Witten evidence submitted by ICSA to the International Development Committee inquiry into sexual exploitation and abuse in the aid sector

1. Executive summary

1.1 The recent scandals within the international aid and development sector involving allegations of bullying, sexual exploitation and misconduct offer significant lessons in the human cost of poor governance, inadequate safeguards, paying lip service to the stated values of the organisation and insufficient due diligence.

1.2 Examples of bullying, abuse, misconduct and poor governance can be found in every sector of the UK economy as well as the many sub-sectors of the charity world. This is not unique to international aid and development charities, though perhaps the very nature of their work presents more opportunities for those who choose to act inappropriately or abuse their power. Power imbalances, including the provider-beneficiary relationship, can provide fertile ground for those unscrupulous enough to seek to exploit the situation. Either way, the measures taken to strengthen safeguarding and whistleblowing measures in international aid development charities could be extended to other charities, especially those working with young children and vulnerable people.

1.3 In providing evidence, we would like to highlight several aspects of charity governance that could be reviewed, reformed and strengthened in order that the entire sector can learn from these terrible events. Stronger governance starts with robust trustee recruitment, induction and ongoing development, including board evaluations. This can be supported by the board having access to a governance professional and adhering to a more actively enforced and updated Charity Governance Code. Charity culture needs to be more regularly reviewed by boards and greater use of whistleblowing or ‘speak up’ policies promoted as tools for learning and development. As such, charities receiving significant government funding should not be permitted to freely use non-disclosure agreements in cases of public interest disclosures. Finally, funders and the Charity Commission, alongside the sector, should be more proactive in informing the public that charity resources must be expended on activities to ensure that charities provide safe and high quality services.

2. About ICSA: The Governance Institute

2.1 ICSA: The Governance Institute is the professional body for governance. We are grateful for the opportunity to contribute to this inquiry. We have members in all sectors and our Royal Charter purpose is to lead ‘effective governance and efficient administration of commerce, industry and public affairs’. With more than 126 years’ experience, we work with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance.

2.2 We are the professional body qualifying and supporting Chartered Secretaries, governance, risk and compliance professionals in all sectors of the UK economy. Members are educated in a range of topics including governance, finance, company law and administration, which enable them to add value to any organisation.

3. Trustee development

3.1 The recent report, Taken on Trust: Awareness and effectiveness of charity trustees in England and Wales[1], highlighted the difficult job some 700,000 volunteers undertake as being a charity trustee. The role of charity trustee is one that can offer considerable satisfaction, challenges and experiences, but it should not be forgotten that the position can be quite onerous and require a significant time commitment.

3.2 Individuals, communities and the wider environment depend on a range of charities to promote the challenges they face and to assist in making things better. The House of Lords Charity Committee report “Stronger charities for a stronger society” defined charities as being ‘the eyes, ears and conscience of society’. Trustees, as stewards of charitable funds, should therefore be expected to perform in a professional manner consistent with the serious nature of the role. This should not necessarily mean that trustees should be paid (the overwhelming majority are not) or undertake formal qualifications to perform the role, but they should be committed to continuous improvement in the boardroom. As such, we would expect trustees to be recruited with due regard to objective, skills-based criteria and urge all trustees to keep a log of all the professional development activities they have undertaken in the previous twelve months. Professional development activities should be structured, and can be undertaken as part of the trustee role, or derived as part of some other role that the individual performs. This could be training and development organised internally by the charity’s governance professional, or delivered by a commercial third party; it could be free or paid for. Whatever the form, the training and development should be formally recorded and the annual report should include information about the development activities undertaken by the board.

3.3 Such an open and transparent approach to trustee recruitment and development could be of benefit to all types and sizes of charities. While there may be some initial administrative costs, the ongoing overheads should be minimal and will help promote to trustees and charity supporters the ongoing importance of good governance and having trustees that are up to date with their legal duties and other external factors affecting the work of the charity.

