...and their capacity to transcend differences. The event was overshadowed by the publication that day of reports into the annual dinner of the Presidents Club Charitable Trust which has shocked the sector and the public and horrified the Charity Commission's Chief Executive.
When charities hit the news for the wrong reasons, charitable independent schools are likely to find that key stakeholders like parents, donors and staff are more alert to regulatory issues surrounding the school as a charity. It is likely that the Charity Commission as regulator will be active, responding to issues raised. Governors will want to know how, if at all, it affects their school.
Reading the Charity Commission's press statements and an open letter from the Commission's Chief Executive to Jo Swinson MP, there are four key regulatory issues involved: fundraising, the charity safeguarding duty, protection of a charity's reputation as an asset and the refusal or return of donations.
Governors are under a duty to ensure that their school's fundraising is carried on responsibly and in line with their values. The Charity Commission's publication 'Charity fundraising: a guide to trustee duties' places the responsibility for fundraising very clearly with the governors as charity trustees. They should be the ones to decide the fundraising methods used, how those methods are to reflect the school's values and to monitor.
Events present particular risks for schools because they are often very different from the familiar, well-rehearsed day to day running of the school. Perhaps the most obvious risk is the financial one. Putting-on a fundraising event usually involves cost and may not result in the return expected. Then there is the issue that so much of life is regulated that the event is likely to be subject to its own regulatory regime which needs to be complied with. Just as life is regulated, so it is never risk free and an event can involve unfamiliar practical and legal risks which need to be evaluated and managed. For example, what is the risk that the behaviour of third parties at events will fail to live up to the values of the school? What will the governors do to ensure the event reflects those values and how will the intervene to protect them if necessary?
It will go some way to meeting these risks if any substantial event is carefully planned and run by an experienced team according to project management best practice standards with a clear project plan agreed by and involving regular reporting to the governors. But appropriate care and governor oversight will be needed in the planning and implementation of any event carried out by or in the name of the school.
Schools are very familiar with safeguarding and will have a clear safeguarding culture. In charity law, the Commission talks about safeguarding as a duty owed by governors not just to pupils, beneficiaries, children and vulnerable adults, but a duty of care owed to everyone who comes into contact with the school. This includes employees, volunteers and contractors as well as alumni and donors.
The press reports serve as a salutary reminder of some of the themes in the Commission's Strategy for dealing with safeguarding issues in charities and its follow-up regulatory advice which were only published just over a month ago. They illustrate the importance of a safeguarding culture where no one will be harassed or caused harm and anyone is able to raise concerns and have them considered properly. The involvement of an agency hiring staff for the event underlines the importance of due diligence, monitoring and lines for reporting concerns and accountability where third parties are involved.
John Webster wrote in The Duchess of Malfi not to forsake reputation. Once it parts, it is never found again. That it seems is the experience of the Presidents Club Charitable Trust, who are reported to be planning to wind-up after thirty years of operation and raising £20 million for other charities.
One of the governors' most fundamental duties in charity law is to protect the school's assets. The importance of reputation as an asset which needs to be factored in to decision making and risk management has never been more clear. It is important to plan for contingencies, have access to PR advice and be primed, ready to make a serious incident report to the Charity Commission before any stories reach the press.
It is perhaps a measure of the level of outrage that one of the most prominent themes in the news has been the refusal and return of donations. The focus on charities for young people on the Presidents Club Charitable Trust website suggests that this could be a real issue for schools, their governors and associated charities. Here we look at the general principles around accepting donations.
The governors' fundamental duty to the school is to act in its best interests. Money is a particularly important resource for schools. Their operations are complex and financially costly. Donated funds could allow them to carry out their purposes more extensively or more effectively. The school has a clear interest in receiving the donation and it will be only on rare occasions that it is justifiable to decline. The most common circumstance is where receiving the donation involves some negative impact on the interests of the school which outweighs the value of the donation.
Whether the negative impact does outweigh the value of the donation is a decision for the governors. Because governors are bound to act as prudent business people, it has to be a robust commercial business decision about where the school's interests lie. One commercial approach might be to try to quantify the negative effect of accepting the donation in commercial terms, to weigh it against the value of the donation.
Negative effects that can be weighed like this might include the impact of accepting the donation on reputation and the effect on being able to secure other sources of income from future fees and donations. Where it is an issue of principle, governors need to be clear whether accepting the gift involves accepting or endorsing a principle which harms the school, its values and its purposes. It is not a question of their own personal position or reputation and care may be needed to separate these issues. In the case of schools, the impact on values and purposes of being seen to accept a gift in circumstances which appear to endorse a person, organisation or their behaviour may be particularly pertinent. After all, in his speech at the Charity Commission annual public meeting, the Duke of Cambridge reflected on the way children are instilled with the values modelled around them.
Other circumstances where governors may wish to refuse donations in the interests of the school include refusals to avoid the risk of handling proceeds of crime, breaching sanctions, becoming involved in money laundering, bribery or being defrauded. Warning signs include suspiciously structured donations, donors whose identity cannot be verified or whose backgrounds point to these risks.
Unless there is a legal claim for the return of the money, handing-back donations already received or waiving payment of sums due to the school is more legally complex. At this stage, the donation or the right to receive the sum is the school's charitable property and can only be applied in furtherance of its purposes. It is difficult to say that the repayment of the source of funds is a proper way of spending charity money and governors need to be particularly careful of inadvertently laundering money through the account of a respected regulated business.
Sometimes payments can be made or sums due waived where governors are morally, but not legally obliged to do so. They can only do this with the authority of the Charity Commission and would need the governors to explain to them the origin of the moral obligation. The most common example of this type of refusal, waiver or repayment of a gift involves testamentary gifts to the charity by testators whose death prevented them from carrying out a clearly settled intention to change their will. The justification lies in the charity's moral duty owed to someone to make the payment, rather than moral concerns with its source.
In the longer term, it will certainly help governors if they have a clear donor acceptance policy which addresses these issues and sets-out their approach to verifying the identity of donors and carrying out risk-based due diligence into them. Declining or returning donations is never an easy subject and not one that governors are likely to embark on without taking legal advice on the particular circumstances.
These are principally decisions for the governors and we are able to offer the advice they need in order to negotiate the various legal issues. With the exception of payments on the basis of a moral duty, many of these questions can be resolved without involving the Commission's advice or sanction. However we recommend that governors bear in mind the need to report serious incidents to the Commission. Foregoing a substantial sum of money and indeed any underlying reason grave enough to consider such a course is likely to be a serious incident.
In the case of momentous decisions of this type, the Charity Commission may also be prepared to offer its advice to governors. The Charity Commission recognise that governors may want to consider the issues with their own legal advice, and in the first instance, we anticipate that is how they will want to proceed. But if they do need the Charity Commission's advice on issues relating to the Presidents Club Charitable Trust in particular, governors should contact email@example.com with The President’s Club in the subject line.