Charity Commission formally responds to House of Lords report

08 Jan 2018 News

The Charity Commission has made its formal response to the House of Lords Select Committee on Charities and has fully accepted three of the recommendations concerning the regulator and rejected one.

Another recommendation was accepted in part while another, it said, was the responsibility of the Department for Digital, Culture, Media and Sport. 

It accepted recommendations on improving guidance around mergers and serious incident reporting as well as on the importance of it setting out its plans to start charging charities. 

But it said it did not agree with the committee’s suggestion that it should offer time-limited structures in the model governing documents it offers for charities. 

It said that a recommendation about recruiting more diverse board members for the regulator is for the Department for Digital, Culture, Media and Sport. And it partially accepted a recommendation about introducing time limits for trustees. 

The committee published its report, Stronger charities for a stronger society, in March, with 100 conclusions and recommendations for government, the sector itself and the regulator. The report was critical of the Commission over its governance and its plans to charge charities for regulation - issues the regulator responded to at the time.

At the end of last year the government published its response to the report, which was broadly supportive of the conclusions and promised that it would feed into the forthcoming Civil Society Strategy, but did not commit to any action. 

Time limit for trustees 

The committee had called for time limit for how long trustees should serve on a charity board. 

In response the Commission said that it is “sympathetic to the principle” and that it endorsed the Charity Governance Code, which suggests nine years is best practice. 

But it said “there may be many reasons why particular charities might be unable to follow this good practice” so there should not be a mandatory limit. 

Time-limited structures 

The Commission rejected the proposal to include time-limited structures in its model governing documents to prompt charities to consider their lifespans at the outset. 

It said it is possible to “create time-limited trusts, but it is not clear that it is necessarily possible to do this with all other structures, at least not without some difficulty”. 

It said that deciding the legal framework of a new charity is for founders and that new legislation would be required to change this. 

The Commission also said that this would be a lot of work for it. 

“Substantively amending our model governing documents would have considerable resource implications for the Commission, and may not be the best way to achieve the committee’s suggested aim,” it said. 

Improving guidance on mergers and serious incidents 

The regulator accepted two recommendations relating to improving advice to charities looking to merge and helping charities understand when and how to report a serious incident. 

On mergers it said it encourages trustees to think about this as part of its 15 questions trustees should ask guide. 

“The Commission is currently looking at changes it should make to its guidance to support the financial resilience of charities and will consider whether further advice on mergers is needed,” it said. 

It said that it had already updated its serious incident reporting guidance.

Future funding of the regulator 

Peers had said that they had “grave concerns” about the Commission’s plans to charge charities and urged the regulator to set out its plans in more detail. 

The Commission has said it accepts that it should explain how it would spend any additional revenue, and said a consultation is due to begin “shortly” and will include details of its plans when it does so. 

It said it is “vital” that the regulator has enough resources to “support trustees to ‘get it right’ and prevent problems” but that “a step-change in our support to charities is simply not possible with our current funding settlement. Only with additional funding are we able to provide better, more proactive support to trustees in line with our statutory functions.”

The Commission added that “ultimately, the sector as a whole will benefit” because better support will “contribute to maintaining and increasing public trust and confidence”. 

It added that given the tight public finances it was “ fair that the charities make a modest contribution to a system that benefits them”. 

The regulator also said: “The Commission has been clear that additional funding from the sector would be spent on our enablement work and would not replace Treasury funding for our compliance functions. We would continue to bid for Treasury funding to fund the rest of our legal, regulatory compliance and enforcement work.”

 

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