Etherington tells minister of ‘serious concerns’ about Commission board

15 Apr 2016 News

Sir Stuart Etherington, chief executive of NCVO, has written to minister for civil society Rob Wilson, expressing “serious concerns” about the Charity Commission’s governance, and asking him to address the issue “as a matter of urgency”.

Etherington (pictured) questioned in particular whether the process of appointing board members was appropriate “to ensure both independence and neutrality”. He also questioned whether the board had become too involved in executive decision-making, and called for Wilson to begin “what has for long been a necessary conversation” about the effectiveness of the regulator’s governance.

Etherington’s comments follow a call by chief executives’ body Acevo for an inquiry into the conduct of Commission board member Gwythian Prins, who wrote an anti-EU essay for a right-wing charitable think tank, shortly after the Commission had published strict guidance telling charities not to campaign over Europe in the run-up to the referendum.

Etherington said that “questions about the appropriateness of the current governance arrangements and the appointment of certain individuals have caused serious concerns within the sector over the last couple of weeks, reigniting a debate that has frequently surfaced over the years and that now must be addressed as a matter of urgency”.

He also referenced emails sent by Charity Commission board members, particularly the lawyer Orlando Fraser, which pressed for the Commission to require assurances from the Joseph Rowntree Charitable Trust over its funding of advocacy group Cage. The Commission said, following a judicial review, that it had no such power to “fetter charities’ exercise of discretion” for all time.

“In January 2015 the National Audit Office highlighted a blurring of the executive and oversight functions at the Charity Commission,” Etherington wrote. “Their report into the regulatory effectiveness of the Commission raised a number of concerns about the board’s continuing involvement in executive matters for an extended period. The NAO highlighted that this could limit its independence and ability to hold the executive to account effectively.

“This risk became real, as the recent High Court judicial review brought by Cage has proven. The proceedings gave an unprecedented insight into the willingness of some Commission board members to express forceful opinions on the work of the executive. Considering that the government’s UK Corporate Governance Code says boards should not stray into executive management, we continue to have concerns in this area.”

Etherington said that NCVO had previously conducted a review of the Commission’s governance and proposed changes, particularly to the process by which board members were appointed, in a discussion paper last year. He has previously said such changes would be particularly crucial if the charity sector was to be asked to pay for the Commission itself – a process the current chair, William Shawcross, has begun.

Etherington told Wilson in the letter that it was now “appropriate that you as the minister responsible for the Charity Commission consider how its governance structures can also be strengthened and in particular how the appointments process can be refined further in order to ensure both independence and neutrality”.

The Cabinet Office has confirmed that it has received the letter and will respond. 

A Charity Commission spokesman said: “The independence of the Charity Commission is crucial, both from the government and from the sector it regulates on behalf of the public. The matters raised in the letter are for the minister to consider and respond to if necessary.”

Andrew O’Brien, head of policy and engagement at Charity Finance Group, said: “NCVO are absolutely right to raise this issue. Now is the time to start a conversation about the governance of the Charity Commission, particularly the significant increase in powers given to the Commission in the recent Charities (Protection and Social Investment) Act.

“The Commission must be beyond reproach and NCVO have put forward a number of sensible suggestions on how we can de-politicise the appointments process.

“This will have the added bonus of encouraging a wider range of people to consider serving on the Commission Board so that we get the right mix of skills and knowledge.”

Government to reform public appointments process

Sir David Normington, who recently retired from being the Commissioner for Public Appointments has warned that plans to reform the appointments process for public appointments, such as the board of the Charity Commission, as outlined in a recent review would be damaging.

Giving evidence to the Public Administration and Constitutional Affairs Committee inquiry into the Better Public Appointments: Review of the public appointments process, he said that the proposals risk “moving back to a system whereby there is total patronage and that the checks and balances that were put in by Nolan and by the current system that you operated have been sidelined”.

Sir Gerry Grimstone published his review earlier this year, which emphasises the importance of ministers playing a role in appointments process, urges more transparency about how people are appointed, and makes recommendations for improving the diversity of applicants and shortening the time it takes to appoint someone.

Normington said: “I think it is almost inevitable that if the Grimstone proposals are implemented in full that there will be more appointments made by ministers without scrutiny and that will enable ministers to make appointments of who they want.”

Grimstone also gave evidence PACAC and told MPs that the intention of his proposals was not to weaken the Commissioner but to make the system more transparent, more efficient and more professional.

He said that he had found “frustration with the present system from virtually everyone” and that over time the “purity” of the Nolan principles had “been lost”. And that he wanted “more expert processes, more transparency, more intervention by the Commissioner rather than less intervention, and frankly greater professionalism in the process”.

In its response to the Grimstone Review Cabinet Office largely accepted the recommendations.

Matthew Hancock, minster for the Cabinet Office, also gave evidence to the committee and said: “There is a clear problem in the process of appointing people to public appointments under the OCPA rules at the moment.”

He said he was concerned that bureaucracy “means good people are put off” from applying.

Hancock added that: “Gerry has quite rightly added diversity as a further Nolan principle if you like, which I think is incredibly important.”

David Jones, Conservative MP for Clwyd West, said PACAC is concerned about that diversity of board could be reduced under Grimstone’s proposals.

“Interestingly on the point of diversity the Committee says we fear that some of the Grimstone proposals, including the possibility that ministers may appoint individuals not considered appointable by the appointment panel, may undermine the aims of the review with regard to widening the appointment base,” he said.

Hancock disagreed and said that reducing bureaucracy would encourage more people to apply.

Additional reporting by David Ainsworth

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