DSC gave written evidence to the Committee (pdf), which stressed the need for commissioning reform and the importance of grants, as well as the dangers of the Charity Commission moving to charge charities fees for regulation. We also reiterated our long-standing position against paying trustees. We’re really pleased that the Committee clearly took these points to heart in their final analysis.
The overall tone of the report and its emphasis on small charities (the majority of the sector) is also refreshing and helpful to have in an official document like this. It gathers together and largely reflects back the views and points made in the evidence, and should be required reading for officials, Parliamentarians and other political folk.
Nevertheless, we’ve been here before: many parliamentary committees and their ilk have looked at similar issues over the years (pdf). Unfortunately (and sometimes fortunately) it’s no guarantee that much will change. For example, Lord Hodgson released his government-commissioned review of the Lobbying Act (pdf)a year ago, with clear recommendations for government. It’s been gathering dust ever since.
Much therefore depends on how Government responds to it – but also how the sector responds. There is plenty in there for charities to consider too, particularly around governance. We’ve pulled together some of the key points for you below (bulleted points are paraphrased slightly from the report for brevity!).
Governance: effectiveness and accountability
The Lords note that good governance is critical to charities. Thankfully, rather than call for a massive overhaul to structures and systems post Kids-Company, they recognise that for most organisations governance issues are rather more mundane – about trustee skills, recruitment, training, induction, and awareness of roles and responsibilities. Many of the conclusions and recommendations are very general, or already good practice. For example, they would like to see:
- Training – infrastructure bodies to identify shortcomings in provision of governance advice and training for charities and do more to raise awareness of the support that currently exists (a main message for the sector to respond to).
- Annual board reviews – charity boards to undertake greater self-reflection, examining their behaviours, processes and skills.
- Skills audits – charities to regularly undertake skills audits of their trustee boards to ensure that they have the necessary capabilities.
- Better induction – development of a best practice trustee induction template for small charities.
- Promotion of trusteeship – the Office for Civil Society to develop a new initiative to promote trusteeship to employees and employers, encouraging greater participation and diversity.
- Trustee time limits – a time limit for individuals to serve as trustees, along with a maximum term of office, endorsed within the new Governance Code.
- Not paying trustees – trustees should not receive payment for undertaking the role, but they should be able to claim relevant expenses.
Funding: commissioning, grants and social investment
The report is probably at its most specific when discussing commissioning – and here it has a number of tasks for the Office for Civil Society. Very helpfully the Lords articulate evidence from DSC and others about the importance of grants and the many problems with current commissioning practices which disadvantage small organisations, including payment by results and large-scale contracts. For example, they call for:
- Grants – which help sustain a healthy civil society and enable communities to benefit from charities’ capacity to innovate. Local authorities should bear this in mind in the course of their financial planning, and maintain or revive grants wherever possible. [This is the heart of DSC’s Grants for Good campaign].
- Grants for innovation – where appropriate, public sector fund charities to test new ideas and innovate during both the early scoping and development of service, and to contribute to the sustainability of the charity sector.
- Impact reporting guidance – OCS to develop guidance for the rest of the public sector on how to set contractual impact reporting requirements appropriately and in a standardised fashion, in order to reduce the bureaucratic burden on charities.
- Review of Payment by Results – Government’s review of commissioning should consider the impact of PbR contracts on charities.
- Core costs in contracts –commissioners should have regard for the sustainability of organisations they commission, including realistic and justifiable core costs in contracts.
- Investment readiness – Government must provide additional resources to support the investment-readiness of smaller charities, or the social investment market is unlikely to reach its potential.
Regulation: the Charity Commission, Brexit, transparency, merger
Again, the Lords helpfully state that they are against ‘significant additional regulation of the sector through increased mandatory reporting requirements’ as ‘this would be a substantial bureaucratic burden on smaller charities’. However, they also recognise that public interest in charities is rightly heightened and that in general the sector needs to respond by providing greater transparency. They highlight:
- Charity Commission charging – the report is perhaps at its most forthright when articulating numerous problems with introducing fees for regulation. The Committee has ‘grave concerns about the Commission proceeding with any proposal to charge charities’ and recommends the ‘Charity Commission makes clear how a charge would benefit charities and strengthen the sector overall [more from DSC here].
- Brexit – the Office for Civil Society should undertake an audit of the potential impact of Brexit on charities by the end of 2017. This should include the impact of loss of funding as well as research collaboration.
- Digital presence – all but the very smallest charities should have a simple website or public social media page to provide transparency. Public sector funders and other donors should evaluate the transparency of charities when considering requests for funding.
- Merger to be easier – the regulatory system should facilitate but not require or promote mergers. The Charity Commission should consider what support and guidance it can offer to charities seeking to merge, and signpost to other help.
- Greater diversity on charity boards and in Charity Commissioners – the diversity of charity boards needs to be improved and the Commission should be mindful of the example it sets to the sector. When filling future vacancies it should explicitly seek to recruit individuals with a range of skills, charity experiences and demographic characteristics.
There is much more in the report and debate around the many issues it contains will continue. The big question now is: what happens next? How will the Government, in particular the Office for Civil Society, respond? And how will the sector react – in particular about the various recommendations around governance?
What’s your view? Comment below or get in touch at @DSC_Charity or firstname.lastname@example.org.