National Audit Office to investigate Charity Commission's ability to regulate5

Governance | Kirsty Weakley | 7 Mar 2013

The National Audit Office will complete a report on the Charity Commission's ability to effectively regulate the sector after MPs voiced serious concerns at a Public Accounts Committee meeting this morning.

William Shawcross, chairman of the Charity Commission and Sam Younger, chief executive appeared before the Public Accounts Committee this morning to answer questions on the Commission’s investigation into the Cup Trust, which was used as a tax avoidance scheme.

Concluding proceedings Margaret Hodge, chairman of the committee said: “We’re pretty appalled, I think, as to whether or not you have the right regulatory regime to give the public confidence that charitable trusts are being properly regulated by you.”

She revealed that the National Audit Office is going to do a report on this issue for the committee, after which Shawcross and Younger be called before the committee to answer further questions.

The Charity Commission has also been asked to provide the committee with details of its investigatory activity within one week.

During questioning Shawcross admitted that the revelations about the Cup Trust were: “Very damaging to the sector and to the Commission.” And that the fact that the Cup Trust was registered to a sole trustee based in the British Virgin Islands “should have been a red flag”.

Shawcross said that the Commission will shortly publish a detailed report about the Cup Trust.

Hodge said she believed that there were 50 charities operating in a similar way to the Cup Trust. Shawcross disputed this figure.

A fuller report on this morning’s session will appear on civilsociety.co.uk later.

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Directory: Charity Commission
Who's Who: Sam Younger | William Shawcross

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Bob Gronow
Chairperson
Private Voluntary worker
19 Mar 2013

As one with recent experience of dealings with the Charities Commission, and using that expereince and information to assess where the charities commission is in its role as a commission with the duty to uphold charity law.
The analysis is that the Charities commsssion is completely defunct where its fiduciary responsibilty to Charities beneficiaries is concerned. The response we received was that the Charities Commssion does not involve itself in a charities internal affairs. "WHAT" this following a complaint from the charities Beneficiaries that the trustees were acting illegally and without consultation with the beneficiaries.
If it is not there to involve itself in internal and for that matter external affairs of charities, what is it doing there ?.

[Reply]

John Weth
Chairman
Association for Charities
8 Mar 2013

For those of us who watched the Public Accounts Committee's questioning of the Commission's chairman and chief executive, on the record of the Charity Commission as regulator, this Civil Society article neatly summarises the concerns expressed by the Committee about the Commission's regulatory performance which went beyond the Cup Trust fiasco.

Surprisingly neither the Commission chairman, nor the chief executive had read the Committee's last report on the Commission in 2001-2002, 'Giving Confidently: The Role of the Charity Commission in Regulating Charities' (available incidentally on the PAC website). In that report reference was made to PAC reports in 1988, 1991 and 1998 which showed severe shortcomings in the Commission's performance. In the 1998 report, the PAC had made recommendations for improvements in the effectiveness of management in the Commission, and the investigation of charities; whilst the 2001-2 report noted that the Commission's use of its statutory powers had declined further. The Committee also noted that the Commission appeared unable to explain why use of most of its regulatory powers had continued to decline.

The Association for Charities' report to the Public Accounts Committee in 2001 noted that 'it would be inexcusable were the next NAO report to have to point to investigation failures again - while in the meantime more beneficiaries, charities and trustees were being failed'. Our report was published as an appendix to the PAC 2001-2 report (Appendix 2, para. 3.23). The request yesterday by the Public Accounts Committee for a new NAO review of the Commission's regulatory performance therefore appears timely.

[Reply]

Chris Harris
Partner
MHA MacIntyre Hudson
7 Mar 2013

The NAO should urgently consider the level of resources that the Commission is able to apply to ensuring that charity accounts meet the required standard. The Statement of Recommended Practice is well developed and widely supported by the sector but if the commission cannot identify and sanction accounts that do not meet the standard, and the Cup Trust accounts clearly do not, then the overall regulatory regime is flawed.

[Reply]

Chris
7 Mar 2013

There's potentially a debate as to whether Cup Trust was breaking charity law.

However, in this case the PAC seems to be expecting the Charity Commission to enforce tax law - clearly not its job, and unfair to pick on them for not doing so. The tax enforcement in this case should have been with HMRC, and the indicators are that the attempted tax avoidance is likely to fail.

[Reply]

Edward Harkins
Knowledge & Research Consultant
Edward Harkins
7 Mar 2013

It can be said that this development has been a long time coming (in England only - not in Scotland). It comes at an especially difficult time for the Charity sector in England with the alleged depredations of the UK Coalition Government on the independence of the sector.

[Reply]

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