Serious incident reporting

This page offers guidance to higher education institutions (HEIs) about the requirement in Annex H of the Model Financial Memorandum between HEFCE and institutions (FM) to report serious incidents to HEFCE.

Table of contents

Note on the guidance

The Charity Commission has published guidance to charities generally about serious incident reporting. Our own guidance does not replace or supersede the Commission’s guidance. Rather, it suggests how that guidance might be interpreted in the higher education (HE) sector. It should therefore be of interest to all HEIs whether they are registered charities, or exempt charities of which we are principal regulator.

Serious incidents

A serious incident is one which has resulted in, or could result in, a significant loss of funds or a significant risk to a charity's property, work, beneficiaries or reputation. HEIs must report serious incidents at the time when they are identified. This will include incidents that may have first come to the trustees’ attention after 1 June 2010, although they took place earlier. 

The FM requires HEIs to report the following serious incidents:

  • loss of assets through fraud, theft or other cause where the value of the loss is in excess of £25,000
  • donations of more than £25,000 from unknown donors, or where the source cannot be verified
  • abuse or mistreatment of a charitable beneficiary involved in activities of the HEI
  • disqualification of a trustee
  • known or alleged links (other than for bona fide academic reason) with proscribed organisations or terrorism; this applies to trustees, staff, students, or anyone else associated with the HEI.

Although the formal requirement is to report serious incidents 'at the time when they are identified' we realise that it may take some time for an HEI to complete its own investigations before making a full report to us. We therefore expect institutions to notify us promptly that a situation has arisen, together with an indication of when the HEI expects to report fully.

If HEIs are unsure whether an incident is serious or significant, we recommend that it should be reported anyway.

A serious incident might arise in an HEI's paragraph 28 charity and should also be reported.

 

Additional guidance about reportable serious incidents

Loss of assets

Although the term 'serious incident' stems from our principal regulator role, we are also interested as a funding body in the loss of HEIs' assets. The FM has always required HEIs to report financial fraud or theft above a certain threshold. From 2010, we extended the FM definition of reportable financial losses so that it covers both our funder and principal regulator roles. We have raised the reporting threshold to £25,000 – matching Charity Commission guidance.

We will consider any report under the terms of FM Annex B paragraph 16 to be a serious incident report. This will be the case even if the loss, fraud or theft is less than £25,000 but:

  • reveals systematic weaknesses of concern beyond the institution
  • is novel, unusual or complex
  • there might be public interest because of the nature of the loss or the people concerned.

Donations from unknown donors or unverifiable sources

Donations for this purpose may be in the form of money or other assets. There is a risk that such a donation may be an attempt at money-laundering by the donor, particularly if the donation is subject to special conditions.

There is no need to report a donation where the source is known to be the proceeds of a collection or other fund-raising event.

Abuse or mistreatment of beneficiaries

The abuse of beneficiaries – in particular vulnerable beneficiaries such as children or disabled adults – is thought to be rare in the HE sector. In part, this is because the most obvious beneficiaries of HEIs are undergraduate and postgraduate students - most of whom are not children or vulnerable adults.

It is also the case that, where students or staff of HEIs work with children or vulnerable adults (for example, during teacher training, nursing or social work placements), HEIs have risk management processes designed to prevent abuse or to detect it early and trigger the appropriate response. We are aware that some HEIs do not consider such people to be beneficiaries of their charitable activities, but incidents involving them could impact adversely on an HEI's reputation.

We recommend that HEIs' trustees should consider who are the beneficiaries of their institution, and its paragraph 28 charities. In terms of serious incidents and reporting on them, trustees should focus on those beneficiaries who may be vulnerable, and consider the systems and processes intended to protect them. Trustees will also want to ensure that they receive reports of serious incidents and any consequences.

Incidents involving harm to beneficiaries may take time to investigate and deal with through due process. They may lead to reports to the police or other regulators. HEIs should report such alleged serious incidents to us at an early stage. If investigations reveal no grounds to consider that a serious incident has occurred, the HEI should advise us accordingly.

