Blog: Friday 6th September 2024 - Corporate Partner, Womble Bond Dickinson

A Summertime Retrospective: Charities Update

Brat Summer is behind us, and lingering memories of golden sands and glowing skies, tinted pink by the sun as it sinks beyond the horizon, are very nearly vanished. However, when it comes to horizon scanning for matters of professional interest, our work is never done…

One key development of note this August was the issue of correspondence by the recently appointed Charity Commission Chief Executive, David Holdsworth, to local authority Chief Executives. The role of local authorities as corporate trustee of charitable trusts makes sense in so many ways, evidenced by the vast number of registered charities which are governed by councils, holding a wide array of assets such as recreation grounds, museums, and arts venues. Yet the pathway to proper and effective management of charitable assets can be fraught with pitfalls, in part due to the inherent governance challenges which bubble to the surface where the swirling waters of charity law and local authority law meet.

As always, upholding governance best practice is paramount since the ongoing financial pressures on local authorities can increase the risk of conflicts of interest occurring where the local authority acts as corporate trustee. For example, a conflict might arise where a local authority is seeking ways to reduce subsidy to a charity out of public funds, or where it seeks to repurpose the use of charitable land to generate more income or reduce expenditure.

The Charity Commission is reported by Public Finance to have dealt with 38 cases involving local authorities in the last three years, with the Commission recently issuing its first ever Official Warning to a local authority over charity mismanagement. This most recent missive therefore comes as a timely reminder to local authorities to ensure that they have identified their charitable assets and have checked the updated guidance for local authorities. The guidance addresses inter alia decision-making, management of conflicts, management and disposal of charity land and record keeping.  There is also a useful checklist appended to the guidance comprising a series of questions to which local authorities should be directing their minds in reviewing the effectiveness of the governance arrangements in place. Those questions range from the production of accounts to the decision-making structure and arrangements for handling conflicts of interest and risk monitoring and management by the local authority in exercising its corporate trustee functions.

A separate guide for councillors has been produced by the Charity Commission with contribution from the LGA, which outlines the local authority trustee responsibilities and is supported by a handful of case studies illustrating the types of issues local authorities can face.

Womble Bond Dickinson has a leading national charities practice and a dedicated local government team with extensive experience of advising on a broad range of charities and local government governance arrangements. Our team is collaborative, down to earth and takes a solution-focussed approach to even the most complex of problems. Please do pick up the phone should you need any support or assistance with any charities-related governance issues that may come to light to assure your local authority's proper exercise of its functions as a corporate trustee.

 

Sian Ballingall, Partner (Public Law and Projects) and Sally Cooper, Managing Associate (Charities) at Womble Bond Dickinson