HK: Mission drift generally means a charity moving away from a course of action or outside its objects. It's not a new issue for the sector, but it has been particularly pronounced in the past 12 months or so, partly because commissioning authorities are grouping services together in one contract to cut costs and reallocate risk, and because charities are feeling the effect of reduced donations.
HW: The downturn is still causing income generation problems for many charities, particularly those with front-line services that are funded mainly by local authorities or government. Over the course of the past few years, it has become more difficult for a charity to receive pure, unrestricted funding. This pressure can lead to mission drift because a charity's focus can shift to what a funder wants to fund rather than what the charity should do to fulfil its objectives. This shift might start off as harmless but can escalate, without careful management, to chasing funds. Mission drift can also occur when a charity decides to do something new. Without reference to the charity's objects, the new activity might not be in accordance with what it was set up to do.
HK: There are legal issues that could have serious consequences. Charities must operate within their objects and are still bound by principles of 'ultra vires'. If trustees enter into a contract that is outside the charity's objects, the transaction will, except in limited circumstances, be void and unenforceable - although this does not stop a charity entering into something that is reasonably incidental to its objects. Trustees could also face personal liability for acting in breach of trust and outside their powers. They should also consider whether entering into such a contract is beyond a charity's insurance. You said mission drift can occur when the board decides to do something new. That could actually be healthy for the charity - changing social circumstances, for example, might be a legitimate reason to reconsider antiquated objects, and some charities have gone through that exercise to ensure that they continue to help beneficiaries in a modern world.
HW: I agree with you that updating activities and services can be beneficial to the charity and, as long as this is within the objects, no further action needs to be taken. However, if the objects need to be updated, this should involve the Charity Commission. Do you have any advice for trustees who are dealing with new activities and services to ensure they stay on the right side of the law?
HK: Although trustees might delegate parts of their functions, the key message is for trustees to remember their role and ensure they have understanding and oversight of their charity's activities. Clear boundaries should be set for senior staff and those people responsible for sourcing new funding, and anything new or possibly contentious should definitely go to the board. Trustees might consider changing the charity's mission if this is necessary, but should do so in consideration of public benefit and the specific beneficiaries. There are different procedures for changing a charity's objects, depending on how it is established - for example, whether it is a company or a trust - but it will nearly always involve the Charity Commission. We find the commission is willing to listen to charities' reasons and assist them when necessary. Trustees should remember that funding decisions should not be the main driver.
HW: I agree. The decision-makers in charities should review activities and services constantly, assessing how these fit in with the charity's objectives. Ideally, the trustees would agree the strategic plan based on the charity's aims and objectives, agree planned priorities and then obtain funding to be able to deliver this plan. However, the shift in the sector towards restricted funding means that charities have started to tailor activities and objectives in order to fit around the funding arrangements that are available. Trustees and senior management need to be absolutely sure that the funding considerations do not drive the mission and the planned priorities, but fit in with the charity's plan.
Hannah Kubie is a senior associate at the law firm Stone King, specialising in charity law
Helena Wilkinson is a partner at the accountancy firm Price Bailey, specialising in charities and the not-for-profit sector