Reporting Serious Incidents has been a ‘requirement’ since 2007.
There is no separate statutory duty imposed on charity Trustees to report serious incidents. However, the annual return requires Trustees to sign a declaration to confirm that no incident has occurred during the course of the year which the Trustees should have reported. If Trustees are unable to make this declaration then they default on the statutory requirement to complete the annual return.
The Commission has consulted on revised guidance and the draft guidance makes it clear that “The Commission requires charities to report serious incidents”, and that the responsibility for reporting serious incidents rests with the Trustees.
The statistics would suggest that many charity Trustees are still unfamiliar with the ‘duty to report’. The number of reports has increased from 255 in 2008-2009 to 2,217 in 2015-16, with over 160,000 charities on the register*. This number seems very low and it seems likely that serious incidents are still being under-reported.
Charities are often uncertain as to whether they ‘have to’ report an incident and what the consequences are if they choose not to do so. It is important for Trustees to bear in mind that it is an offence under section 60 of the Charities Act 2011 to provide false or misleading information to the Commission. False or misleading information would include confirming in the annual return that there have been no reportable incidents if there have been.
In addition, if the Commission has cause to open a review or investigation into a charity, the fact that the charity has not made a serious incident report where it should have done, may be regarded as evidence of mismanagement by the Commission, which may decide to take regulatory action.
Charities also remain worried that reporting themselves to the Regulator will open themselves up to unwanted scrutiny. In our experience, however, reporting the incident carefully and addressing each of the questions that the Commission outlines in its guidance tends to result in the Commission not requiring any further action to be taken.
When is an incident ‘serious’?
Any incident is regarded as serious if it results in, or risks, significant loss of your charity’s money or assets, damage to property, or harm to the charity’s work, beneficiaries or reputation.
The new guidance sets out in Annex 1 specific examples of incidents that are reportable. The main categories of reportable incident are:
- Fraud, theft and money laundering — there is no minimum loss figure that should be reported.
Instead, Trustees need to decide whether the incident is serious enough to report. The guidance sets out factors to consider when deciding whether an incident is reportable including size of loss, number of incidents, period
of time etc.
- Large donations from unknown sources, or suspicious activity using charity funds — unverified donations over £25,000 should be reported and Trustees should exercise judgment in relation to lower value donations.
- Other significant financial loss – fire or flood, or losing a court case, significant donors or key delivery contracts — as a guide the Commission expects losses to be reported with a value in excess of 20% of the charity’s income or totalling over £25,000. Lower amounts should be reported if they are significant to the charity. There is greater emphasis in the new guidance on incidents which may affect a charity’s solvency and Trustees should familiarise themselves with this new guidance when it is issued in final form.
- Links to terrorism or extremism — these should always be reported once a report has been made to the Police.
- Suspicions, allegations or incidents of abuse involving beneficiaries — a report should be made where there has been abuse or mistreatment of beneficiaries or allegations of abuse. Charities should deal with such incidents in accordance with their safeguarding policies.
- Other significant incidents — including insolvency, withdrawal of banking services, criminal activity within the charity, Trustees acting whilst disqualified, significant adverse findings by CQC or OFSTED, major governance issues.
The Commission advises that if Trustees are unsure as to whether the incident needs to be reported, it is best to report it anyway.
When to report?
Trustees are obliged to report an actual or suspected incident as soon as possible after it happens or immediately they become aware of it. However, there is a balance between reporting promptly, and ensuring that you have sufficient information to be able to make a sensible report. The new guidance also contains an option for Trustees to be able to make reports on a periodic basis covering multiple incidents.
How to report?
Serious incidents have to be reported to the Commission using its designated email address email@example.com
What to report?
The Commission asks Trustees to provide details of the following:
- the details of the person reporting the incident and how they are authorised to report
- who on the Trustee board is aware of the incident
- what has happened and when the charity became aware (providing enough detail to give the Commission a clear picture of what happened and when, as well as the extent of any loss)
- the action the charity has taken
- the steps the charity has put in place to prevent future problems. This is important in demonstrating to the Commission that the charity has learned lessons from the incident and has made any necessary changes, whether amending its financial controls, putting in place new policies, retraining staff etc. It can also be helpful to tell the Commission where you have sought advice from your auditors or other professional advisors.
- any reports made to other statutory agencies (Police, ICO, CQC, FCA, OSFTED, LADO etc)
- any media statements that have been prepared
Remembering to report your serious incidents?
It can be helpful to add the reporting of serious incidents to a charity’s Risk Register to ensure that the Trustees keep this in mind. Charities should also consider adding the reporting of serious incidents to any disaster recovery or crisis management plan to ensure it is not forgotten.
*Source: GOV.UK Corporate report Taking abuse and mismanagement 2015-16: full report Charity Commission for England and Wales: Reporting serious incidents - updates to guidance and reporting regime 21 October 2016
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.