4. Charities culture

4.1 The Charity Governance Code in Principle 3: Integrity, stresses the importance of charities taking seriously their responsibility for building public trust and confidence in their work. Trustees can facilitate this through accountability and effective communication, ensuring that the charity’s performance and its relations with stakeholders are guided by the values and culture established by the board. An area that boards should be looking at more seriously is that of organisational culture.

4.2 The modern operating environment for charities, and the public’s understanding of the sector, play an important role in establishing and maintaining a culture that matches the expectations of those that support and fund charities. Traditional values, where charities might have been entirely volunteer-led and run, have been replaced by a more professional and business-like approach in some major organisations. This can lead to a disconnect between different charity stakeholders and, in the worst cases, between operations within the charity. A charity that claims to stand for one thing, but whose behaviour does not support that claim, will tarnish the view of all who come into contact with it and contaminate the wider sector too. If words and actions do not match, there is a danger that declining public trust will erode the potential positive impact of the sector on wider society, leading to a reduction in funds, support and commitment. That is why culture is a board responsibility and should be regularly reviewed.

4.3 ICSA’s report “Cultural Markers: assessing, measuring and improving culture in the charitable sector[2]” provides suggestions as to how a charity’s board can look regularly at its culture and offers a number of criteria that can be used to assess whether the culture is a heathy one or not. Initial reactions to previous charity governance scandals have been to look at the regulatory environment, with new fundraising regulations and the Government augmenting the Charity Commission’s powers in order to improve the sector’s culture and practices. Regulators, policymakers and sector commentators, however, have come to appreciate that a rules-based approach can only influence the behaviour of some within the sector. Encouraging boards to regularly review their charity’s culture, and to adopt and promote ‘Speak up’ initiatives, will help improve the culture within a charity whereby an open and honest approach to learning from mistakes will pay dividends in the longer term.

4.4 Furthermore, trustee boards should move more quickly to establish boards that are diverse, in its widest meaning. Diversity of thought – the specific characteristics of an individual – is always more important than the ticking of any ‘diversity box’, but any mechanism which does not recognise the best available talent, in whatever form it presents itself, does both the organisation and our wider society a disservice.

4.5 A mechanism which allows bias, whether conscious or unconscious, for or against, on grounds of gender, ethnicity, education, class, sexuality or any other factor which militates against the appointment of the best possible candidate for a role, is therefore fatally flawed. As a society we should be in a position where the best candidate will always be appointed; diversity should be a fact of life, not an issue. The Walker review[3] into the banking crisis highlighted the dangers of group think in the boardroom, and the importance of boards undertaking constructive challenge and testing the analysis and presumptions of papers presented to the board. Diversity is one way to reduce group think, board reviews are another.

4.6 Comprehensive and professional board reviews will reflect on the quality of discussion and decision-making in the boardroom. Paragraph 5.8.2 of the Charity Governance Code recommends that:

‘The board reviews its own performance and that of individual trustees, including the chair. This happens every year, with an external evaluation every three years. Such evaluation typically considers the board’s balance of skills, experience and knowledge, its diversity in the widest sense, how the board works together and other factors relevant to its effectiveness.’

4.7 ICSA, as a founding member of the code, is fully committed to regular board reviews, regardless of the sector within which the organisation operates. As such, we would urge larger charities to adopt the code as a matter of urgency; in particular those principles that promote diversity, integrity, evaluation, whistleblowing, openness and transparency.

5. Role of the governance professional in large charities

5.1 Depending on the size and complexity of the charity in question, the trustees are likely to play a very different role in terms of the organisation’s performance and effectiveness. As with commercial entities, the role of the board will fluctuate in times of growth, consolidation and challenge. In a large charity, the board will act as a sounding board for the senior managers and monitor progress against the agreed strategic plan. In smaller organisations (which account for around 80% of charities in England and Wales), the trustees will also be the people delivering the services and activities, so will be more ‘hands on’ in terms of performance and effectiveness. In both instances, the board is responsible for ensuring the charitable objects are being delivered, and will be accountable for their decisions and actions, including those delegated to staff.

