Charity Review Visits programme - key findings
The purpose of the Commission’s charity review visits programme was to:
- ensure compliance with the legal framework within which charities operate;
- identify evidence of good practice already in place and advise on areas for improvement; and
- learn about how charities in different parts of the charitable sector operate, and what issues are currently influencing or concerning them.
We visited 988 charities in the last three years.1 During this period we have highlighted 1876 legal requirements which need to be adhered to and made 4072 good practice recommendations. Analysis of the trends identified shows evidence of much good practice among charities we visited, although there are a number of areas for improvement.
Strengths identified
Governance
Overall, there is evidence of sound governance within the majority of the charities we visited. For example:
- The trustees of almost all of the charities showed evidence of legislative and sector awareness (99%) and over three-quarters have procedures in place to ensure general legal compliance.
- The trustees of most charities have a copy of the charity’s governing document and are aware of its provisions (88% overall, 100% in 2006/07).
- In most charities trustee appointments and retirements are made in accordance with the provisions of the governing document (93%).
- The majority of charities have adequate arrangements in place for trustee meetings and recording of minutes (81%).
Objects, activities and operation of the charity
We saw evidence of innovation and good practice within most of the charities we visited, both in terms of the charitable activities undertaken and the operation of the charity which supports this charitable activity. The following significant trends were identified:
- There is evidence that the wording of the charitable objects is under regular review and the majority of charities have modern and workable objects, relevant to the current work of the charity (89%).
- Most charities have sound policies and procedures in place for the management of activities and the setting of standards (95%).
- There was clear evidence of impact measurement among most charities (93%).
- The vast majority of charities have good external communication methods (95%) and promote their charity well (97%).
- Most charities have an adequate reserves policy in place and this is an improving trend (91% overall, 100% in 2006/07).
- The majority have adequate financial management and controls in place and again this is an improving trend (80% overall, 96% in 2006/07).
- Almost all charities submitted their accounts and Annual Return within the 10 month deadline (98%).
Areas for improvement
We identified cases where specific improvements could be made in the governance and operation of charities visited, although evidence shows that improving trends are emerging in some areas. Some significant examples are given below:
Governance
- Many charities have sound trustee recruitment, selection and induction procedures in place, but we needed to advise a quarter of charities to make improvements in this area. There is an improving trend emerging, however, and only 14% of charities were advised on improvements in the last year.
- Although a lot of charities have a clear trusteeship and delegation structure in place, and a clear understanding of the role of the trustee body and the limits of delegation to staff and sub-committees, there was room for improvement in just over a quarter of charities.
- A quarter of charities did not have sufficient provisions in the governing document to support the administration of the charity, although we have observed an improving trend in the last two years.
Objects, activities and operation of the charity
- 14% of charities were acting outside of their objects. Whilst this is a relatively low percentage, this is a fundamental issue as all charities should be aware of and adhere to their charitable objects.
- Most charities have sufficient measures in place to protect vulnerable beneficiaries where applicable. However, in 6% of cases we made recommendations regarding Child and/or Vulnerable Adult Protection Policies and in a further 10% of cases made recommendations in relation to the CRB checking procedures for staff, volunteers or trustees.
- We advised on improvements to strategic and business planning procedures in 19% of charities.
- 32% of charities did not have a risk assessment policy in place or risk assessment processes were inadequate. We have not noted any improvements year on year. We are therefore providing more advice and guidance to charities and have recently conducted a Review Visits project focussing on risk management. The results are feeding into a forthcoming Research Report on Charities and Risk management.
- We found it necessary to advise 9% of charities on issues relating to trading subsidiaries.
Particular weaknesses
Governance
Despite evidence of good practice in most governance matters, we have identified some specific weaknesses and highlighted to charities where improvements were needed. Again there are some common themes among charities visited and we have given advice and guidance as applicable to individual charities. For example:
- Over half did not carry out checks on trustees to ensure that they are eligible to act as trustees (57%). We recommend that all new trustees are checked to ensure that they are not disqualified under section 72 of the Charities Act 1993.2
- Half either did not have processes and policies in place for the management of conflicts of interest or these were inadequate (50%).3
Accountability and Transparency
- A high proportion of charities were not producing accounts and trustees’ annual reports which were fully SORP compliant (61% overall). Adherence with this legal requirement varied from minor non-compliance issues to significant non-compliance which required more detailed guidance and support from the Commission’s accountants.