Charity Commission’s official warning highlights limitations of the regulator

The Charity Commission last week issued the RSPCA with an Official Warning under the Charities Act 2016. This act gave the Commission new powers to issue warnings when it considers there has been a breach of trust or duty or other misconduct or mismanagement in a charity.

The warning related to a significant pay-out to the former interim chief executive, who, according to The Times, left the charity with a settlement understood to be ‘far bigger’ than his salary of £150k. He had apparently challenged the recruitment process for the new CEO, because of concerns that he was turned down for the role because of his age.

I won’t add to the numerous commentators who don’t have all the facts but are keen to discuss the rights and wrongs of this case – other than to note that there are few rights, and how unimpressed I would be if I were a financial supporter of the RSPCA.

What is noteworthy about the Commission’s sternest possible slap on the wrist is that it focuses not on the fact that a payment was made, but rather on the way the decision was taken, and the lack of skill in keeping the pay-out to a considerably smaller sum. Specifically, it reads ‘a group of trustees (“officers”) failed to ensure they were sufficiently informed before making a settlement offer to the charity’s former acting chief executive’, and ‘failed to act with reasonable care and skill in negotiating with that former executive’.

The wording is such because the powers of the Commission leave it with sharper teeth regarding the way a decision is taken than what that decision is. Which leaves it, in circumstances like this, having to focus on process rather than outcome.

The Commission is almost certainly right to conclude that there was mismanagement in the charity, but in announcing the Official Warning it has highlighted not only continued messy governance in some charities, but also the invidious position in which the Commission itself now sits.

Too many charities are still being governed badly, but although the regulator wants – and is widely expected – to do something about this, it is hamstrung by the rules set out for it. Change is needed, but this can’t happen until it is clear who is going to pay for it. Having been (generally) persuaded to pay for the Fundraising Regulator, expect pressure on charities to fund their regulator to increase considerably in the near future.

If a group of your trustees are likely to fail to ensure they are sufficiently informed before making a large decision, or you have any concerns about the way your organisation is run, Fiveways may be able to strengthen your governance. If so, do get in touch.