Transcript
Please note this transcript is an automatically generated summary and may contain inaccuracies.
Our Head of Charity Law, Kirsty McEwen, joined Tim Beynon on The Charity Show podcast from The Good Studio recently to talk about charity law and what it's actually like being a trustee. Here's a summary of our conversation.
Tim Beynon: Kirsty, welcome to the show. You're a charity lawyer, a trustee, and you head up the charity law team at Higgs LLP. Tell us a bit about yourself - how did you end up specialising in charity law?
Kirsty McEwen: I've been doing this for over 25 years. I got lucky early in my career - landed a training contract at a firm in Birmingham that had a dedicated charity team, which is quite unusual. Most firms don't specialise in this area. I spent six months there during my training contract, and it just struck a chord. Charity law is the best of all worlds. You work with people who want to do something good, but you also get into nitty gritty technical issues. The work is challenging, and you work with organisations doing incredible work.
Tim Beynon: You're also a trustee yourself. Tell us about that and how being a trustee gives you a different perspective in your professional life.
Kirsty McEwen: If you're going to work in the charity sector as a professional, you need to sit on a board of trustees yourself. You've got to be able to walk the walk. When you're sitting across from clients, you need to understand what they're going through. I'm vice chair of governors at an independent school in Edgbaston, and I'm also a trustee of two grant-making charities. Until last year, I'd been a trustee for 10 years of the Solicitors Benevolent Association. Before that, I was on the board of a women's refuge in Birmingham. This frontline perspective means I understand the sacrifices trustees make and the challenges they face.
Tim Beynon: Tell us about Higgs LLP. What sort of work do you and your team do with charities on a day to day basis?
Kirsty McEwen: Higgs is celebrating our 150th year this year. We've got a real legacy in the Black Country, though we operate regionally and nationally. The Charity Not For Profit team is five people, and we work with charities of all shapes and sizes across all sectors. We work with some very small embryonic charities starting out, through to very large national charities. Across all sectors - arts charities, sports charities, religious charities. We also work with not-for-profit organisations like community interest companies. No day is ever the same. No client is ever the same.
Tim Beynon: You mentioned fraud prevention is a big theme right now. What are you seeing, and how can charities protect themselves from fraud?
Kirsty McEwen: The statistics on losses are staggering. Charities are vulnerable because so many people working in them are volunteers - they don't have the infrastructure that larger organisations have. We've had clients in the last couple of years who've been victims of cyber fraud and banking fraud. Real financial losses. For larger charities, there's now a new offence called "failure to prevent fraud" where trustees can be held liable if they fail to put proper procedures in place, even if they didn't know about it.
Tim Beynon: What kind of fraud are we talking about - external or internal?
Kirsty McEwen: Both, unfortunately. There are stories in the Charity Commission's regulatory casework about fraud committed by senior leaders in charities. We know of examples where chief executives have defrauded charities for several hundred thousand pounds, often because of lack of appropriate internal financial controls. Too much responsibility placed on one individual and not enough checks and balances. Then there's banking fraud, cyber fraud - someone phones up and pretends to be you, they've got into the system somehow. Or they're trying to steal data on beneficiaries and threaten to release it.
Tim Beynon: What advice would you give small charities that are limited on money and resource but still need to protect themselves?
Kirsty McEwen: The Charity Commission has useful guidance around internal financial controls and understanding fraud. It's about strong financial management and knowing your responsibilities. Have an anti-fraud policy in place. Make sure all trustees have read the guidance. All charities should have a risk register with fraud identified as a risk. Perhaps once a year run some checks to see if your financial controls work - test the system. Training is important. Have a fraud response plan - just a five page plan of what you would do if you were subject to fraud. Do pre-employment checks on employees, do checks on volunteers including trustees.
Tim Beynon: Beyond fraud, what are the most common legal issues you see charities running into?
Kirsty McEwen: The first one is that charities often don't follow their constitution or governing documents. I regularly come across charity trustees who don't know what their charitable objects are. You're set up for a purpose which has to fall within 13 purposes in law and be for the public benefit. Even if you're doing something that feels right, if it's not allowed under your objects, you're acting outside of your powers. Another big one is paying trustees when you can't. The general principle is trusteeship is voluntary. Trustees can be reimbursed for reasonable out-of-pocket expenses, but anything beyond that requires careful consideration. You might have a trustee who's an accountant doing your accounts, or a trustee who lets the charity use their building and charges rent. These situations might be allowed under the Charities Act, but you have to follow a statutory process and check your governing document.
Tim Beynon: Tell us about recent changes coming from the Charity Commission. What's new and what's the practical impact?
Kirsty McEwen: The pace of change is relentless. There's been a consultation on the Statement of Recommended Practice, so charities can expect changes to how they prepare their accounts. We've had new guidance on everything from dealing with property to accepting donations. For charitable companies, there are significant changes coming from the Economic Crime and Corporate Transparency Act. Charities will have to identify all their directors and trustees via Companies House, everything's going fully digitised, and penalties for late filing are increasing.
Tim Beynon: How do charities cope with keeping on top of all this change?
Kirsty McEwen: Not all guidance will be relevant to all charities. But there's lots of free advice out there - organisations like NCVO, the Charity Commission. We run an annual charity conference. Trustee training is important - all trustees should have an induction when they start and ongoing training.
Tim Beynon: What advice would you give CEOs and boards if they do miss something or drop the ball?
Kirsty McEwen: Don't panic. Everybody makes mistakes. Sometimes things happen you couldn't have anticipated. If you're an employee, make sure your CEO knows. If you're a CEO, tell your chair of trustees as soon as possible. Then come up with a plan. That might be getting advice about whether you need to tell the Charity Commission. There's a duty to report under the serious incident reporting regime anything considered significant or substantial. The key thing is trustees are ultimately responsible. It doesn't matter if you have a leadership team running the charity day to day - the commission will hold the trustees accountable.
Tim Beynon: If you had a room full of charity leaders, what are the three things you'd want them to keep in mind when it comes to legal compliance and governance?
Kirsty McEwen: First, know and understand your governing document and make sure it's fit for purpose. We often find trustees who've never read their governing document, or it's 30 years old and the law has moved on. Second, understand the environment you're operating in. A grant-making charity faces very different challenges from one that delivers services. Understanding your environment helps you understand your operational challenges and financial position. Third, plan for change. Be proactive. Think about what might impact you this year and how you can adapt.
Tim Beynon: Finally, what's one piece of advice you'd give people thinking about becoming a trustee for the first time?
Kirsty McEwen: Go for it. It's worthwhile. The statistics on the decline in volunteering post-pandemic are terrifying. But make sure the charity resonates with you personally. It's a lot of time you're giving up. Be prepared for it to be more work than anyone says - you can't just turn up for four meetings a year. Make sure the charity provides proper induction. When I joined the Solicitors Benevolent Association, I had a mentor whom I could meet with before every meeting. That support was invaluable. And don't be afraid to ask questions. You are ultimately responsible. The commission will hold you accountable. If something feels wrong, put your hand up and ask before a decision is taken.
This information is for guidance purposes only and does not constitute legal advice. We recommend you seek legal advice before acting on any information given.
