In recent years the Charity Commission’s caseload has steadily increased. It is now registering more charities than at any point in the recent past and its regulatory activity has stepped up. Last year it saw a 36 per cent increase in compliance cases, year-on-year, to a record 2,269, as well as a record number of applications for registration. There has also been a steady rise in serious incident reports and statutory inquiries.
It appears a positive move from a more proactive regulator. But does the Commission have capacity to take on this increased regulatory workload? And if not, what impact is this having on charities and the people who come into contact with them?
We’ve seen evidence that in some of its lower priority cases the Commission is taking a considerable time to act. The average length of an investigation rose in just two years from 209 days to 380 – over a year. And we are receiving reports that it is taking a long time to even begin to look into issues.
A number of individuals have approached us with concerns that delays have placed charity assets at risk, or that public could be further exploited as poor practice continues.
Sector bodies have voiced concerns about the knock on effect this could have on public trust and urge the government to consider adequate funding for the regulator.
There are many examples of this. See below for just three.
Why is regulation slowing down?
The Commission has historically been told it is not doing enough regulation, and has responded by getting much tougher. But it faces a complex regulatory environment.
Despite beefed up powers in the Charities Act 2016, the Commission is a civil and not a prosecuting authority, meaning that if an investigation includes criminal activity then it needs to work with the police, who are not always well-placed to help.
Compared to many other regulated sectors the charity sector is messy and wide ranging. Diversity of cause and size mean the regulator must address a wide range of issues.
And the Commission’s budget almost halved in real terms over the past decade. It has now received an emergency grant of £5m a year from the Treasury until it can start charging charities for regulation, as well as £8m one-off funding to improve its technology, but these are papering over the cracks.
The situation also looks set to worsen, because the Commission is now facing a significant number of new cases connected to safeguarding.
When it comes to high profile cases – often the most serious – the Commission has shown that it can act quickly and decisively. In the case of the Presidents Club the Commission closed the case and published the report in under seven months. A case into the Legatum Institute Foundation, a charitable think tank which drew media ire over its Brexit report, also took just a few months. But this does not appear to be the norm.
NCVO has concerns that these regulatory delays pose the risk of the individuals involved “losing faith” in the regulator and that there is a knock on effect that threatens wider public trust in the sector and its regulator.
Elizabeth Chamberlain, head of policy and public services, says: “These delays are concerning for both charities and for the Charity Commission itself. It’s clear that some charities, and complainants, can be stuck in a prolonged state of uncertainty, with a risk they could lose faith in the handling of their case.
“While it’s positive that the Commission has been able to act quickly in recent high-profile cases, it seems this may have come at the expense of its more routine but no less important enforcement work.
“It’s no secret that the Commission’s resources are spread thinly, but concerns about charities allowed to go months or even years without any apparent progress present a clear threat to public trust in charities and their regulation.”
The Commission is well aware of the challenges involved in exercising its powers at a record level. It is increasing its digital capacity to deal with these issues, but warns the influx of safeguarding cases will make it busier still.
David Holdsworth, deputy chief executive of the Charity Commission says: “We are responding to this challenge as the public would expect: by focusing on issues presenting the highest risk and greatest harm. Over recent years, we have also invested in digital services, not least to help ensure charities, where possible, receive a smooth and efficient service.
“This is helping us do more with less. This is not easy. But we have the right systems in place, and the right, expert, committed people in post, allowing us to provide the regulation the public expects with our limited resources. I am also confident that the new staff we are recruiting right now will increase our capacity and resilience.”
One positive step is that the regulator is publishing more detailed information about its regulatory work. The default position is to publish a report about its findings and it does so in about 70 per cent of cases. Exemptions occur when there is a risk to confidentiality or national security, or a risk to someone’s safety, or a host of other reasons.
It comes down to money. Can the Commission do what it must with £25m a year and fewer than 400 staff?
Recently, the International Development Committee warned that the regulator must be “adequately funded”, though it did not elaborate on how much more money was needed for that to be the case. And there is little evidence that Treasury will listen.
The Commission's senior leadership also has concerns about its current level of funding.
“In the longer term, we are clear that our funding must be sufficient and sustainable if we are to meet our rising challenges and the legitimate expectations of the public and charities into the future,” says Holdsworth.
Its long-held belief is that the solution to its money troubles is to start charging the larger charities some sort of levy.
The vision for this funding settlement is not finalised. The regulator needs sign-off from the government before it can go out to consultation, and government has been preoccupied with Brexit. It’s also possible that plans that were drawn up under William Shawcross are being tweaked by the new chair, Baroness Stowell.
