The report by the National Audit Office (NAO) concludes that the Charity Commission:
- is not regulating charities effectively
- does not do enough to identify and tackle abuse of charitable status
- uses its information poorly to assess risk and often relies solely on trustees’ assurances
- makes little use of its powers and fails to take tough action in some of the most serious cases
- does not fully meet its statutory objective to increase public trust and confidence in charities
- is not delivering value for money.
These are damning criticisms considering the five objects set out for the Charity Commission in the Charities Act 2011 which can be summarised as:
- The public confidence objective is to increase public trust and confidence in charities.
- The public benefit objective is to promote awareness and understanding of the operation of the public benefit requirement.
- The compliance objective is to promote compliance by charity trustees with their legal obligations in exercising control and management of the administration of their charities.
- The charitable resources objective is to promote the effective use of charitable resources.
- The accountability objective is to enhance the accountability of charities to donors, beneficiaries and the general public.
The National Audit Office report comes in the wake of criticism of the Charity Commission’s role in the regulation — or rather lack of regulation — of the Cup Trust, but for many years there have been wider rumblings in the sector about the weakness of the Charity Commission and the way many charities regulate themselves, relying heavily, as they do, on volunteer trustees.
Hodge says give the role to HMRC
Former Labour Minister and now Chair of the Public Accounts Committee, Margaret Hodge, went further and called for the Charity Commission to be closed and its functions moved to HMRC.
This is not just an issue for the Charity Commission
The NAO report criticises the regulator’s weaknesses.
But is there a deeper question here about the charities themselves whose weaknesses the regulator is failing to spot. It’s a bit like criticising the police for a rise in burglaries but not criticising the burglars too.
There has often been a reluctance in the voluntary sector to speak openly about its own weaknesses.
One reason has been concern that criticism of one charity would lead to the public losing confidence in charities as a whole — with a consequent drop in donations.
That is a genuine concern, but it can have a warped consequence: problems are brushed under the carpet, staff and trustees are put under pressure to keep quiet and therefore the problems never get solved. In that climate one bad apple can soon infect the whole barrel.
This is not just an issue for the voluntary sector
Many people rely on services provided by charities. Charity services are usually free to the beneficiaries which can again make people reluctant to complain. But if the service provided by a charity is poor there is often no alternative provider.
Many charities are extremely professional and business like — though the terms ‘professional’ and ‘business like’ are disliked by many in the sector.
But other charities perhaps revel too much in their ‘amateur’ status and face a real dilemma: how do they stay true to their founding principles, relying heavily on volunteers at both trustee and operational levels, and become professional and business like enough that they can continue to attract the funding they need to survive?
Charities who feel they face this dilemma should have nothing to fear.
Being professional and business like should not be controversial
If you expect other people to part with their hard earned cash to fund you, it is not unreasonable to be able to promise them that you will use that cash as effectively as possible.
That is not simply saying that x% of the £1 you donate will go to charitable purposes and not to administration — and I worry about the charities that claim that 100% of your donations will go to the beneficiaries. That simply is not realistic — there are always overheads.
It’s also about promising that whatever percentage does go to management and administration is being spent effectively and is ultimately aligned to achieving defined outcomes.
That means having a clear mission and objectives. Robust financial procedures. Effective procurement procedures to obtain best value for money. Making good use of technology to reduce overheads. Having good recruitment and line management procedures so you recruit the right staff — and trustees and volunteers — and they are clear about their roles, well motivated and operating well as a team. It means making sure you are aware of legal and regulatory requirements and adhere to them, so you don’t put your charity and therefore donors’ money at risk. Quite simply the law is not an optional extra you can just ignore (a debate I have had rather too many times with people in the sector).
These principles are part of normal private and public sector life and are what I mean by being businesslike and professional.
Ask not what the Charity Commission can do to you, ask what you should do to yourself
The lesson then, from this report, as JFK might have put it, is to ask not just what the Charity Commission should or should not be doing, but for each charity to ask itself: what are we doing? What aren’t we doing? What could we do better?
This report on the Charity Commission should not be allowed to become a deflection. Charities play a vital role in our society and there are millions of unsung heroes and heroines working paid or unpaid for charities and donating to charities which do fantastic work.
Public confidence in charities remains high, according to a 2012 Charity Commission report:
“Charities are amongst the most trusted groups in society, with only doctors and the police being seen as more trusted”
But everyone can always do better and what was good enough yesterday and today won’t necessarily be good enough tomorrow.
This report will be most useful if it starts a wider debate about how all charities, not just their regulator, can improve. In an ideal world you wouldn’t need a regulator at all if everyone was doing their job properly. That’s a basic quality principle: ‘Get it right first time’.
Do you work in the voluntary sector?
Contact me about how I can help your charity or social enterprise. My experience includes being Director of Communications and Business Operations helping to turn round a struggling small group of national charities and on the management committee of a small London charity.
Give your views in this poll
- National Audit Office: The regulatory effectiveness of the Charity Commission. This takes you to the press release and links to the full report.
- Charity Commission: Public trust and confidence in charities. IPSOS MORI
- Legislation.gov.uk: Charities Act 2011
- Guardian Voluntary Sector: Network National Audit Office Report on Charity Commission