The Charity Commission should be allowed to fine charities that don’t submit their accounts on time, and charge fees for filing annual returns, Lord Hodgson has stated in his Charities Act review.
In his report, which will be presented to ministers today, Lord Hodgson said he thought the Commission needed more appropriate sanctions than those currently available for those charities that don’t comply with reporting requirements.
He said the key argument from people in the sector who opposed fines was that it would not be an appropriate use of charitable funds. But he did not see much force in this view, "as charities are already required to pay fines to a number of other bodies for failures of regulatory compliance”.
He further contended that while it would be undesirable that charities use charitable funds to pay fines, “it is similarly undesirable that they should be sufficiently poorly managed to fail to comply with their responsibilities”.
“I consider that relatively small fines could be an appropriate measure for encouraging compliance.”
Sanctions should also include the withdrawal of gift aid, he said.
Sector ‘should help fund its own regulation’
He also thought the sector should contribute to some of the cost of funding the Charity Commission.
While it would not be appropriate for charities to fund the Commission’s entire budget, in light of the drastic cuts it has suffered it could well be in the sector’s best interests to provide some money if that would boost the regulator’s ability to carry out its functions adequately.
“A charity sector where fraud and mismanagement were common and where the public felt there was no central oversight or transparency mechanism as to how their money was spent would not long prosper,” Hodgson said.
Thus, the government should work with the Commission to devise a “fair and proportionate” system of charging for charity registration and filing of documents. The Commission might also wish to consider reinstating its bespoke, specialist advice to charities on a cost-recovery basis.
Hodgson also explored whether the Commission’s role as both a regulator and friend to the sector should continue and concluded that, particularly in light of its shrunken budget, it should focus on ensuring that charities comply with the law.
And to ensure this narrower role is properly understood, it may well be worth considering changing the name of the Charity Commission to the Charity Authority.
