Sean Egan gives a legal opinion on the revised terms and conditions attached to Arts Council England’s National Portfolio Organisation agreements.
I share some of the concerns raised by the wording of clause 8 of the draft terms and conditions applicable to National Portfolio Organisations and Major Partner Museums. Arts Council England’s press release is helpful in explaining the thinking and offering amended wording, but it leaves some questions unanswered and more information would be welcome.
The current NPO funding agreements allow the Arts Council to impose additional grant conditions if it “believes it is necessary to make sure the Agreed Programme is delivered …and/or the Arts Council has reasonable grounds to believe it is necessary to protect public money”.
the wording, from a legal point of view, in the original and revised form of agreement, is unfortunate and raises concerns
The wording that has now been withdrawn would have allowed the Arts Council to impose additional conditions if it “judges that members of the organisation’s governing body, volunteers or staff or any person or organisation closely involved in carrying out the Agreed Activity act in a way that may have a detrimental effect on the Agreed Activity or on the Arts Council’s reputation as a distributor of public money or as a Government sponsored body”.
The revised wording now allows additional conditions if “the Arts Council has reasonable grounds to believe that the Agreed Activities are being carried out by the Organisation in a way that may have a detrimental effect on the Agreed Activities, or on the Arts Council’s role as a distributor of public money. For the avoidance of doubt, this would apply to the manner and speed of the delivery of the Agreed Activities, or to any illegal or negligent actions by the Organisation, and not to any artistic decision made by the Organisation.”
The press statement also gives two examples of the sort of situation where it may choose to impose additional conditions. The first is where there is potential child abuse that is not being addressed (my précis) and the Arts Council wishes to impose requirements as to safeguarding and require additional checks. The second is where the organisation is missing milestones and the Arts Council wishes to take a more hands on role to ensure delivery of the work.
The changes raise a number of issues:
- The examples given to justify the changes do not, in my opinion, provide a rationale for the new wording even in its modified form. The two examples given are dealt with by the wording in the current agreement and no change is required. For the first example, the current wording (standard term 5.2.6) provides that the organisation must comply with best practice in respect of the protection of children – the example sets out a situation where this is not being followed and as this is a breach of the agreement the Arts Council is entitled to impose additional conditions under term 5.12. In the second example the organisation is similarly in breach of the agreement and the Arts Council could also impose additional conditions on the basis that the additional conditions are “necessary to make sure the Agreed Programme is delivered”. I appreciate that standard documents need updating from time to time but I question whether the examples provide justification for the changes.
- The revised wording allows additional conditions to be imposed if “the Arts Council has reasonable grounds to believe that the Agreed Activities are being carried out by the Organisation in a way that may have a detrimental effect on the Agreed Activities” (please forgive the repetition). The grant agreement should clearly set out the Agreed Activities so that the organisation knows what it has to do. This wording allows the Arts Council to object to how the activities are delivered, even though under the grant agreement and the detailed schedules setting out the Agreed Activities the organisation would not otherwise be in breach of its obligations. I would ask the Arts Council to set out the sorts of situations where it would need to use this wording – i.e. other wording in the grant agreement is insufficient. My other concern is that it is potentially subjective and retrospective. It is the Arts Council’s belief (albeit reasonable) that is the basis of the wording, not an objective determination of a “detrimental effect”. The notion of “detrimental effect” itself is highly questionable – must it be a material effect, an effect on whom, should this be a perception of being detrimental or need actual proof? And so on. The more you look at this wording the more uncertain it is. An organisation could be left with the unenviable decision of accepting a judgement of the Arts Council which it doesn’t agree with or challenging it – no one wants to have a serious argument with a funder who may be crucial for the organisation’s existence.
- Lastly, although the wording referring to trustees and others closely involved with the organisation has been removed, I am concerned, as a trustee myself, at the thought process involved in this wording being included at the outset.
For the record I am not criticising the Arts Council or the excellent work that it continues to do in developing and supporting the arts. I just feel that the wording, from a legal point of view, in the original and revised form of agreement, is unfortunate and raises concerns. I am sure these can be addressed and clarified so that when it comes to boards considering these important agreements, the focus can be on delivering the agreed arts commitments rather than being distracted by these provisions.
Sean Egan is a legal consultant.