The Charity Commission has opened a consultation on new draft guidance for its controversial power to issue official warnings to charities.
The draft guidance, published for consultation today, explains when warnings would be issued, how much notice the commission would give and when it would publish the warnings – something it says it would usually do by placing them publicly on the commission’s website for two years.
The draft guidance says the commission could issue warnings automatically to charities that fail repeatedly to file their accounts with the commission or file them late.
The consultation will run until 23 September, eight days before the earliest date warnings could be used.
The new power, granted through the Charities (Protection and Social Investment) Act, will enable the regulator to issue a warning to a charity trustee or a charity itself when it considers there has been a breach of trust or duty, misconduct or mismanagement that represents a mid or low-level concern but is not serious enough to warrant a statutory inquiry.
Once a warning is issued, a charity will not be able to appeal at the charity tribunal.
Before the act was passed, many in the sector expressed concerns, including Jo Coleman, chair of the Charity Law Association working party on the bill. She said she feared the power could become the "weapon of choice" for the commission and could be used inappropriately.
Sarah Atkinson, director of policy and communications at the commission, said in a statement today: "The power to issue an official warning is an important new power for the commission to tackle misconduct and mismanagement proportionately and effectively."
The draft guidance says a warning could be triggered by any act that might lead to a charity’s reputation being harmed, charitable resources being lost or misused or beneficiaries being put at risk, or by the charity acting inconsistently with trustees’ duties and legal duties or the governing document.
It could also be prompted by someone committing an act they knew or ought to have known was criminal, unlawful or improper, it says.
The guidance says that, when deciding to issue a warning, the commission should take into account how much money has been lost and how much can be recovered, the risk of harm to beneficiaries, whether this is an isolated incident, whether it is an honest mistake, the likelihood of it happening again and the risk to confidence in the charity or the sector.
The guidance says the commission will contact a charity by email 14 days before it plans to issue the warning, saying what it plans to do and why, what action it believes the charity should take and whether the commission plans to publish the warning.
Charities will then be able to make representations about the complaint itself or whether the complaint should be published and remain on the commission website for two years.
The guidance says warnings will usually be published and the policy would be "based on public-interest considerations in the issues and outcome and whether there are lessons that other charities can learn from".
It says potential adverse publicity or embarrassment will not be sufficient reason to suppress publication.
"We are keen to ensure that the sector understands our approach and the important safeguards for charities," said Atkinson.
"We hope that charities, professional advisers and other interested parties will respond to our consultation to further inform that approach."