scruttonbland.co.uk
CHARITY NEWSLETTER
Topical updates for your charity and not for profit organisations over the next 12 months
Contents 3 Welcome to our latest newsletter, covering the key financial issues facing charities and not for profit organisations
Charity newsletter introduction
8 It’s only large
charities that need an audit – isn’t it?
10 Running a charity event this year?
The past year has seen the post-Covid world continue to open up, and you might have been forgiven for sensing a glimmer of optimism on the horizon. But we did not anticipate the war in Ukraine, inflation soaring to levels not seen in 30 years and a cost-of-living crisis set to push 1.3 million people in the UK into absolute poverty, according to the Resolution Foundation think tank.
4 Guide to insuring and employing volunteers
12 The dangers
of phishing for charities
T he result of these recent events? Whilst demand for the services UK charities provide has grown, the premiums demanded by insurers have also increased, and we are seeing rising levels of claims, placing the trustees and managers of charitable organisations under more pressure than ever. So, what can charities do to mitigate current risks? Here are some simple steps to protect your charity against claims against you: Ensure your risk register is reviewed and current to reflect your organisation as it operates now – it will be the first thing that loss adjusters look at in the event of a claim. Keep your internal records properly documented and maintained. If you need to make a claim then it is important to have proper records of, for example, who was on your premises that day, and the security of the building. Make sure staff and volunteers are trained. The days of ad hoc training are long gone, and there are lots of sources of free or low cost training such as official government guidance and advice from national organisations such as NCVO and ACEVO.
Keep your accident book up to date. If there is a slip, trip or other accident on your premises and it isn’t recorded in your accident book, it will be much harder to defend a claim being made against you. With these points in mind, it is important that charities make best use of the independent services that exist to help them manage and mitigate the risks they face. Insurance is a key requirement for not for profit and charitable organisations, but the different covers and the levels of protection will vary considerably depending on the size and complexity of their operations, so it’s going to save you time and money if you talk to a charity insurance professional who knows the market inside out and can quickly locate the best and most cost- effective insurance for you. Similarly getting an independent audit may be something that a charity now needs to organise, if they need a bank loan, or apply for a grant from a government body. And finally, getting to grips with their tax requirements is vital in order to meet their regulatory obligations, and avoid the financial pitfalls that could result in unforeseen fines. At Scrutton Bland we have highly qualified and knowledgeable independent advisers who have decades of
6 Are you managing your cyber risks?
14 My charity doesn’t need specialist insurance advice – does it?
experience dealing with charities, and who would love to hear from you.
We hope you’ll find some useful advice in this newsletter and would love to hear from you if you have any comments, or if you’d like to know more about anything we’ve covered. We love working with our charity clients, and we understand that your priority is to always act in the best interests of those that you serve. We’re here to help you manage your financial operations as simply and cost effectively as possible.
Shirley Greer, Charity Director
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Guide to insuring and employing volunteers
Volunteers play an important role in most charities, but without the right practices and policies in place, things can go wrong.
Do charities need to insure volunteers? Legally speaking, you don’t have to. However, doing so can offer the volunteer the same protection as one of your employees, should a claim be made involving the volunteer, as well as protecting you if the volunteer brings a claim against you. Despite your best efforts to keep the distinction clear between employees and volunteers, there can be situations where the law regards a volunteer as an employee. This can be complicated and lead to disputes with insurers, so it is always best to have volunteers included within the policy definition of employees. Most liability policies extend to protect employees against claims made against them while working for you (in the same way as you would be if the claim was made against you). Including volunteers within the policy definition of employee ensures that they have the benefit of your policy cover should they have the misfortune of having a claim made against them while volunteering for you. The same applies where you arrange other covers for the protection of your employees, for example, assault or personal accident cover. How can charities ensure insurance is ‘fit for purpose’? Check your policy wording, particularly if you have more than one insurer covering your liabilities and ensure that such covers dovetail together (a specialist charity insurer will usually be able to provide this cover within one comprehensive policy). For more information on insurance cover for your volunteers please get in touch with one of our friendly charity team who would be happy to talk to you about what you may need by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
These are some of the questions charities should consider when employing volunteers.
