Large charities should get powers to pay their trustees, says Hodgson

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Large charities should get powers to pay their trustees, says Hodgson 9

Governance | Tania Mason | 16 Jul 2012

Charities with annual income of more than £1m should be able to pay their trustees without seeking permission from the Charity Commission, Lord Hodgson has recommended in his official review of the Charities Act 2006.

The 159-page review, titled Trusted and independent: Giving charity back to charities, contains dozens of recommendations aimed at shoring up public trust and confidence in the voluntary sector and improving the regulatory environment in which it operates.

On the vexed issue of trustee remuneration, Hodgson said the best solution is to maintain the status quo whereby charities can pay their trustees with permission from the Charity Commission, but that large charities, with income of over £1m, should not need permission provided they disclose payments in their annual reports.

If adopted, this measure would mean that more than 6,200 charities would gain automatic powers to allow them to pay their trustees.

The recommendation drew predictable responses from the sector’s umbrella bodies. Acevo’s Sir Stephen Bubb said it was “hugely welcome that Hodgson has recognised the fact that some charities want to pay their trustees and we agree with him that they should be allowed to”. NCVO’s Sir Stuart Etherington said it would “set a dangerous precedent and is a deregulatory step too far”.

Peter Lewis, CEO of the Institute of Fundraising, added that the recommendation seemed totally inconsistent with the tone of the rest of Hodgson’s report, which emphasised the importance of the sector’s voluntary ethos.

The report also recommended that trustee tenure should be limited to three terms of three years.

Hodgson: 2006 Act a missed opportunity

In general, Lord Hodgson said the 2006 Act has been well received and has had a positive impact on the sector. In many ways, however, it was been “an opportunity missed” – it “could have gone further in deregulating and freeing up charities”.

Among his other more controversial recommendations were:

Raising the income threshold for compulsory registration with the Charity Commission from £5,000 to £25,000, though those with less than £25,000 income should be able to register if they wish
The requirement to submit accounts and reporting information should also be set at £25,000
The abolition of National Exemption Orders, which currently allow charities that carry out high volumes of house-to-house cash collections to do so without needing to apply for separate licences each time
The Charity Commission should look at charging charities to file their annual returns and to register new charities
Local authorities should not be allowed to ban chugging
A sector-funded, public-facing, central self-regulatory body covering all aspects of fundraising should be set up. The Cabinet Office should chair a standing committee to drive this forward.
FRSB membership should not yet become compulsory but government should review its progress again in five years to determine whether it has made the necessary step-change in coverage and public awareness.
Requiring all unregistered charities to put the word ‘unregistered’ on all their fundraising materials, letterhead and cheques
Giving serious consideration to the introduction of fines for charities that fail to comply with reporting requirements and withdrawal of gift aid for those that file late
Charities with less than £25,000 income should be required to put the word ‘small’ before their charity number wherever it appears
Raising the audit threshold from £500,000 income per year to £1m and removing the ‘asset test’ that currently requires organisations with assets worth £3.26m to undergo an audit
Abolishing the Standard Information Return
Changing the name of the Charity Commission to ‘Charity Authority’
Enabling the Charity Commission to delegate some of all of its functions to another organisation to exercise on its behalf
The Office for Civil Society and the Charity Commission should investigate shifting regulation of social housing providers to the Homes and Communities Agency.
The Charity Tribunal should have to include a short, plain-English summary at the start of all its judgments to help lay people understand the main points
The time limit for bringing a case to the Charity Tribunal should be extended from 42 days to four months
A charities ombudsman is not recommended but the sector should look at the feasibility of setting up its own complaints scheme
The government should devise a standard social investment vehicle and should amend the Financial Services Bill to provide a statutory and regulatory underpinning to social investment
A debate needs to be had among and between Parliament, the sector and the public, to pin down what constitutes a charity in today’s world

Click on the linked sentences above to see more detail on those proposals.

Place a comment

Carl Allen
2 Aug 2012

A more precise and perhaps useful question ... should all charities have the general power to pay specific Trustees an attendance allowance on the basis of personal financial disadvantage?

The attendance allowance is not based on the value of Trustee competence/work but perhaps living wage related and in the nature of an honorarium.

