NAO follow up on the Charity Commission – reviewed by Jay Kennedy

The National Audit Office’s recent follow up report on the Charity Commission was accompanied by some grand claims: that the Commission is ‘transforming’ itself and becoming a ‘robust and effective’ regulator. But what’s really going on here?

In the wake of the Cup Trust scandal there has been a kind of puppet show played out between the Commission’s leadership, politicians, the media, and other institutions such as the NAO. There has been plenty of stomping and shouting, but also a distinct sense that those pulling the strings aren’t fully aware of the real audience. Some crucial issues have also been written out of the script.

Charity law can be complex and obscure. The population being regulated is also hugely diverse. The Commission’s role in interpreting the law and explaining it to charities is fundamental, not least because trustees have a legal duty to understand and abide by Commission guidance.

Any functioning regulatory system needs to enable trustees to follow the rules and get things right in the first place.

Despite this, the role of guidance and the public register of charities in the context of ‘regulatory effectiveness’ were excluded from the NAO’s analysis. Hence their top-line judgements that the Commission was ‘not regulating effectively’ and was ‘not delivering value for money’ are for me just not valid on the evidence provided. The Commission does need to protect public trust and confidence in charity, and take strong enforcement action where necessary. But prevention is not only better than cure; it’s really the only effective, long-term cure.

But the NAO’s report does raise some notable points. It illustrates the Commission’s ‘new’ risk-based approach in its revised business strategy, and says this indicates progress in the right direction. But the Commission has had some version of a risk-based approach for years, including during the period now being judged as a failure. I wonder how new the ‘new’ approach is going to be. It’s always been a compromise between too much regulatory responsibility and too few resources – which begs the question of what’s realistic. Could ‘effective regulation’ actually mean sending compliance officers out to inspect and audit every charity on an annual basis? Perhaps – but that would need a budget of £200 million not £20 million. That’s not an option.

The NAO also examines information exchange and cooperation with other regulators and agencies, noting that recently the Commission has been submitting three times as much information to HMRC as it receives. I think this problem partly stems from a lack of clarity about the Commission’s responsibilities. The draft Protection of Charities Bill is seen as part of the solution; it increases the Commission’s powers in certain areas but I doubt more laws will improve matters. The Commission simply does not have the clout in Whitehall to bang heads where other agencies are failing to coordinate or prioritise regulatory problems involving charities.

The Commission has implemented many changes to ‘first contact’ over recent years, and the NAO notes that the ‘Commission has successfully reduced the volume of telephone calls, emails and letters’. But what is the impact on regulatory effectiveness? Are there fewer contacts because the Commission’s guidance is now so clear and accessible that trustees don’t need clarification? (doubt it). Or are trustees not getting the help they need because the helpline has been halved to 15 hours a week, and hence are at greater risk of making mistakes? (more likely).

The NAO shows how the Commission is well behind its targets on the time taken to register medium and high-risk cases, which appear to be due to staffing problems and restructuring. Registration is surely another area where regulatory effectiveness comes into play, because it is where charitable status is formally assessed and stamped with the imprimatur of a registration number. Decisions taken at that stage may have repercussions later. The more time taken to register an organisation, the more time before its activity is formally regulated.

These matters are playing understudy in the puppet show about the Commission’s new ‘robust’ approach, but they should be centre stage. Enforcement is important, but the Commission must be able to dedicate resources and effort to improving other vital functions to effectively regulate in the future.

Jay Kennedy is director of policy and research at the DSC

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