Is there a guide for best practice and legal requirements? Volunteering England has a ten-step quality standard. It is an independent charity and membership organisation committed to supporting, enabling and celebrating volunteering in all its diversity. The National Council for Voluntary Organisations, which represents 16,000 voluntary organisations, community groups and social enterprises across England, also publishes useful guidance on its website. What should a volunteer agreement include? Some organisations use volunteer agreements to ensure separation from employment contracts. These are helpful to define what you would like a volunteer to do and set boundaries of expectations, but they should avoid any terms implying contractual obligations. Should charities have a written guide detailing the volunteer’s role? Managing a volunteer’s enthusiasm and directing their energy in the desired way requires skilful oversight, either by an employee or an experienced volunteer with a demonstrable track record. When recruiting volunteers, it is advisable to set out what the parameters of the role will be. This needs to be recorded in writing, agreed with the volunteer and preferably signed and dated. Having this documented record will help your insurer defend your position should an incident arise where a volunteer is injured and it involved activity outside the agreement. Do volunteers need to have a DBS check? In general, providers and managers of regulated health, child and adult social care services have to ensure that all staff (including volunteers) who come into contact with children or vulnerable adults have a satisfactory DBS check. More information on DBS checks can be found on the gov.uk website.
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Are you managing your cyber risks?
These days, cyber risk should be high on the third sector’s risk management agenda, as cyber-criminals target charity organisations with increasing frequency.
V irtually every charity and not- for-profit organisation, even non-governmental and non- profit-making ones, operates electronically to some extent in order to perform its key services. This can be anything from a website or online profile or using third-party software to manage back- office requirements such as accounts and payroll. In this article we look at the different types of cyber risks affecting the care sector and what to do about them.
Types of cyber risk When it comes to cyber risks we aren’t just talking about the more obvious hacking incidents – exposure to such risks can also arise from employee and software errors. Since the implementation of GDPR back in 2018, breaches which result in personal details ending up in the wrong hands are now considered major incidents and can see organisations facing fines of up to £17.5 million or 4% of their annual turnover, whichever is greater. Civil claims can also be brought by each of those affected. Digital data therefore comes with increasing legal and reputational risk.
Managing cyber risks Cyber security services, including data risk analysis, data masking (which is the process of hiding classified data with modified content) and vulnerability discovery (the process of researching a piece of software or hardware to evaluate the presence of vulnerabilities), is a fast-growing sector and a trend which is expected to continue and accelerate over the next few years. Cyber security professionals can help organisations with some preventative measures, such as vulnerability discovery and data masking, to help mitigate risks. But whether or not you choose to use them the key point to remember is that third sector organisations should protect their communications and data in the same way that they protect the security of their buildings and property assets.
Cyber risk can be grouped broadly into the following categories:
Of course, some cyber risks are simply not preventable and are fuelled by our dependency on IT, GDPR legislation, and a compensation culture around privacy. Specialist cyber insurance policies can offer policyholders a combination of incident management and access to legal and PR experts, as well as cover for costs such as those caused by business interruption or data issues. An effective insurance policy will help charities and not-for-profit organisations to respond to cyber incidents and boost the confidence of the other parties they provide services for. If you need any help and advice around cyber insurance for your organisation, please email hello@scruttonbland.co.uk or just pick up the phone and call 0330 058 6559 to discuss your needs with our charity and third sector specialists. We already look after the insurance needs of 1000 charities and would be happy to advise you on your requirements.
– Operational cyber risk - The risk to business continuity if organisations are denied their electronic systems. – Financial cyber crime - Committed by hacking/spoofing communications, such as fund transfer requests and interfering with website payment links. – Data risk - The risk associated with the increasing amount of data that organisations are holding and transferring. A significant part of information cyber risk relates to the growing legal regulations and sanctions associated with data.
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It’s only large charities that need an audit – isn’t it?
At Scrutton Bland we specialise in audits for the not-for-profit sector, particularly charities. Tim O’Connor, Corporate Services Partner, discusses the need for charities to have audited financial statements and the benefits that brings, particularly in a time of economic uncertainty and the collapses of some businesses due to accounting irregularities.
F or some charities an audit can be seen as an requirement. An audit can provide stakeholders and Trustees with the comfort that they are compliant with the necessary Charities Commission requirements as well as providing them with credibility to donors and stakeholders that their funds are being appropriately managed. Basic principles Charities are regulated by the Charities Commission which requires that all charities must maintain accounting records and prepare accounts. These must be made available to the public on request. Registered charities must also prepare a Trustees’ Annual Report incorporating their financial statements, which will vary in terms of content, dependent upon the size and constitution of the charity. The Trustees’ report is a method for the charity to explain to the users of its financial statements the charity’s purpose and how its activities have helped to achieve that in the previous year. This can be seen to be a method of promoting the charity, however the report should be balanced. unnecessary compliance cost, diverting valuable time and resources away from the charity’s core activities and purpose. However, the benefits of an audit are far more extensive than achieving a legal
Does my charity need to be audited? In most cases charities are governed by the Charities Act, and for incorporated charities, also the Companies Act. However the threshold for charities to be legally required to prepare and file audited financial statements is much lower than those of private and public companies. The law now states that charities with an income of £1 million and over are legally required to be audited. An audit will also be needed if total assets (before liabilities) exceed £3.26m, and the charity’s gross income is more than £250,000 per annum. Audits may also be undertaken if it is required by the charity’s governing document or due to a condition imposed by a funder. Charities with a gross income in excess of £25,000 are required to have an independent examination of their financial statements, which requires a lower level or inspection, but provides stakeholders with the reassurance that their financial affairs are in order at a basic level. However a charity can voluntarily request an audit and there is a strong argument for charities voluntarily submitting their accounts for inspection by an auditor.