Thus far umbrella bodies have remained unconvinced of the Commission’s suggestion that the sector should pay.
Vicky Browning, chief executive of Acevo, says: “With increased requests for charity registration, increased reports of serious incidents and the average duration of closed enquiry cases increasing to over year, it is clear that the Charity Commission needs additional resource from the government to enable it to provide support and efficient, robust regulation.”
But she also calls on the Commission to set out its priorities.
“It is the Charity Commission’s responsibility to articulate a clear vision of what good regulation looks like and the strategic priorities that will enable it to achieve this,” she says.
“In her first four months as chair, Baroness Stowell has rightly spoken about the need for charities to increase the public’s trust in the sector. Public trust in charities is an important issue but it is not the sole purpose of the regulator. The Commission also needs to articulate a clear vision about how it will achieve its full purpose. Without this we risk the public and charities losing trust in the regulator’s efficacy."
Iona Joy, head of charities at the think tank NPC, agrees that the Commission does not have enough cash to operate effectively, despite the £5m uplift.
“We are not convinced this is enough to police a £75bn sector,” she says. “A 0.04 per cent funding ratio for such a large sector, especially one which so often deals with vulnerable people, seems light.”
How much longer?
It’s hard to see how the Charity Commission can continue to register more and more charities, scale up its much needed proactive regulatory work, and respond faster to pressing concerns, without significantly more funding.
There some signs that things might improve. The Commission is in the process of appointing around 80 new staff, which should bring its headcount to the highest level that it has been for some years. It has also just embarked on a strategic review which is the ideal time for some serious reflection about priorities, resourcing and how it might plan for any further increase in the number and complexity of cases.
But charities, the regulator and government need to take the opportunity to have a full and frank discussion about what can realistically be expected, and on what budget.
The sector deserves a regulator which is capable of responding to adequately to issues where they arise at all sorts of charity. Politicians, the regulator and charities have all called for better, longer-term, more sustainable funding for the Commission, and it’s about time the government listened.
In October 2017 concerns were brought to Charity Commission by members of the Union of Muslim Organisations of UK and Ireland that the chair and secretary general had breached its constitution and accused him of taking control of the charity’s assets and excluding other members from key decisions. It’s a complicated case involving four connected charities, a dispute over who should be running the charity and serious allegations of fraud.
One trustee stands accused of misappropriating £12,000 of charity funds and of using the charity’s £1m property as collateral to secure a loan from a commercial company without the knowledge of the other members. Members were afraid that he could sell the property and wanted the Commission to step in to prevent him from being able to do so.
But they did not hear from the Commission for several months and approached Civil Society in the December.
The Commission has since engaged with the charity, opening a regulatory compliance case, and says it has resolved the issue.
Action Aid for Animals
Action Aid for Animals has been engaging with the Commission since 2012 with concerns around its repeated failure to file its accounts.
The Commission issued an action plan in November 2015 and escalated its investigation to a statutory inquiry in July 2016, freezing its bank accounts at that stage.
But the issue was not resolved for some time. Months after our coverage of the case, a member of the public got in touch with concerns because she had paid to adopt some animals but not received them. Separately, a comment reporting a similar incident was left on the bottom of the news story by a different person.
In February 2018 the charity’s founder and chair, Kendra Pinder, posted a long announcement on Facebook saying that she was resigning as a trustee after being physically assaulted.
More recently the charity’s official Facebook page clarified that she was no longer involved in the charity and “has been removed by the Charity Commission”.
The Commission says: “Our inquiry remains underway, and we cannot comment on the very serious issues under investigation while that is the case. We recognise the public interest in our work, and endeavour to ensure that our inquiry reports paint a comprehensive picture of the issues under inquiry.”
Newham Community Leisure
Newham Community Leisure runs the Old Spotted Dog football ground in Forest Gate, home to Clapton FC. But more than five years ago, the Commission heard accusations the ground is being run as a private business.
A response has taken so long that a campaign group, Save the OSD Ground, recently staged a protest outside the Commission’s offices and handed over a petition demanding action.
Newham Community Leisure has now placed itself in liquidation - a move campaigners suspect is an attempt to avoid proper scrutiny – and the Commission has opened a statutory inquiry.
It not the first time the Commission has engaged with Newham Community Leisure. It completed an inquiry in 2002 looking at whether the it was doing enough charitable activity and has been “monitoring progress” ever since.
Vincent Mcbean, chief executive of the football club and a trustee of Newham Community Leisure Trust, has denied wrongdoing.
The Commission says it is “working closely with relevant individuals and authorities, including the Insolvency Service, to address issues of serious regulatory concern as quickly as possible”.
It has promised to publish a report as quickly as possible.