In recent months the Charity Commission for England and Wales (CCEW) has come in for a fair bit of criticism – more so that the newer charity regulators in the rest of the UK – OSCR (for Scottish charities) and the Charity Commission for Northern Ireland (CCNI).
The latest onslaught against the CCEW is a report on The Regulatory Effectiveness of the Charity Commission from the National Audit Office published today (4 Dec 2013). However, it follows other criticisms in particular from from the Public Accounts Committee of the House of Commons which reported in June this year on The Charity Commission: the Cup Trust and tax avoidance and a few days later from the Public Administration Select Commitee on The role of the Charity Commission and “public benefit”: Post-legislative scrutiny of the Charities Act 2006. There have also been criticisms from many individuals and certain sections of the media who dislike the CCEW’s position on certain issues – even in some cases wanting the CCEW to do things which fall outside its powers or which would be incompatible with charity law.
But I would argue that a good effective Charity Commission is a pre-requisite for an effective charity sector, which is a pre-requisite to a healthy civil society.
Of course, there is much about the Commission which many of us would like to improve. There is no doubt in my mind that the huge budget cuts they have experienced in the last few years (a 40% cut in real terms) have been disastrous. As a result they have lost lots of good staff, they have introduced new ways of working which make it harder to communicate with them, and they have tried to improve things with a new website which people find terrible to use.
But before hurling complaints, we need to ask why do want want a Charity Commission in the first place? England has the oldest system of charity law in the world, going back certainly to 1601(arguably earlier). As long ago as 1601 charity commissioners were appointed to investigate abuses of charitable gifts. The early commissioners were not long term appointments but by 1853 the place of charities in society had become important enough – 160 years ago – to justify establishing a permanent body of Charity Commissioners, who evently became the modern CCEW.
However, it was only in the Charities Act 2006 that the CCEW was given clearly defined functions and objectives. The objectives (which now appear in section 14 of the Charities Act 2011) are as follows:
1 The public confidence objective – to increase public trust and confidence in charities
2 The public benefit objective – to promote awareness and understanding of the operation of the public benefit requirement
3 The compliance objective – to promote compliance by charity trustees with their legal obligations in exercising control and management of the administration of their charities
4 The charitable resources objective – to promote the effective use of charitable resources
5 The accountability objective – to enhance the accountability of charities to donors, beneficiaries and the general public.
If you believe in the importance of the voluntary sector and accept that charities are generally a good thing for society, it is hard to disagree that we need a statutory body like the CCEW to take forward these objectives. The 2011 Act (section 15) also sets out the Commission’s functions – i.e. the key activities through which it carries out these objectives:
1 Determining whether institutions are or are not charities.
2 Encouraging and facilitating the better administration of charities.
3 Identifying and investigating apparent misconduct or mismanagement in the administration of charities and taking remedial or protective action in connection with misconduct or mismanagement in the administration of charities.
4 Determining whether public collections certificates should be issued, and remain in force, in respect of public charitable collections.
5 Obtaining, evaluating and disseminating information in connection with the performance of any of the Commission’s functions or meeting any of its objectives.
6 Giving information or advice, or making proposals, to any Minister of the Crown on matters relating to any of the Commission’s functions or meeting any of its objectives.
These are further expanded with a list of specific duties for the Commission (in section 16 of the Act). However, my point is this: if society is to recognise certain organisations as charities and give them a special status we have to have a body which protects that status. Of course, the CCEW must have the powers to take action when charitable status is abused. But its biggest role, as I see it, is protecting the status of the vast majority of charity which operate properly in accordance with their objects.
Arguably the most important function is maintaining the Register of Charities. At the heart of the Register are two fundamental processes which receive far too little attention from critics:
- deciding whether new organisations meet the criteria for charity registration (which includes the all-important issue of considering whether they are established for public benefit); and
- ensuring that charities once registered operate in accordance with the requirements of charity law – working for the interests of their beneficiaries, not abusing their charitable status, and demonstrating accountability by producing annual accounts and completing returns.
These roles are clearly recognised and well documented – in the NAO report – but not particularly highlighted in its press release which begins with the most negative phrase possible “The Charity Commission is not regulating charities effectively”.
Looking at today’s CCEW I think this is unduly harsh. I have a huge respect for most of the individual members of staff at all levels: most are struggling to do a good job in an incredibly difficult environment.
I am concerned, in particular, that far too many people seem to think there is a fixed group of charities in our society, and do not appreciate the Commission’s incredibly important role of registering new charities. If the registration function does not operate properly (as sometimes happens (I dealt with a recent charity registration which took well over two years) it is disastrous. If people cannot readily set up new charities the growth and development of the voluntary sector comes to a standstill.
But some new developments with the Commission are working well – since January this year we have had the new legal structure of charitable incorporated organisations (CIOs) in England and Wales. With a CIO, registration with CCEW actually forms the CIO as a legal entity, so it does not exist until registered. But generally I find CIO registrations are being considered and approved quite quickly. Also the administraton of the new Charity Mergers Register seems to be working fine. New regulations on the management of permanent endowment have been issued in time for a legal change which takes effect from 1 Jan 2014 – these sort of issues take up a lot of time for senior staff, but once the new forms or guidance are in place they usually work OK.
Addressing the criticisms
But on the criticisms, I do not think there is an easy way forward. After the cuts, the CCEW’s budget is £23M this year. This works out at around £140 for every registered charity which at first sight doesn’t sound too bad. But this is the total income – there is no extra income for registering new charities. No extra for the hugely expensive investigations which are somethimes needed when a charity gets into major problems. No extra for the huge legal costs involved when the Independent Schools Council challenged the Commission’s guidance on public benefit. No extra for all the time spent responding to Parliamentary enquiries, or Freedom of Information requests from the media. No extra for all the time spent on the many thousands of excepted charities (charities which do not have to register, but which still need CCEW approval for many issues).
Also, charities have a huge diversity of purposes, means of working, size, scale etc. A ‘one size fits all’ approach tor regulation cannot work – the Commission needs staff who have the ability to relate to individual charities.
So – what should those of who are concerned about the charity sector do in response to the criticisms of the Commission? I have three suggestions.
First, I think there is too much emphasis on the Commission as the regulator of charities and far too little focus on its role as registrar of charities. We need to remind people that much of CCEW’s work is about assessing charities for registration and monitoring them when registered. Formal action of a regulatory nature is important, but it is rightly only a small part of the total. The NAO report says that around 23% of resources are spent on investigations, and that strikes me as about right.
Secondly, I agree with Lord Hodgson, in his 2012 Review of the Charities Act 2006 that the CCEW should be able to make charges for certain aspects of its work so it is not solely dependent on Treasury funding. For example, I think a charge for new charity registrations and an annual charges to charities over a certain size would be reasonable – provided there is a clear Government commitment that this will not lead to reduced income from the Treasury. I don’t think charities should object to this. The CCEW must also be able to make charges to external bodies – for example for support to other Government departments or police forces or providing speakers to external conferences. But charges of this kind can never cover the full range of the Commission’s functions and duties.
Thirdly, we must stress that charitable status is about organisations to which society gives particular respect. The regulation of charities is not primarily about their tax status – it is first and foremost about recognising that resources given to charity deserve special protection. Just as we have a planning system to protect people from improper building developments we need a charity system to protect us from organisations falsely claiming to be established for public benefit. In my view a system of charity registration and monitoring is one of the best way of achieving this – and a properly working Charity Commission is vital to that end.