So why have an audit? The benefits of having an audit are split into 3 areas:
Control and process improvement – Whilst an audit is typically focused on the numbers in the financial statements, the insight that an independent auditor is able to provide to your charity’s processes is extremely valuable and will highlight areas of your financial processes that may need attention or tightening up. A good auditor will work with you to suggest improvements to your charity’s administrative systems which could save your charity time and resources. They may also have suggestions for methods that can assist in reduce the charity’s tax and VAT liabilities. At Scrutton Bland our experience in auditing a range of charities means that we are able to benchmark your charity against other similar organisations, to help you understand how you are performing and to suggest areas that can be improved. How do I choose an auditor? Working with an independent auditor who understands the charity sector is a great place to start. They will know the kind of issues that you face and will be able to work with you and your teams to offer practical solutions and useful assistance. At Scrutton Bland we offer a range of services for the charity sector including audit, accounts, taxation and insurance and we have experienced and friendly specialists in each area who understand how important it is to help you to manage and mitigate the risks you face.
Assurance - If you are a Trustee or a stakeholder of a charity, then an external audit of your financial statements can give you much greater confidence that the financial position is appropriately presented. You will be able to demonstrate that your accounts are being properly managed and that your accounting systems are producing reliable financial information. This information can then be used as a clear basis to make future decisions. Furthermore, whilst an audit cannot guarantee that fraud is not taking place, it is an important tool in the prevention of fraud. The audit process will assist Trustees and management in highlighting where processes can be improved to reduce the risk of fraud and identify risk areas. A common issue for smaller charities is either the lack of segregation of duties or the lack of in-house financial expertise. Reputation and credibility – An audited set of financial statements can be an important piece of information in presenting your charity’s credibility to future donors. If the donor can see that donations are being managed and spent appropriately then they are far more likely to support the charity. Typically, donors will provide funds with certain restrictions and will gain comfort that the expenditure incurred is appropriately offset. Furthermore your lenders will typically request audited financial statements as a prerequisite for a loan agreement.
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Running a charity event this year?
How to get your insurance right for fundraising event
A fter three years of virtual or hybrid events, it’s wonderful to hear that many in-person events will be happening again this year. Whether that’s an AGM, a conference, a parade or a quiz night, these fundraising events are which are often integral to the continued success of a charity and obtaining the correct insurance is an essential part of organising a successful event.
Public liability insurance First of all, this form of insurance protects a charity against any injury caused to a member of the public because of negligence on the organisation’s part. An example of this could be a member of the public tripping over an obstacle at an event. In addition, public liability insurance also covers damage made to third- party property. Many charity fundraising events will be held in public spaces such as community centres or rented properties. It is very easy to accidentally damage the floors or walls when setting up and running an event, with some seemingly minor damage costing a surprising amount to repair.
Employers’ liability insurance This insurance is a legal requirement if a charity has contracted employees and can sometimes, depending on the policy in place, also cover any volunteers for the organisation. You should always double-check whether this is the case or not. Public liability does not normally cover volunteers, so investment in a suitable policy is very important. Business equipment insurance As well as protecting a charity against outside claims, providing cover for an organisation’s equipment and assets is also recommended. Electrical equipment such as laptops, microphones and speakers, for example, can cost thousands of pounds to replace. Business equipment cover can protect a charity against paying out for expensive repairs or replacements.
