Charities play a vital role in our society. The vast majority of people who work in them and act as trustees do sterling and important work. However, if the public is to continue to support charities, it must have confidence that the sector is well regulated and that the rare instances of unethical or even criminal behavior are robustly dealt with.
To that end it is essential that the sector’s regulator, the Charity Commission, operates effectively and has the necessary powers to fulfill its important role. Following sustained recent criticisms of the commission – not least from parliamentary committees – the government produced a draft protection of charities bill in November 2014 with the aim of giving the Charity Commission extra powers in order to strengthen its investigatory and enforcement work.
Since November I have chaired a committee of MPs and peers looking in detail at that draft bill, and today we publish our report and recommendations (pdf).
Increased power
Some of the new powers in the draft bill are designed simply to remove loopholes in the current regulatory framework. For example, the bill would disqualify individuals with convictions for money laundering, bribery, perjury or terrorist offences from becoming trustees. It would give the Charity Commission the power to disqualify trustees who step down from their position in order to avoid sanction. In the past if a trustee has been under investigation by the commission, the trustee could resign and the case would be closed. This meant that the trustee would avoid disqualification and be able to take up a position at another organisation. Other provisions would introduce new powers to the commission’s armoury, such as the power to issue an formal warning to a charity.
Many of the changes we would like to see to the draft bill concern points of detail. We believe that the introduction of a warning power is sensible but we recognise that charities’ reputations are their lifeblood. For that reason a number of new safeguards should be applied to the warning power, such as a requirement on the commission to give written notice prior to issuing a warning, and a reasonable period in which representations against the warning can be made.
All charities to be registered
In common with the rest of the public sector, the Charity Commission has had to try to maintain the quality of its work in the face of significant reductions in resource. That is unlikely to change. However, confidence in the management of charities whether large or small is vital, and to ensure that we recommend the commission take on the extra responsibility to register charities in England and Wales. Currently charities with an annual income below £5,000 or those who fall under groups such as churches, scout/guide groups or armed forces organisations and bring in less than £100,000 are exempt from registering. We believe the commission’s recent and welcome investment in digitisation should allow them to register all charities in England and Wales without significant extra costs.
My colleagues on the committee and I have been conscious throughout our inquiry of the need to engage charities themselves in the debate over what tools the regulator needs in order for it to regulate the sector effectively. On the whole, this evidence has led the committee to be supportive of the bill.
Leadership
We think the bill will enable the Charity Commission to be a more effective regulator. However we recognise that legislation alone will not enable the Charity Commission to fulfil its demanding remit. The leadership of the commission also needs to ensure that it is taking a proactive approach , in cooperation with umbrella bodies, and is making the best use of its limited resources. The evidence we received, and recent follow-up work by the National Audit Office, suggests that the Charity Commission is on its way to achieving this.
The effect of the terrorism law
During our inquiry an important question arose of the impact of terrorism law on charities. We heard convincing evidence from witnesses that the current effect of terrorism law risked having a chilling effect on NGOs carrying out vital humanitarian work in conflict zones. We have called for the government to review this issue as a matter of priority. It is important that charities are protected when doing well-intentioned and vital work in areas such as Syria, where they may unavoidably be having to negotiate with proscribed organisations controlling access to parts of the country.
These are all important issues. It remains to be seen what form any bill will take in the new parliament. We believe the recommendations we have made will improve the effectiveness of the bill and ensure the commission uses its powers appropriately. We hope the government, whatever its hue after the general election, will take them on board.
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This article was amended on Wednesday 25 February to correct what charities are exempt from registering with the Charity Commission.