I have on several occasions when doing strategy for specific types of charities advised that such payments be considered as normal when and if the trustees become aware of such disadvantage. Further that the Chair and Secretary take care to notice such circumstances as part of their role.

In looking back, no abuse has been found thought it does not indicate there will never be an abuse.

[Reply]

Carl Allen
2 Aug 2012
Response to [Carl Allen]

Just got asked a very good question and reply is worth noting

1. Charity begins at home ... this is not a case of charity.

2. Why not deliberately build the Trustee experience/skills of suitable individuals with current personal financial disadvantage ... capacity building is part of the charity process and inclusivity

3. Such Trustees bring current experience that other Trustees may not have had ... wisdom of the crowd and avoiding the sameness trap

[Reply]

L Walker
CEO
Bliss Services
1 Aug 2012

NO TO PAYMENT OF TRUSTEE MEMBERS.
Is this buy your trustees

[Reply]

Carl Allen
26 Jul 2012

Are bigger charities be more trustworthy than smaller charities when it comes to abuse of funds re Trustees compensation?

It is the role of the Commission to regulate the stated rationale of individual charities for paying Trustees and not to make the decision itself.

Indeed there should be no permanent permission to pay Trustees and any charity holding such permission should be required to periodically reapply for such permission.

And are Trustee paying charities sufficiently transparent about the amount their trustees are paid and the rationale for such payments?

[Reply]

Beryl Hobson
Professional Governance Services
17 Jul 2012

As the Head of the Large Charities Division at the Charity Commission, I was the decision maker for many of the requests for Trustee Remuneration.

All the reasons for remunerating trustees seem to be based on anecdotal evidence that it leads to better governance. I have not yet seen any actual research to prove this. In fact the more I see of the private sector, I wonder what some of their paid NEDs were doing.

If anything, surely it is the charities that find it hard to get trustees (because they are operating in the less 'glamorous' types of work) which may need to pay, rather than those where it is perceived as a good addition to a c.v?

[Reply]

John Marshall
CEO
Centrepoint Outreach
16 Jul 2012

What a pity! What about the spirit of giving time and talent - as a charity volunteer - Trustee or otherwise? I would not financially support any charity that effectively pays Trustees - that is not what donors and fundraisers give their money and time for! The size of the charity doesn't matter.
I am paid as a CEO - but I also gladly do voluntary (unpaid) work for other charitable organisations. It is about giving back - not just receiving!

[Reply]

Barbara
16 Jul 2012

Very interesting points. I used to work in so-called infrastructure organisation and I have to say that I worked with many charities that were not reaching heights of their potential because trustees couldn't be asked, they are volunteers after all, have lives for Christ's sake. But then one can imagine what will start to happen upon the whole 'payment to trustee option', trustees fighting for places, charities becoming nothing more than personal gain vehicles and so on. More importantly, less popular groups of society will be pushed out and it is not the point at all, this in fact is one of major roles charities fulfil - they give people voice an representation.
But then I used to work in Poland in a charity. In Poland there is no voluntary requirement of any sort in regards to trustees so it is normal that trustees are also employees of their own charities and it makes them more effective and wanting to grow their organisations because otherwise there would be no salaries. Having said that, growing is good only if it helps beneficiaries more, not for its own sake unlike many claims.
So, at the end of the day, interesting times ahead.

[Reply]

John Forbes
Ex Trustee
16 Jul 2012

To do anything like Lord Hodgson is proposing in terms of paying Trustees, would be to do nothing more that show up large Charities as being not able to properly manage their own operational resourcing issues.

A Trustee should be on one side of the governance line or should resign trusteeship to be on the other side. The two should never be confused.

25 years of Trusteeship and forty years in corporate life tells me that roles involving oversight and personal gain do not mix.

What has happened in the last twenty or so years is an inexorable move by legislation etc to bring Charities into a more corporate model of operation.

What has not happened in parallel, is the adaptation of Charitable organisations to meet the change in operating environment.

This should be addressed properly and competently before any consideration is given to changing the basis of remuneration for a Trustee

[Reply]

Karl Wilding
Head of Policy, Research & Foresight
NCVO
16 Jul 2012

"Large charities should get powers to pay their trustees, says Hodgson"

No they shouldn't.
Cheers
Karl

[Reply]

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