Event cancellation insurance This type of cover can safeguard your charity if your fundraising event is postponed or cancelled for reasons outside your control, such as weather, illness, or the non-appearance of a speaker or celebrity guest. If you or your charity are planning to host any events this year, reach out to our charity insurance specialists to get a no obligation quote by calling 0330 058 6559 or emailing by the team at hello@scruttonbland.co.uk
Charity fundraising events often take a long time to organise and can require a lot of investment, so it is always sensible to arrange some form of protection against unforeseen circumstances occurring at the event or prior to it taking place – whether it will be a low-key affair or a large-scale operation. Most charities will, of course, make every effort to ensure all risks are minimised before an event, but taking out such insurance will help to protect even the most organised charity against any unpredictable or unavoidable problems. Take the pandemic, for example – no matter how much risk management a charity did when organising their events for 2020, it’s highly unlikely they had a plan that considered the outbreak of coronavirus.
Although organising insurance might seem like a hassle, it can save a significant amount of money should somebody make a claim. If there is no insurance in place, costs will have to come out of a charity’s own finances and the total can rack up to thousands of pounds’ worth of compensation and legal fees. The Chartered Institute of Fundraising offers plenty of advice on the matter, but there are four basic types of insurance to consider.
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The dangers of phishing for charities
Phishing attacks are as dangerous as any other malicious act performed by internet hackers and are becoming increasingly sophisticated. Here’s our guide to what to be aware of.
A s more of the general public are becoming educated on cyber security and taking steps to reduce the chance of falling victim to an attack, attackers are introducing new methods to lower people’s guards. Go Phish! A staggering one in five people fall victim to scams every year and nearly 50% of adults have been targeted by a scam. Phishing is a method cyber criminals use to steal sensitive information by making the victim believe they are a trustworthy entity. It’s usually over email, but can involve websites and social media accounts, or even letters posted through your letterbox. Attackers are able to fake their identity by using techniques such as email spoofing or phone number cloning and can register an email address that looks very similar to one you would trust.
Beware of the fakers Televised disasters like the Grenfell Tower fire or school shooting incidents in the USA have been catalysts for cyber criminals, allowing them to tug at the heartstrings. With the speed at which news – real or fake – propagates through social media, along with the help of Twitter bots being used to interfere with trending hashtags, phishers have been able to use these tragic events to their advantage. The COVID pandemic was, unsurprisingly, an opportunity for cyber criminals to target new victims, with scam emails purporting to be from HM Government, asking for donations to the NHS as part of a “nationwide appeal in efforts against coronavirus”. The Charity Commission also warned that the pandemic has created environments that are enabling charity fraud.
Effective phishing isn’t about being highly technical, but about being aware of the human condition and understanding how to lower someone’s guard merely through an email subject line. This is why there is a continuous evolution in phishing methods employed to catch people off guard. In the past, criminals would use scare tactics to retrieve sensitive information from unsuspecting victims, using approaches such as “your account will be deactivated if…” to grab people’s attention – a form of cyber extortion to which we’ve since been desensitised. Consequently, phishing campaigns have recently started to leverage the emotional effect charities have on the public. Figures from Action Fraud, the national reporting centre for fraud and cyber crime, show that from January to November 2022 almost £2.3 million was lost to charity fraud, money that charities desperately need.
Fake donation emails and charity websites have started to become the norm for phishers, causing problems for more than just the victim. Donors are made to think they’re contributing to a legitimate cause, completely unaware that their donation is going straight into the pocket of fraudsters, not towards helping those in need. Protect yourself and your donors The best way to protect yourself and those who you interact with is to remain vigilant when reading an email, text message or a social media post about your charity. Make sure you have up- to-date virus protection software, don’t click on any links or open attachments if you don’t know where they have come from, and make regular data backups. The message to donors is that if they want to donate it’s best to go directly to the charity’s website rather than through third parties.
You can direct them to websites like gov.uk’s Charity Commission or give.org, which allows people to research charities and not for profit organisations, providing peace of mind that they are legitimate charities that aren’t going to disappear once they have clicked ‘send donation’. If you come across what you think is a fake charity that is trying to scam you, the best thing to do is report it. For the charities who suspect they may have fallen victim to cyber fraud, Harvey Grenville, Head of Investigations and Enforcement at the Charity Commission, advises that they “report it immediately to Action Fraud and to the Commission. You can visit www.gov.uk/guidance/protect-your- charity-from-fraud for advice and top tips on how to protect your charity against cyber- fraud.”
It’s important that phishing attempts are reported, not just deleted. Working as a community will help to fix this problem and ensure everyone’s donations are sent to legitimate charities instead of scammers. Our charity and not for profit team is made up of experienced professionals who have been handpicked from within our business for their expertise in their specialist fields. We understand how important it is for charities to get it right, particularly as the sector remains vulnerable to so many risks. From supporting trustees as they deal with regulatory requirements, to providing assurances that your organisation is operating as it should be, through an Internal Audit, we have advisory teams who can help you to manage and mitigate these risks, leaving you free to get on with helping the causes your charity was set up to assist.