5.2 ICSA has previously called for large charities to appoint a governance professional to support trustees in their role[4]. Within large companies, it is recognised that boards, and especially the chair, require access to a professional with knowledge of how boards operate and of the legal, ethical and regulatory environment in order to advise and recommend ways forward.

5.3 This individual should not be the chief executive, finance director or legal counsel, as combining that role with that of the governance adviser creates a potential or actual conflict of interest. The roles are subtly, but significantly different and there should be an awareness that the guidance and advice provided by each may well differ according to the circumstances. The governance professional, as the ‘conscience of an organisation’ will consider not only legal or financial issues in the advice provided, but also supply guidance which considers the ethical and cultural implications of a proposed course of action. The governance professional should be appointed by the board and report to the chair.

5.4 At a time when public trust is more precious and transitory across all sectors, it is vitally important for charities not only to act in accordance with their stated values, but also to be seen to be living those values. Research by ICSA has highlighted the value that can be added to a board by having access to a governance professional for guidance and support[5].

6. Whistleblowing practices

6.1 An internal whistleblowing procedure will be effective only if it enjoys the confidence of its intended users and beneficiaries: employees. In turn, employees will have confidence in such a policy only if their employer, from the most senior level, is genuinely committed to it. The best way of signalling the employer’s commitment and securing employees’ confidence is to ensure that the procedure:

•          is consistent with other relevant policies and procedures (for example, contracts of employment, existing disciplinary codes, codes of conduct/ethics, rules on the provision and acceptance of gifts and hospitality, grievance and internal complaints procedures);

•          applies throughout the organisation

•          is seen to be confidential and robust and can demonstrate to users [of the process] that their concerns are listened to and acted upon; and

•          has the support of employees’ representatives.

6.2 It is worth noting that the Public Interest Disclosure Act 1998 applies only to employees normally working in the UK. However, there is a stronger case today for organisations with overseas employees voluntarily providing those employees with protection equivalent to that enjoyed by their UK counterparts by virtue of the 1998 Act. Similarly, organisations which make use of the services of the self-employed and volunteers might usefully provide them with protection equivalent to that enjoyed by employees.

6.3 A charity’s governance professional, and the wider secretariat, should be central in the receipt of, and acting upon, disclosures relating to whistleblowing and safeguarding (unless of course they are implicated in the disclosure). Depending on the internal governance arrangements, that disclosure could then be shared with the audit committee or a lead trustee. However, as such a disclosure could have a material impact on the charity’s activities and reputation, regular anonymised reports should be presented to the board so they can monitor incidents and trends. Trends, serious incidents reported to the Charity Commission and completed internal investigations should be reported in a transparent manner by the charity, but in accordance with the appropriate standards of privacy and confidentiality. Criminal and suspected criminal acts, committed at home or abroad, should be reported to the appropriate authorities expeditiously.

7. Use of non-disclosure agreements

7.1 For charities receiving a proportion of their income from public funds, it might be beneficial to improve a contractual obligation on charities not to use non-disclosure agreements that include ‘gagging clauses’ in matters concerning protected disclosures, including safeguarding or whistleblowing matters[6], similar to that operated within the NHS.

7.2 Following the Mid-Staffs scandal, Sir Robert Francis’ “Freedom to Speak Up” review made recommendations for building an open and honest reporting culture in the NHS. This included protections from discrimination for people seeking NHS employment on the basis that they were perceived to have ‘blown the whistle.’ Interest in the topic led to recommendations by the Public Accounts Committee that revised guidance from the Cabinet Office should require public sector organisations to secure approval from the Cabinet Office for special severance payments and associated compromise agreements where they relate to cases of whistleblowing. 

