Given the deteriorating state of relations between the sector and the Charity Commission, is there scope for a complete overhaul of charity regulation? If the model’s broken, can it be fixed or should it be rebuilt?
One suggestion is to charge charities for regulation, thus solving the funding problem (the commission is currently entirely government-funded, and recent cuts have seen its budget slashed from £31.7m in 2007/08 to £21.4m in 2013/14. The commission’s chair William Shawcross is a fan: he recently aired the idea of applying charges to charities with annual incomes above £100,000.
Lindsey Williams, director of external services at Wales Council for Voluntary Action, has some sympathy for the idea, saying “good regulation helps charities in the long run and an under-resourced regulator is not particularly effective”. But she doubts that charities would respond positively to a paid-for proposal. Other sector bodies, such as Acevo, reject the proposal, while Pauline Broomhead, chief executive of the Foundation for Social Improvement, FSI, says her members, all smaller charities, feel that money raised should go directly to support their cause or beneficiaries.
Suggestions that the commission should drop its quasi-independent status and sit within government instead are also summarily dismissed. The general feeling is that it is better to have some independence than none at all – and preferably, total independence with transparent, non-political governance structures . This is exactly what umbrella body NCVO is looking into.
Closer collaboration between charity regulation and HMRC, however, is broadly supported. Andrew Edwards, deputy director and head of charities at HMRC, recently told the joint committee on the draft protection of charities bill that prior to 2010 the regulator and the tax department shared very little. Since then, a close working relationship has helped HMRC deal with some 4,000 to 5,000 inquiries a year related to financial mismanagement within charities.
Edwards also announced that by April 2016 the two organisations will launch a joint online portal. “Charities will be able to put all their details in and it will go to both the Charity Commission and us … it will also be made available to the regulators in Scotland and Northern Ireland,” Edwards said. “That new system will both help weed out inappropriate charities and help us to work together better.”
Big changes to charity law also loom large. The draft protection of charities bill – currently being scrutinised by the joint committee – proposes new powers for the commission, including the ability to issue official warnings, to disqualify trustees for up to 15 years or suspend them for up to two years, and to forcibly close charities and transfer their assets.
The commission’s head of policy, Sarah Atkinson, describes these as a “modernised set of powers for a modern regulator”. She highlights the need for formal warnings as an example. “At the moment there’s nothing in between us writing a charity a stiff letter, which they can and do ignore, and using formal powers in a statutory inquiry.”
However, Professor Gareth Morgan, a lecturer in charity studies at Sheffield Hallam University, argues that charity regulation is in a state of crisis. There are important sections of the 2006 Charities Act that remain unimplemented, he says. The draft bill does not address these and is being prioritised because of a perceived link “with the terrorism agenda”, he says. Indeed Met Police detective chief superintendent Nicholson recently described the proposed new powers as a “tremendous help” and said that “charities [are] being abused for radicalisation and extremism purposes”.
Many charities see all this as a sledgehammer to crack a nut. “None of our members felt that [terrorism] was an area of significant concern,” says Broomhead. But Williams argues that to repair public trust in the wake of rare but high-profile abuse cases, “the commission needs to have appropriate powers... That’s why WCVA supports some of the provisions in the draft protection of charities bill, such as preventing disqualified trustees from acting in another position of power in a charity, and extending the list of offences that would lead to automatic disqualification as a trustee.”
For the most part, the sector’s plea is not for a complete overhaul of the commission and charity regulation, but simply for a change in tone and increase in accessibility. Broomhead says a recent poll by FSI of its members found that they felt they had difficulty accessing basic information on independence, transparency, sensitivity and clarity of guidelines.
This was made worse when the commission website’s was transferred to the Gov.uk portal (Shawcross recently told MPs that the commission didn’t want to make the move, and that the website was no longer designed for charities), but the commission is taking steps to put this right. Michelle Russell, the commission’s head of investigation and enforcement, informed the joint committee in December that a third of the £8m ear-marked by the Treasury for the commission is being put toward improved digital communication. She said this was “specifically to look at digitalising the front end [advice]... and a better IT infrastructure [so] that much more can be done online much faster, which will be of benefit to the vast majority of charities.”
The National Audit Office will be publishing its long-awaited follow-up report on the Charity Commission later this month, after finding in 2013 that it was failing to regulate charities effectively. The joint committee is due to report in February, with most expecting the draft bill to be largely approved. The NCVO will also report upon perceived political interference in the commission’s governance. And there is the small matter of a general election on the way, and the very real prospect of the charity regulator becoming a political football once again. The Labour party has already stated it would repeal the much loathed Lobby Act.
Charity regulation and its regulator may remain in a “state of crisis”, but improvements are visible on the horizon.
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