The Public Accounts Committee has said it has “little confidence” the Charity Commission has the leadership capability to tackle its “significant failings” and radically reform.

In a damning report released today, the Public Accounts Committee (PAC), which scrutinises public spending, said it was “dismayed” that Charity Commission is still not regulating charities effectively, and recommended a “radical rethink”.

The Committee's reprimands follow similar criticism from the National Audit Office last year, which said the Charity Commission was “too passive” and not adequately meeting its statutory objectives.

“The Commission is a reactive rather than a proactive regulator,” said the PAC, “and has yet to use its powers properly in registering, monitoring or intervening in charities.”

The PAC continued that it has not always been clear whether the Commission sees its primary purpose as supporting the voluntary sector or protecting the public interest.

It said the regulator “continues to perform poorly and is still failing to regulate charities effectively”, despite five interventions by the Committee since 1987.

The Committee concluded: “The Commission is seeking to change its culture and approach, but we are not convinced that it has the leadership capability to tackle its significant failings and transform its culture.”

Recommendations and one-year review

It made a number of recommendations and said it will review  progress against them in a year’s time.

The PAC argued that the Commission has no coherent strategy for delivering clearly defined priorities within its broad remit and has responded to budget cuts by salami-slicing its activities rather than radically rethinking its purpose.

Last year, the NAO also recommended that the Commission revisit its business model and think “radically” about alternative ways to meet its objectives within constrained resources.

The PAC today recommended that the Commission should develop a clear strategy and change management plan detailing how it will deliver its responsibilities as a regulator effectively, and what budget it needs to deliver it. “If it is being asked to do too much with too little it should clearly set out its case for additional resources to government,” the PAC says.

Commission defends itself

However, in response to the PAC, William Shawcross, chair of the Charity Commission, rejected the suggestion that it lacked a coherent strategy.

“We have already begun to implement the recommendations of the National Audit Office. We are making rapid, visible progress. The figures on new statutory inquiries and the increased use of our powers demonstrates that our new board and senior management team are implementing significant change.”

The PAC also said the Commission's weakest area is in identifying deliberate wrongdoing by charities and taking effective action. It recommended that it needs to make better use of the intelligence it already holds on charities to identify risks and it should respond more quickly to serious concerns in individual charities.

The Charity Commission is already taking steps in this respect. Last week, at a Charity Commission board meeting, its chief executive Sam Younger pledged that the regulator would significantly increase the number of charities whose accounts it reviews and use data it collects to better target its enforcement work.

And today Shawcross added that while the Charity Commission has acknowledged that its past approach to tackling problems in charities was too cautious, “we also have to ensure that the few cases of serious mismanagement and abuse do not undermine public trust and confidence in charities more widely”.

Shawcross also expressed disappointment that the PAC had not recognised the regulator's recent work in identifying and tackling serious abuse of charity – for example by asking for new powers.

He cited a number of figures to back up his stance –

• The Commission has opened 48 statutory inquiries since April 2013 compared to 15 opened between April 2012 and March 2013.
• It has used its legal enforcement powers 657 times in statutory inquiries and operational compliance cases since April 2013 compared to 216 for the previous financial year.
• In 2012/13, the Commission analysed 5 per cent of charity accounts, while to date this financial year it has monitored 18 per cent.

New leadership team needed

The PAC also heavily criticised the Commission’s senior team, past and present, saying it has consistently failed to tackle poor performance and ongoing weaknesses in the organisation.

“Over the past 26 years the Commission has repeatedly said it will get things right,” said the PAC. “In practice, it has failed to implement our recommendations, its performance has not improved, and the board has not exercised adequate oversight to the Commission’s leadership when it failed to achieve a fundamental transformation of the organisation.”

The PAC recommended that the Commission introduce a “determined and focused” new leadership to radically transform the Commission’s culture and operations. It added that the Commission board needs to have “sufficient grip” on the Commission’s performance and operations to hold the executive to account effectively.

The PAC concluded in its recommendations that it has “little confidence” in the Commission's ability to turn itself round. “Nothing we heard convinced us that things have changed significantly since we last examined the Commission, and we are concerned that it does not possess the capability to put right its problems and address its failings.”

Margaret Hodge (pictured), chair of the Public Accounts Committee, said: “It is clear that the Charity Commission is not fit for purpose.

“When the Commission finds its new chief executive, it will have to bring about radical change in the Commission’s culture and operations, to restore confidence in its ability to regulate charities.”