The Charity Commission has defended itself against a stinging attack on its performance and leadership in Saturday’s Times newspaper.

A full-page article in the Money section headlined Charity Commission’s failures leave public funds ‘open to abuse’ suggests that the regulator’s “reluctance” to investigate the vast majority of complaints about charities that are lodged with it, has made it easy for fraudsters to fiddle the system and left taxpayers exposed.

It said that less than 10 per cent of allegations of wrongdoing are investigated by the Commission, and last year serious sanctions were imposed on only 36 charities, a tiny fraction of the 1,845 complaints received.

The Times approached former Charity Commission chair Geraldine Peacock, who was back in the news last month urging the Commission to reopen the Atlantic Bridge investigation, to comment on the regulator’s recent performance.  She described the statistics as “shocking” and added: “With this kind of laxness, the Commission is conniving in financial abuse.”

‘Worst regulator of all?’

Accompanying the story was an opinion column by The Times’ personal finance editor Andrew Ellson, headlined Is this the worst regulator of all?  Ellson said the “lax regulation of charities has left the sector open to financial abuse” and added:

“Does the Commission seriously expect us to believe that misdemeanours worthy of punishment happened at only 36 (two one-hundredths of 1 per cent) of the UK’s 180,000 registered charities?  There’s optimism in the good of humanity and then there is plain naivety.

“The sad reality is that the Commission’s checks on charities are so pathetic that they make the UK Border Agency look like it has built a new Hadrian’s Wall.”

Ellson conceded that part of the problem is the Commission’s reduced funding, but opined that “buckets of cash” would not provide the answer.  He said the Commission needs a “wholesale change of culture”, a “change in its statutory powers”, and “probably a major reshuffle of personnel”.

Proportionate actions

In response, the Commission ignored the criticisms about its leadership and culture and focused instead on explaining its regulatory approach.  It said: “Most problems that are raised about charities are resolved in the assessment stage by trustees, with help of our regulatory advice and guidance.

“Where serious concerns exist we will go on to open an investigation but in most instances it is not proportionate to do so.

“The reference to ‘serious sanctions’ imposed on 36 occasions relates to the 36 occasions that we used our statutory powers during statutory inquiries. We consistently take regulatory action that does not involve using our powers and it is important to note that the use of powers is just one aspect of regulatory action.”

New risk-based approach

The regulator also pointed out that it is still developing its new risk framework which will underpin its future compliance activities.

“Regarding the changes to the type of investigations we will carry out in future, it is proposed that all investigations going forward under the new risk framework will be statutory inquiries. However, it’s important to note that although we will no longer be using the term ‘regulatory compliance investigation’, we will still look at the types of concerns dealt with in these cases in our operational teams.”

And on reporting, it said: “We will be reviewing our policies on how we report on our work. However, we haven’t even started doing this yet so, as we advised Mark Bridge [The Times journalist], it would be absolutely wrong to conclude there will be less reporting of our work in future.

"It may be, for example, that if there are more inquiries in the future there will be more reporting, not less.”