Charity Commission issues warning to local authorities over failure to comply with legal duties as charity trustees
The Charity Commission has seen a significant number of cases where local authorities have failed to comply with their legal duties as charity trustees and the watchdog has had to take action following receipt of complaints from the public, its new chief executive has warned.
In a regulatory notice sent to chief executive officers of local authorities calling on them to ensure compliance, David Holdsworth wrote: “As a fellow public sector leader, I know that these are tough times for local authorities, which are having to step up to the pressures created by ever increasing demand coupled with tighter budgets.
“It is therefore not unsurprising that we have seen a rise in the disposal of, or a change of purpose for, charitable assets such as buildings or land as councils look to balance their budgets in challenging circumstances.”
He warned, however, that cases where local authorities have failed to comply with their legal duties as charity trustees can be costly and resource intensive for both councils and for the Charity Commission as the regulator.
“Often these changes, if not done correctly, will also result in additional budget pressures on local authorities rather than providing the additional resources initially thought,” Holdsworth suggested.
The regulatory notice revealed that common problems the Charity Commission sees include local authorities changing the use or status of charitable land, or disposing of it, in a way that is not compatible with its charitable purpose, “sometimes without even realising it is charity property”.
Holdsworth added that as well as causing concerns for local beneficiaries of the charitable asset, it can create a significant administrative headache for the local authority to retrospectively correct the situation. “We have dealt with recent cases involving local authorities which highlight the inherent risks of councils not identifying issues pertaining to charitable land early enough, or at all.”
Setting out the action required, the Charity Commission’s chief executive said it is important that local authorities understand which of the assets they manage or own are charitable.
Many local authorities act as trustees of charities, often of public facilities such as recreation grounds and public gardens; concert halls and buildings of historic interest; swimming pools and war memorials.
But Holdsworth suggested that “often due to the passage of time or turnover of personnel authority leaders and councillors don’t realise that they are trustees of charitable assets rather than simply owners of an asset.”
The regulatory notice recommends that local authorities review their asset register and clearly identify on it those assets held which are charitable.
Holdsworth then urges councils to be ensure they are familiar with the different legal requirements and legal restrictions on actions in relation to assets that are charitable rather than simply owned.
The Charity Commission has recently published new formal guidance for local authorities, which:
- outlines what is expected of local authorities in the role of trustee
- gives advice on how to handle issues such as managing conflicts of interest
- explains filing accounts requirements; and
- sets out rules around disposing of charity land
The Commission has also produced a shortened version for councillors, jointly with the Local Government Association.
Holdsworth also asked councils to consider the watchdog’s new Recreation Ground Charity guidance which examines some of the common problems that trustees of such charities often encounter and what they can do to address these, such as hiring new trustees and exploring avenues for raising additional funds.
