. This limits the scope for future criticism.

Charity Land Disposal Rules

The recent case of David Roberts Art Foundation Limited v Riedweg [2019] indicates a flexible and pragmatic approach by the courts to the Charity land disposal requirements.

Part 7 of the Charities Act 2011 sets out the requirements that must be fulfilled before a charity disposes of land. It requires that a specific written report be prepared by a qualified surveyor directly instructed by the charity. The Charities (Qualified Surveyors' Reports) Regulations 1992 provide guidance on the required contents of the surveyors report. Recommendations in the surveyors report should then be used as the basis for advertising the sale of land. Then, only once the charity trustees are satisfied, having given due consideration to the surveyors' report, that the proposed sale terms are the best that the charity can obtain, the charity is able to progress the sale. When the contract of sale is made, it must contain a statement as required by section 122 of the Charities Act.

The trustees of the David Roberts Art Foundation Limited, a charitable company, decided to sell a property owned by the Charity in London. A surveyors report valued the property at £7.5m and the Charity received an offer from Nicole Riedweg for £8.01m. A contract was entered into for the sale of the property but this did not contain a section 122 statement. In addition, the minutes documenting the meeting where the trustees approved the sale contract showed no clear evidence of the trustees having considered the surveyors' report. Riedweg failed to complete the transaction and the Charity issued a claim seeking a declaration that the sale contract had been validly rescinded and that the deposit was forfeited. Riedweg argued that the sale contract was invalid due to a failure to comply with charity law requirements for the sale of the land. The case went to trial for summary judgement.

The High Court held that while it was preferable for the requirements of section 122 to be stated together within the sale contract, it suffices if the contract contains the information in a form that can be understood on a careful reading of it. The court further opined that Parliament cannot have intended that the failure to include the statement in the contract would lead to the contract being invalid. The judgement also discussed the Charities Act requirements surrounding obtaining and relying on a surveyors report to obtain the best sale terms. It was stated that the overriding test is namely that the terms of the disposition are the best that can reasonably be obtained for the charity: "if the charity is able to demonstrate that advertising would have made no difference, a failure to advertise, and a failure to obtain advice about the need for advertising, should not impugn the transaction." Although in this case, the nature of the evidence caused the court to reject the summary judgement for need of a full trial, it indicates that transactions will not be found void simply for a technical failure in compliance with the charity land disposal rules. The key test is whether the terms of the sale are in the best interests of the charity.

Charity Commission Chief Executive speech: regulating charities in line with changing needs in society

On 16 July, the Charity Commission Chief Executive, Helen Stephenson CBE, gave a key speech on how charities need to adapt to meet the needs of a changing public perspective.

Helen Stephenson's speech acted as the welcome plenary at the Nonprofit Academic Centers Council Biennial Conference 2019. Her introductory talk was based in two key developments seen as having a significant impact on charities in the current "period of particular challenge for charity and civil society".

The first being an increase in public expectations of charities. Charities are no longer able to rely on a base standard of trust in the public purely because they are charities. The public's automatic trust in charities has weakened and charities are now "subject to far greater public scepticism, and consequent scrutiny". The speech highlighted how the concept of charity is as much based in behaviour and values as it is in the express work carried out. It can be inferred, therefore, that an even level of focus should be placed on both areas.

Secondly, the speech highlighted the increasingly important wider role that charities are now playing in British society. The example of charitable response to the Grenfell Tower fire was drawn upon to show how local charities have a "legitimacy and standing in the community" that local and national government institutions lack. This increasingly integrated role within society demands adequate regulation. The speech draws upon the historical background to this. However, Ms Stephenson was very clear in stating that "regulation cannot be, is not, an end in itself. It must have a purpose". A significant purpose highlighted in the speech is that of leading change across society. Regulation must promote this and ensure that charities "rise to the challenge".

Charity Tax Commission Report

The Charity Tax Commission, a body set up by NCVO, has recently published a new report on charity tax reform.

The report, 'Reforming charity taxation: towards a stronger civil society', outlines suggested reform that could reduce unnecessary admin and make charitable giving an easier process. The report highlights a lack of review of charity tax reliefs in 20 years, despite the digital revolution. It is suggested that a universal donor database alongside encouraged payroll giving could boost charity income. The need for a greater level of awareness surrounding gift aid is also highlighted in the report.

Read the report here.