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My charity doesn’t need specialist insurance advice – does it?
The work that charities do is often at the forefront of society’s wellbeing. So it’s important they talk to an experienced insurance broker to help set up comprehensive insurance cover that is tailored to their needs. These are some of the main reasons why:
Abuse Charities need to ensure they’re protected against possible claims of abuse against their organisation. These claims can be complex and can often be brought years after the incident has occurred. Abuse cover can be provided on a claims-made or claims-occurring basis; the latter provides clients with long-term protection for their business. Specialist insurers can provide retro abuse cover in the event that clients have previous periods of claims-made abuse, ensuring these gaps in cover provision do not leave clients exposed. Another issue is that many insurers won’t openly state that they cover abuse which is why it’s so important to talk to a specialist who can help you as the policyholder understand exactly what is covered.
Medical malpractice Traditional professional liability cover can exclude medical professional liability or cases of medical malpractice to which charities are exposed. Specialist insurers will understand this exposure and provide specialist cover and ensure these risks are under one single policy - this minimises the chance of claims falling between insuring clauses. Breach of professional duty Professional liability provides cover for claims arising in the event of an allegation of provision of incorrect advice or negligent services by those considered to have expertise in the services they provide. A ‘standard’ professional liability policy can exclude charity scenarios or provide insufficient levels of cover. A specialist charity policy will ensure these risks are under one single policy, minimising the chance of claims falling between insuring clauses.
Volunteers Employers have a legal responsibility to maintain a safe working environment, and failure to do so could result in a claim under employers’ liability cover. However, volunteers aren’t considered employees under law and this can lead to confusion. Organisations that rely on volunteers should consider specialist policies that ensure volunteers are covered. Honesty Whilst the vast majority of charities hold the highest levels of integrity, it is vital that their trustees and managers consider specialist policies which will protect them against fraud, theft or dishonesty by volunteers or employees. Common examples include fabricating invoices, false expense claims, petty cash theft and stealing collection tins. These often occur in small amounts initially and build up over time, resulting in a significant financial impact on the organisation’s finances.
Legal expenses A more robust regulatory and legislative compliance environment has seen a marked rise in the number of enforcement actions taken against operators in the charity and third sector. Against this background, it is crucial to have access to a legal expenses policy which responds, understands and delivers protection against the unique exposures that charities may face. Regulatory and compliance obligations Understanding what you need to do to comply with regulations and providing the appropriate training to staff as well as risk management can be difficult for any business. Care organisations are amongst the most heavily regulated with regular reviews by CQC/Ofsted, health checks and inspections, and specific training needs including safeguarding. This makes it more important to stay up to date and ensure the ever-changing regulations and laws are adhered to at all times.
Through our specialist charity scheme, we provide charity and not for profit clients with exclusive terms and a bespoke set of covers that aren’t readily available on the open market. Our insurance is underwritten by one of the UK’s leading, A-rated insurers, giving our care organisation clients the cover they need in one policy and at an affordable premium. Get in touch with our specialist charity team for a no obligation insurance review by calling 0330 058 6559 or emailing hello@scruttonbland.co.uk
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Meet the Team We have a long-standing association with the charity sector and our specialists have a thorough understanding of the opportunities and challenges facing the sector. We aim to build long-term trusted relationships with our charity and not- for-profit clients. It is important to us that we fully understand the charitable organisation’s aims and objectives, in order for us to provide bespoke and appropriate advice. Get in touch with a member of the team to see how they can help you.
Tim Mulley Senior Partner tim.mulley@ scruttonbland.co.uk 01473 945741
Graham Doubtfire Private Client Tax Partner
Richard Atkinson Account Executive richard.atkinson@ scruttonbland.co.uk 01473 945744
graham.doubtfire@ scruttonbland.co.uk 01206 417267
Tim O’Connor Audit Partner tim.oconnor@ scruttonbland.co.uk 01206 417225
Chris George Tax Advisory Director chris.george@ scruttonbland.co.uk 01473 945836
Keri Lucas Account Executive keri.lucas@ scruttonbland.co.uk 01473 945745
Paul Goddard Risk & Assurance Partner paul.goddard@ scruttonbland.co.uk 01473 945842
Shirley Greer Charity Team Director shirley.greer@ scruttonbland.co.uk 01206 417279
0330 058 6559 scruttonbland.co.uk
@scruttonbland
Scrutton Bland Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority. Our FCA registered number is 828934. 0763/02/2023/MKTG
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