Disqualification of a trustee

People who are disqualified by law from acting as trustees include anyone who:

  • has an unspent conviction for an offence involving deception or dishonesty
  • is an undischarged bankrupt
  • has been removed from trusteeship of a charity by the Court or the Charity Commission for misconduct or mismanagement of a charity
  • is subject to a disqualification order under the Company Directors Disqualification Act 1986.

It is normally an offence to act as a trustee while disqualified unless the Charity Commission has given a waiver.

The disqualifications listed above apply to all types of charities. The Criminal Justice and Court Services Act 2000 also disqualifies certain individuals from holding a range of positions in children's charities, including charity trusteeship.

Links with terrorism or proscribed organisations

The Charity Commission's guidance refers to sham charities and the use of charities for money-laundering and other illegal purposes. Such cases are rare and unlikely to apply to HEIs in their own right. But most HEIs are large, with complex and dispersed operations (including activities outside Great Britain), and thousands of staff, students and on-site contractors. This size and complexity makes it difficult to ensure that no issues will ever arise. HEIs have also been both targets and victims of terrorist or illegal activity.

Every organisation has statutory responsibilities to inform the police if it has suspicions that anyone associated with it has links with a proscribed organisation, or to terrorist or other illegal activity. 'Links' includes making bribes or inducements, and paying ransoms or protection money. Again, ensuring that internal controls are effective may be more difficult when the HEI operates overseas.

It is important, therefore, that HEIs remain vigilant and that the trustees are informed about the risk assessment and management approaches relating to this topic, and about any incident that might arise.

We are aware that the sector has concerns about the impact of counter-terrorism legislation on academic freedom. This is not, in itself, an issue about charity law. As principal regulator we are not responsible for ensuring that HEIs comply with all of the many laws that apply to them. We are, however concerned that HEIs manage risks of non-compliance which might damage the reputation of an HEI or of the HE sector.

What is serious or significant?

At its most basic level, an incident is serious if the HEI considers it to be serious. Indicators of this could include the involvement of the police or a regulatory agency, the seniority (level of responsibility) of the person involved, disciplinary proceedings against staff, or reports to the senior management team, Audit Committee or Governors.

However, in the HE sector there are many incidents reported to the police – particularly relating to student behaviour - that are not likely to be serious. Most HEIs liaise regularly with the police reflecting a wish to ensure good community relations. Even so, there are occasions when an issue – or series of related issues - may be considered significant and to need senior management or trustee intervention.

Even if events have been well managed there is still potential for damage to the reputation of the HEI concerned or to HEIs more generally.

Our regulatory focus

As the FM makes clear, when an HEI reports a serious incident, our main interest is to understand how the HEI has managed the incident, including how it has reviewed systems and controls to minimise the risk of recurrence. In most cases, if the initial report is comprehensive, we hope that we will not need to seek more information or take further action. If further action seems necessary, it is likely to fall within the range of actions set out in the institutional engagement and support strategy (FM Annex D).

We will also need to consider whether to involve the Charity Commission. Although the Commission is not obliged to act on a request from us it has a number of powers that we do not.

The Commission itself publishes an annual report on serious incidents (Adobe PDF) that it has dealt with to promote good practice in the charity sector. The most recent report repeatedly refers to the responsibilities of the trustees both to ensure that systems are in place to manage risks and that they ensure that those systems are effective in practice.

The FM (Annex H, paragraph 13) describes our intention to treat reports of serious incidents with care but explains that we are subject to the Freedom of Information Act. Further guidance about the way we apply both the Freedom of Information Act and the Data Protection Act is available on our web-site.

Further information

Charity Commission guidance

Independent research

'UK counter-terrorism provision and civil society: ensuring responsibility, ignoring proportionality' (Adobe PDF 84K) by Dr Alison Dunn, Senior Lecturer, Department of Law, University of Newcastle.

(We are grateful to Dr Dunn for permission to use this article which explores the implications of recent counter-terrorism legislation for governance in charitable and similar organisations. We do not endorse the views expressed in the article, but hope it will stimulate discussions in the HE sector.)

Government publications

'Promoting good campus relations, fostering shared values and preventing violent extremism in universities and higher education colleges'

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