7.3 The best solution to any issues surrounding the burying of unfavourable news is to ensure that the use of gagging clauses does not prevent the employee from making a protected disclosure. As with the NHS, the charity sector will be better able to deal with incidents of abuse, bullying or serious misconduct if there is a framework by which charities can share learnings from mistakes and act together to tackle and prevent any future issues.

8. Role of Charity Commission

8.1 The Charity Commission will be integral to the success, or failure, of the sector to tackle the issues raised, learn from mistakes, and develop resilience. It has a role to play in educating the public that charities providing safe and high quality services and activities will need to spend more money on those things not currently considered ‘the front line’, but which are essential to ensuring a charity is run properly and treats people well.

8.2 It also has a role in moving the debate away from criticising more open and transparent charities for their mistakes and failures, to one which welcomes that openness and uses it as an opportunity to share learnings and enable all to be better. Those charities leading on transparency and accountability are likely to be the ones that attract more criticism, because of their openness. This is unfortunate, as by recognising the issues they are likely to be at the forefront of tackling inappropriate cultures and behaviours. There can be no doubt that any move towards increased openness and transparency in the sector will bring more examples of poor governance and wrong-doing to light. The regulator is uniquely placed to ensure that such disclosures are received in an appropriate manner and to promote to the wider sector that ‘speaking up’ is an action that deserves respect and requires reflection and change as a consequence. This should sit comfortably alongside its regulatory duties to prevent and investigate charity mismanagement.

9. Charity costs

9.1 Running a modern charity, of any size, requires a certain amount of funds to be spent on administration and management. The public outcry relating to safeguarding, fundraising and the sustainability of the sector means that charities must be seen to be run in a professional manner. This means that not ‘every penny in the pound’ will be spent on the front line, but it will mean that every penny that is spent on the front line is done so in a professional and appropriate manner. If we want charities to provide the best services they can, the public needs to be aware that this costs money; money to counter abuse, mismanagement, fraud and other unsavoury or illegal behaviour.

9.2 ICSA calls on the Charity Commission, funders and sector umbrella bodies to acknowledge and promote better understanding amongst the public that reasonable overheads are a fundamental aspect of a well-run charity. Reasonable overheads can differ from charity to charity, and will depend on a number of factors. As such, an arbitrary percentage figure of funds spent on these running costs should not be introduced, but perhaps examples of a range of figures, according to charity size, complexity, income, age and activity could be provided to help the public understand what a reasonable amount is.

9.3 Those funding charities, via grants and contracts should accept and allow a proportion of that money to be spent on the support, delivery and oversight of that project. Full-cost funding will demonstrate a commitment to charities being able to provide professional services, and speak more widely to other donors and stakeholders that providing safe and high-quality activities requires funds to be spent on those matters that directly and indirectly support those the charity seeks to support.

10. Policing of the Charity Governance Code

10.1 The Charity Governance Code should be reviewed to assess whether specific recommendations pertaining to safeguarding and whistleblowing should be included. Furthermore, large charities should be required to report against the code, as part of the Statement of Recommended Practice (SORP), and this should be policed by the Charity Commission.

10.2 The Charity Governance Code states in Principle 7: Openness and accountability that:

‘The board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.

Rationale

The public’s trust that a charity is delivering public benefit is fundamental to its reputation and success, and by extension, the success of the wider sector. Making accountability real, through genuine and open two-way communication that celebrates successes and demonstrates willingness to learn from mistakes, helps to build this trust and confidence and earn legitimacy.’

10.3 The Charity Commission is well placed to lead on endeavours to help support this principle being implemented, in a way similar to the safeguarding summits already organised. The Commission reports now on the trends and lessons learnt from operational risks, including safeguarding, widening this approach to include more general disclosure and improved transparency arrangements, could be compiled and then shared, either anonymously or with the approval of the charity involved. By sharing examples of what has gone wrong, and how things have been improved, we have a better chance of lifting the standards of the entire sector.