Reporting serious incidents

As if dealing with a serious incident wasn’t hard enough – especially during a pandemic – charities have to remember to tell the Charity Commission about them. At the right time and in the right way.

A natural reluctance to put one’s head above the regulatory parapet resides within most of us. Many would recognise the equally natural tendency to forget the requirement to do so, amidst the hectic frenzy of activity that typically surrounds a serious incident. Unconscious ignorance of the reporting requirement - whether altogether or in a particular context – or a deliberate refusal to comply with it - are also not unusual.

As the regulator of charities, the Charity Commission’s statutory objectives and wide powers encompass a policing function. Any sense of “’fessing up” to the regulatory policeman will inevitably be accompanied by trepidation, concern or anxiety – possibly also by prevarication, resistance or denial.

Covid-caused chaos has spawned a proliferation of incidents within charities, of varying degrees of severity, and this has increased confusion about reporting generally and whether Covid incidents need to be reported.

Detailed guidance

Detailed guidance, including Covid-specific guidance, is provided by the Charity Commission, but inevitably the listed examples may not mirror the particular circumstances faced by a charity, leaving trustees and staff in a quandary as to how to proceed.

What constitutes a “serious incident” and when and how does a charity report one to the Commission? Do different rules apply to Covid-related incidents? What are the implications of filing a report? What are the implications of not doing so?

An incident, by way of dictionary definition, is an event, especially one that is unpleasant or unusual. The application of this broad definition to occurrences within or affecting a charity is not much facilitated by the addition of the word “serious”, which has an elastic meaning and stretches or contracts according to a particular charity’s circumstances.

The Commission’s guidance advises charities that a serious incident is an adverse event, whether actual or alleged, which results in or risks significant:

  • Harm to your charity’s beneficiaries, staff, volunteers or others who come into contact with your charity through its work.
  • Loss of your charity’s money or assets.
  • Damage to your charity’s property.
  • Harm to your charity’s work or reputation.

“Significant” means significant in the context of the particular charity, taking account of its staff, operations, finances and/or reputation. For example, what is a catastrophic amount of money for a small charity to lose may be a mere drop in the ocean for a large charity.

Main categories

The Commission’s guidance explains that the main categories of reportable incident include incidents relating to the protection and safeguarding of people, financial crimes (such as fraud and theft), suspicious financial activity with the charity’s funds, mysterious large donations, other significant financial loss, links to terrorism or extremism, and other significant incidents including insolvency, major data breaches or losses or incidents involving partners that materially affect the charity (“partners” includes trading subsidiaries and charity grant recipients).

There are some indicative thresholds. For example, financial losses which do not involve a crime and which exceed either £25,000 or 20% of a charity’s income are expected to be reported, just as unverified or suspicious donations totalling £25,000 or more should be reported. But these are not the only rules affecting the reportability of such incidents and charities should decide whether or not to report after consideration of all relevant factors.

Various examples are described throughout the Commission’s guidance and in the linked examples table. If an actual incident resembles a reportable example, then the need to report is evident. Alternatively, the sheer severity of some incidents renders the need to report obvious.

Charities will be familiar with high profile serious incidents of recent years, such as Oxfam’s safeguarding failures and the President’s Club scandal, and the requirement to report incidents of a similar nature, magnitude or impact is apparent. Outside these categories, however, it can be difficult determining whether or not to report.

Ultimate responsibility

Trustees may delegate the decision making to the executive, but the board retains ultimate responsibility. The Commission asserts that the reporting regime helps charities to help themselves and will always advise that, if in doubt, a charity should report.

