BLOG: Charging charities for regulation

The Charity Commission is planning to launch a wider consultation into whether charities should be charged fees by the regulator and the proposal has received a generally negative reception from the sector.

Objections to the proposal include that fees would be an unfair levy on the sector and present a risk to the commission’s independence. There are concerns that the introduction of such fees would open up the possibility for the government to further reduce the commission’s funding in future.

Broadly, the argument for charging charities is that most regulators are funded by the sector they regulate. In addition as the commission is facing increasing pressure on its funding there is an inevitable pressure to make up the shortfall.

A comparable body to the commission would be Companies House. Companies House administers the registration of UK companies and maintenance of the UK company register. It charges fees for annual confirmations from companies, incorporation of new companies and other administrative matters, such as changing articles, dissolutions and name changes. The public can use its website and the register to view guidance and company documents, some of this information is free, the remainder available for a fee.

Many charities are also companies and already pay annual fees. Companies House charges companies fees for specific services. Fees vary depending on the service and whether the transaction is submitted is digitally or on paper. The two most common fees are annual confirmation fees of £13 or £40, and incorporation fees, £10 or £40.

At 31 March the register consisted of 3,896,755 companies, which generated an income of £67.28m, of which £42.1m came from confirmation fees and £8.1m from new registrations. In contrast, the commission does not wish to charge for specific services but rather introduce flat fees.

The fees that would be proposed are yet to be decided. Early indicators suggest that small charities, those with a turnover of less than £100,000 will be exempt, with a sliding scale of fees applying to the remaining charities.

The range of these fees vary from the January 2017 estimate of between £60 to £3,000 to the latest estimates of £75 to £1,750. The difference in the proposed fees charged to charities by the commission to those charged by Companies House is eye watering.

It is unclear at this point what size of funding the commission is seeking to meet with these fees. At 31 December 2016 the register contained 167,109 charities, 122,695 had annual turnover of, or less than £100,000. Therefore, whatever shortfall is required must be raised from the remaining 44,414 charities. If the target is, for example, £10m, then this would be an average of £225 per charity.

If the commission adopts a flat fee approach it will be asking all charities to subsidise its compliance and investigation work including those who are already compliant and well governed.

Unfortunately for the sector, the Fundraising Regulator seems to have set a precedent by charging fees to charities engaged in fundraising, regardless of whether those charities have been in breach of regulation. It would be a lost opportunity not to consider alternative funding models in any future consultation.

For example, would a low fee regardless of size be fairer just for registration? A service fee would avoid the costs of assessing qualifying charities. Would it be reasonable to expect compliant charities to pay for all the costs of compliance and investigation teams? Would a system of fines be more reasonable for charities found to be in breach? Should all documents and guidance continue to be free to all? Could free guidance be limited to charities as part of the registration fee and chargeable to the remainder of the public?

The consultation is yet to open but I hope any fee charging system has taken into account alternative sources of income generation and it is clear what any such fee is a payment for.

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