Charity Commission surrounded and under heavy fire

I hope the besieged staff of the Charity Commission have their helmets on. At the end of a year of incendiary broadsheet headlines, warning shots from MPs, and a good measure of self-inflicted friendly fire, they’re probably going to the office in full body armour these days. The long-anticipated report from the National Audit Office on the Commission’s regulatory effectiveness is the latest high-explosive attack.

The report stems from investigations earlier this year by the House of Commons Public Accounts Committee into the Cup Trust scandal, where a charity set up as a Gift Aid scam by some dodgy (and deeply cynical) tax advisors was registered by the Commission. The NAO released two reports in fact – one on the Cup Trust itself and one on the Commission’s broader regulatory effectiveness.

Now the Charity Commission doesn’t get everything right and has acknowledged its shortcomings, including in the Cup Trust case. And most of the NAO’s findings seem sensible but are not exactly ground-breaking (e.g. ‘the Commission has a broad range of responsibilities’ – er, no kidding, really?). Similarly the recommendations may prove useful but many are already happening.

The big flaw with the report is its verdict that the Commission is ‘not regulating charities effectively’ and that it ‘doesn’t deliver value for money’. These top-line conclusions just aren’t justified by the evidence (or lack thereof). In fact, they seem calculated to give those critics of the Commission in politics and the press what they’ve been braying for – extra ammunition.

The biggest problem with the NAO report is what it doesn’t look at – by taking an overly narrow view of the idea of ‘regulation’ and ‘regulatory effectiveness’, it fails entirely to look at a significant and crucial aspect of the Commission’s work – the provision of advice and guidance to charities.

This function is not separate from the Commission’s regulatory role; it is an integral part of it. ‘Providing regulatory guidance on the duties of trustees under charity law’ is one of the Commission’s core regulatory activities. There is no way to effectively regulate over 160,000 registered charities, across vast and complex areas of law, without relying on informed self-regulation by trustees.

This guidance is integral to the regulatory system, not a ‘nice to have’ luxury. Did the NAO look at how the Commission provides this information? Whether it is accessible, clear and able to be followed by charity trustees? Has the Commission improved how it provides this information online to trustees and the wider public? What does the Commission do to ensure trustees are aware of their duties?  What information does it gather about how aware trustees actually are, and where more effort needs to be made? The NAO can’t answer these questions, because it didn’t ask them. This gaping hole in the NAO’s analysis means its conclusion about ‘regulatory effectiveness’ is quite simply untenable.

The report also does little to acknowledge the context of strategic change at the Commission over recent years. In particular the impact of swingeing cuts to its budget (nearly cut by half over five years), and the need for rapid reorganisation and loss of key staff that has resulted. Nor does it give adequate weighting in the conclusions to the changes the Commission is making as part of its strategic review, or  recognise or highlight where the Commission has made clear progress (or is very near to meeting its targets) in spite of the cuts, even when the evidence gathered by the NAO points that out.

For example, clear progress in the time taken to register charities and in reducing the number of enquiries is noted, but not further analysed or commented upon. Why has this happened? What has the Commission done that has worked? Can the learning be applied across the rest of the organisation? What bearing does it have on ‘regulatory effectiveness’?

Instead, the report bizarrely argues that the Commission needs to make a better case to the Treasury for more resources to regulate effectively. This presupposes that doing so could lead to a better financial settlement, which is dubious at best. One of the downsides of being a non-Ministerial department answerable to Parliament is that the Commission has no Minister to fight its corner in spending reviews.

The thrust of the report is that the Commission needs to enforce the law and regulation more strongly – it needs to be more of a ‘bad cop’ and less the friendly neighbourhood support officer. This argument seems framed with the current mood in Parliament and the press in mind, rather than the weight of evidence. It is worth stating again that the evidence gathered by the NAO does need consideration by the Commission, but the focus on enforcement fails to recognise the difficult balance the Commission has to strike. Only this year it was hauled over the coals by MPs for ‘coming down too hard’ in the Plymouth Brethren case. Then it was slammed for not investigating the Cup Trust proactively enough. The Commission may be damned if it does and damned if it doesn’t.

The detailed information in this report should prove useful to the Commission as it identifies some areas of concern. However the debate that will ensue is unlikely to be constructive. We are already hearing wild suggestions that the Commission could be scrapped and charity regulation handed over to HMRC – which would be a total nightmare for charities and wouldn’t be in the public interest either.

Against the backdrop of having its budget slashed, trying to chart a new strategic direction, and a new board which is, to put it kindly, ‘finding its feet’, this report will mainly be used as a stick that politicians and the media can use to beat the relatively defenceless Commission with. That won’t help improve its performance. To call the report a hatchet job would overstep the mark, but it’s close.

NAO report on the regulatory effectiveness of the Charity Commission

NAO report on the Cup Trust

The Cup Trust

Charity Commission response

Public Accounts Committee