04 Aug 2020

The Charity Commission has published its inquiry report into mismanagement at RNIB, describing the case as "one of the worst examples … of poor governance and oversight having a direct impact on vulnerable people". The facts which gave rise to the inquiry are set out below.

Key findings

The Commission determined that there had been systemic shortcomings at RNIB between 2015 and 2018 in respect of:

  • The charity's capability to manage complex and specialist care needs at the RNIB Pears Centre children's home in Coventry, including a failure to ensure adequate and appropriately trained staff were in place and a failure to manage the use of medical prescriptions
  • The governance and management of RNIB’s estate of specialist care and educational centres
  • RNIB’s broader corporate governance, which did not adequately address the complexity, scale, nature and associated risks of the charity’s activities and disparate group structure.

The report goes on to say that these shortcomings resulted in harm to beneficiaries, and that those beneficiaries and their families were "badly let down" by the charity. The failings, along with the associated financial losses caused by the issues at the Pears Centre and its subsequent closure, constituted misconduct and serious mismanagement in the administration of the charity.

The overall picture painted by the report is one of systemic failure across all aspects of governance within the organisation; Helen Stephenson CBE, the Commission's Chief Executive, said "A catalogue of serious failings were allowed to occur, because the charity’s governance was simply too weak for the trustees in charge of the charity to do the job that beneficiaries needed them to do."

Background

In March 2018, following serious safeguarding and mismanagement concerns at the RNIB Pears Centre, the Commission launched an inquiry under section 46 of the Charities Act 2011 into potential mismanagement and child safeguarding breaches.

Initially the focus of the inquiry was on specific failings at the Pears Centre relating to safeguarding (these failings having been identified in earlier reports from the Care Quality Commission and Ofsted).

The Pears Centre closed in November 2018 (during the course of the inquiry's investigation) after Ofsted notified RNIB of its proposal to cancel the Centre's Ofsted registration due to myriad safeguarding failures and potential breaches of the regulations set out in The Children's Homes (England) Regulations 2015.

The safeguarding crisis at the Pears Centre quickly led to financial issues for RNIB. The centre had been loss-making throughout its period of operation and its regulatory difficulties had led to increased borrowing costs for RNIB. At the time of its closure the Commission calculated that the total financial cost of the Pears Centre to RNIB (taking into account its cumulative operating deficit during its lifetime) was £30.71 million.

After the closure of the Pears Centre the inquiry's scope was widened to include an assessment of financial losses incurred by RNIB and the trustees' financial decision-making in respect of the Pears Centre.

In addition, the preliminary findings of an independent review led by Hugh Davies QC in parallel with the Commission's inquiry raised further concerns around RNIB's broader governance and decision-making processes – the inquiry built these further issues into its report.

Points of interest

The Commission rightly highlights the legal role and responsibility of the trustee board in its report, noting that ultimate responsibility for the failures at RNIB lies with them and they must be held to account for the same. This is a reminder that all trustees should continue to ensure they understand the risks to their charity and make sure those risks are properly managed. Trustees can do this by ensuring they have the right information from management, interrogate that information and seek clarification or validation from senior management as required.

What is interesting about this report when viewed against other recent high profile inquiry reports is the clear acknowledgement from the Commission that the systemic failings at RNIB were not solely the fault of the trustee board but represented failures across the organisation. The Commission seems to accept that it can be difficult for trustees of significant, complex organisations to ensure they are equipped to do their job well, because they are often not sufficiently appraised and / or meeting frequently enough.

The report therefore acknowledges the governance challenges around the operating model of large service-providing charities, in which trustees (nearly always acting voluntarily) oversee an executive management team which has considerable latitude in operational decision-making. Of course, until there is a shift in the paradigm of charity governance, the legal position remains that trustees are ultimately responsible for everything that goes on in their charity, and they therefore expose themselves to criticism (and potential risk) in the event that something goes wrong which exposes a weakness in governance.

The Commission refers to the Charity Governance Code in its report. The Code is a sector led guide to best practice in charity governance, originally published in 2005 but substantively updated in 2017. All trustees should ensure they have read (or re-read) the Code, and that they have implemented its recommendations wherever possible.

Update to the Charity Governance Code

From November 2019 to February 2020 the Steering Group responsible for the Code's development ran a consultation exercise with stakeholders across the sector with a view to refreshing the Code during the course of 2020. Production of the report detailing the results of the consultation have been delayed as a result of the pandemic, but we are expecting it to be published during the course of this month, with the updated Code launched by the end of the year. In addition, the Steering Group is hosting a webinar on 12 August to explore the consultation's findings and to discuss potential changes. We will provide a further update on the nature of the changes to the Code as and when we learn more.

In any event, the principles in the Charity Governance Code remain relevant to ensuring that charitable organisations have the most solid governance foundations.

Regulatory alert

The RNIB inquiry prompted the Commission to issue a regulatory alert to all operational charities with revenue in excess of £9 million which have "more complex" governance and management structures. Complexity in this context refers to having separation in the system of governance, with a board of trustees having strategic oversight and a separate group of executives taking operational decisions (i.e. the normal operating model for large service-providing charities).

The regulatory alert stresses the importance of accountability and transparency in charity governance by:

  • Minding charity trustees of the need to maintain robust oversight of their charity's operations and structure, noting that as an organisation increases in size and complexity (RNIB, for instance, delivers its services through a complex network of operating subsidiaries) this oversight requires a greater level of understanding on the part of the charity's trustees
  • Suggesting steps which senior employees can take to help their board in its role as strategic overseer, for instance by putting in place regular reporting lines and considering ways to provide the Board with better assurance in respect of the charity's activities
  • Emphasising that where charities work with vulnerable individuals, protecting people and safeguarding responsibilities should be a governance priority and not an optional overhead, even in times of economic distress such as those caused by the COVID-19 pandemic.

The central theme of the alert is that, while the Commission acknowledges the considerable decision-making powers delegated to the executive in large charities, the trustee board must always take responsibility and be willing and able to hold the executive to account.

We would urge trustees and senior employees of all operational charities to read the regulatory alert carefully, particularly if your work involves engaging with children or vulnerable adults.

Trustees need to ensure that their governance documents and processes not only talk the talk, but they walk the walk in terms of how they are applied to decision making in practice. Ensuring the board debate is properly informed, trustees must be rigorous in their interrogation and challenge of management information. We see many charity governance structures and ways of working which have not kept pace with the regulatory requirements of 2020 and beyond. Boards need to think and work differently.

Please do get in touch if you want to talk about Board effectiveness and ways of working.