Charity Commission heavily criticised by the National Audit Office

The criticism was delivered in its two reports on the Regulatory Effectiveness of the Charity Commission and the Charity Commission’s regulation of the Cup Trust.

In its report, published on 4 December 2013, into the effectiveness of the Charity Commission in its regulation of the sector, the National Audit Office (NAO) concluded that, in its opinion, the Charity Commission is not doing enough to identify and tackle abuse of charitable status and is not delivering value for money. In particular, it criticised the Charity Commission for not using the information it has to carry out risk assessments, for being reactive rather than pro-active and for relying too heavily on reassurances from trustees. Even when the Charity Commission has identified concerns in relation to a charity, the NAO considered that it made too little use of its statutory powers to take action and failed to take sufficiently strong action in some of the most serious cases.

These accusations were brought into focus in the NAO’s second report relating to the Charity Commission’s failure to regulate the Cup Trust. The NAO found that the Charity Commission failed to take into sufficient account the nature and scale of the tax avoidance scheme or that the directors of the corporate trustee were running the tax avoidance scheme.

Although the NAO did recognise the important and necessary work that the Charity Commission carries out, as well as acknowledging the impact of the 40% budget cut it has suffered since 2007, the NAO found that there was a gap between the role and functions that the general public expected from the Charity Commission and what it actually does. The NAO believes that this undermines the Charity Commission’s ability to increase the public trust and confidence in charities – one of its statutory objectives.

The Charity Commission, in its response to the NAO report, accepted and endorsed many of the report’s recommendations and noted that a number of them had already been implemented. However, it also noted that the NAO report had only focussed on the Charity Commission’s investigatory and compliance functions and had not considered the many other areas of its activity.

Other responses to the NAO’s report have been mixed with some, including MPs, calling for HMRC to take over the regulation of charities and for the Charity Commission to be abolished. However, many within the sector have rejected this approach, noting the other roles and functions performed by the Charity Commission which it does relatively well. Instead, many have called for proper resourcing and support for the Charity Commission to enable it to improve on its investigation and enforcement functions.

Links to the NAO Reports on the Charity Commission

http://www.nao.org.uk/report/regulatory-effectiveness-charity-commission/

http://www.nao.org.uk/report/cup-trust/

IBB Solicitors’ specialist Charities team has over 50 years’ combined experience in delivering practical commercial advice to charities and not for profit organisations and those who work with them. For advice, contact a charity lawyer. Call us on 08456 381 381 or email enquiries@ibblaw.co.uk.