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Commission outlines new regulatory approach

Governance | Tania Mason | 16 Jan 2012

Opening a statutory inquiry into a charity will be very much a last resort for the newly-slimmed-down Charity Commission and will be reserved for the most serious of cases such as those involving fraud, terrorist activity, or risk to vulnerable beneficiaries.

The new regulatory approach is contained in the Commission's new Risk Framework published today, which outlines how the regulator will decide whether and how to engage with charities on various issues.

The regulator is facing a real-terms reduction in its budget of around a third over the next four years and so has been examining how it can best fulfil its regulatory duties with less money to spend than it has been used to.

The 11-page Risk Framework is accompanied by a longer, 25-page document that explains how the Commission will apply the Framework.

The Framework emphasises that the Commission will work to proactively indentify and manage risks rather than simply reacting to problems.  It will rely on its online guidance to provide charities with information, and work with other sector organisations to generate generic or more targeted advice.

However, it will only give individual advice to charities where not doing so will cause trustees to breach their legal duties – though it will provide advice in “complex charity mergers and restructures”.

It will routinely check a sample of accounts each year and take appropriate follow-up action if there are found to be issues.  It will not get involved in internal disputes or engage in issues that “do not pose a serious risk to a charity’s status, assets, services or beneficiaries”.

It will assess the nature of the risk and the level of risk before considering how to respond to cases that arise.

“We do not act as a complaints service looking at all complaints on behalf of complainants,” the Framework states. “We assess and identify if there is a regulatory issue or concern and if it satisfies the test we may become involved.”

Statutory inquiries

On statutory inquiries, the Commission states: “It is only in relation to regulatory concerns that we consider are the most serious that we would consider conducting an investigation.”

Factors that are likely to feature in a decision to open a statutory inquiry include:

• Fraud or other criminal activity
• Misuses of a charity for terrorist purposes
• Ongoing and immediate risk to a charity’s beneficiaries
• Deliberate abuse by trustees
• Potential for significant damage to public trust and confidence in the charity, the sector, or the Commission

Sam Younger, the Commission's chief executive (pictured), said: "This approach sets out how we will use our resources and expertise to target the areas of highest risk and where our intervention will have the most impact.

"We will continue to deal with serious abuse and non compliance, and do so robustly.  We recognise that some trustees, acting honestly and reasonably, may make mistakes. However, careless and deliberate wrongdoing damages not only the charity concerned but public trust in the sector more generally.  If something goes wrong, we expect trustees to take responsibility for putting things right."

Click here for the Risk Framework and Application of Risk Framework.

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