Charities' Legal Spend – In Support of Your Charity, What to be Aware of
What do charities need to consider to demonstrate responsible management?
Charity spending on legal fees recently hit the headlines again, as part of Save the Children being questioned before the International Development Committee of the House of Commons about the recent allegations against it. Part of the session included questions on letters sent by the charity's lawyers to media organisations in response to the media's unfavourable reporting on the allegations.
It is not the first time that charities have come under scrutiny for their legal spending and proactive legal action. The former chair of the Charity Commission, William Shawcross, noted in one of his last interviews before leaving office that well funded charities may be using lawyers to head off unwanted attention.
Separately, the RSPCA has had to justify its spending on private prosecutions on alleged animal cruelty.
Charity, including academy, trustees have a duty to act in furtherance of their charitable objects and to manage charity resources prudently. There is significant scope for trustees to determine what may be in the best interests of their charity. As part of that trustees are actively encouraged to seek advice as and when they need it. Setting an annual budget for legal (and other professional) advice can help demonstrate responsible management
Charity Commission guidance states that "a decision to take or defend legal action must be made exclusively in the best interests of the charity, having considered whether or not another course of action is available". That includes consideration of the economic prospects and proportionality of any such action.
Adding an interesting twist is the decision of the Charity Tribunal in the Support for Heroes case (2017). Whilst the tribunal noted that the technical legal advice given was accurate, and did not comment specifically on the amount spent, it did suggest that the charity's lawyers should have alerted the charity to possible reputational risks inherent in the contemplated course of action which the trustees should also have in mind.
Chris Billington, Head of Education at Wrigleys comments: "It is not surprising that charities spending money to stave off media attention will itself attract media attention. Those charities, including academies, which are publically funded should also expect detailed scrutiny. Charities must, as a matter of good governance, be able to justify their spending decisions to all key stakeholders in an open and transparent way. Legal spend, as with any other expenditure, should further a charity's objects but that does include protecting and promoting the work of the charity."