Covid has, as across most aspects of life, caused commotion amidst serious incident reporting. The Commission introduced specific guidance, with supplementary examples, to assist charities to decide whether or not to report Covid-related incidents. Key points clarified by the Covid guidance include that:

  • Adherence to government rules (such as closing premises) is not, of itself, a serious incident: the impact of such action on the charity is what matters. If, for example, such action leads to insolvency or permanent closure (whether immediately or in the next year), that would trigger the reporting requirement.
  • Above-mentioned financial thresholds do not apply to Covid-related financial losses, as the significance of the impact of such losses on the charity is what would trigger, or otherwise, the need to report.
  • Whilst it is unnecessary to report a single instance of someone connected with a charity contracting, or suspected of contracting, Covid, an outbreak which would prevent the charity from continuing its usual operations or delivering vital services to at risk beneficiaries (such as a residential home for vulnerable adults with insufficient staff) would be reportable.

Reportable Covid incidents, as all serious incidents, are to be reported to the Commission as soon as reasonably possible after the incident, or when it becomes apparent that significant loss or harm is highly likely.

In the melee of an incident unfolding, it can be difficult to establish precisely what has happened or the full extent of it, let alone develop a detailed plan of action to deal with it. Even where a charity has identified at an early stage the need to report, it may not be immediately apparent quite what should be reported.

Delaying reporting

The temptation is to delay reporting until there is clarity both as to the incident and how it is being handled. Charities are understandably concerned to present to the regulator a comprehensive picture, demonstrating that the trustees have a firm grip on investigating and resolving matters.

The Commission is not unsympathetic to this perspective, but encourages charities to report early and then to provide subsequent updates if material facts change.

In some cases, the Commission will seek to assist a charity in dealing with a serious incident and, where assistance is required, the earlier it is provided, the better for the charity and its beneficiaries.

In other cases, delayed reporting may result in, at best, a lightly delivered regulatory slap on the wrist or, worse, it may raise regulatory eyebrows in concern at a charity’s identification and management of an incident.

The timing of submission of a serious incident report can be a judgment call, therefore, but charities should heed the Commission’s guidance to report promptly.

The only method of reporting a serious incident is via the Commission’s online form. Questions on the form are tailored to the type of incident and the substantive questions carry a character limit. The form surely assists the Commission in its role and is presumably intended to aid charities in their reporting, but the success of the latter intention is debatable. Questions often do not fit the circumstances of the incident being reported, making them tricky to answer, and complex, multifaceted incidents can be challenging to summarise within the character limit.

It is vital, however, to make a full and frank disclosure of all material facts, concentrating on the key details of the incident and how the charity is dealing with it. It also is usually preferable to anonymise persons necessarily mentioned in the report.

Managing risk

Following submission of the report, the response from the Commission would ideally state: “Based on the information you have provided, which we assume is a full and frank disclosure of the relevant facts, you have assured us that the trustees are dealing with the matter appropriately and responsibly. This indicates that they are satisfied both that the trustees have identified a risk to the charity and that they are managing it, signifying that further action by the Commission is unlikely to be necessary. They may, however, ask further questions and require detailed follow-up action.

If trustees fail to report a serious incident that subsequently comes to light, the Commission may consider this to be mismanagement, which may prompt regulatory action, particularly if further harm, damage or abuse occurs after the initial incident. Failure to report also calls into question the annual return declaration (that no serious incidents during the period are unreported) in respect of the year during which an incident occurred. It’s an offence to provide false or misleading information to the Commission, which includes through the annual return.

Documenting decisions

If trustees decide not to report an incident, they should document their decision and the reasons behind it, for future reference if required. And a further practical tip is to include an item on serious incidents on board agendas – this serves as a reminder to consider whether anything reportable has occurred and to update or inform the full board of incidents which have been reported.

Experiencing a serious incident is often challenging enough, and the reporting regime is a cumbersome, difficult and easily overlooked requirement. The Commission expects serious incidents to occur, however, and is more inclined to be suspicious of a charity which doesn’t report any.

Remember to report, do so promptly, fully and succinctly, and comply with any follow-up actions directed by the Commission. Where there is doubt about the need to report, err on the side of caution to best protect the charity and do so.


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