Charity Commission should split advice and regulatory functions, committee told

A submission to a House of Lords committee from the charity law policy unit at Liverpool University says there is an 'inherent tension' between the two functions

The Charity Commission should consider a "structural split of its advice and regulatory functions", according to a submission to the House of Lords Select Committee on Charities from the University of Liverpool’s charity law policy unit.

The select committee has published a batch of submissions it received after it made a call for evidence, which closed on 5 September, for its inquiry into the state of the charity sector.

Among the issues the committee is looking to address are the roles of the Charity Commission and of the government.

In response to the question about the role of the Charity Commission, the university’s submission describes an "inherent tension" between the Charity Commission’s advice and regulatory functions. It proposed a split as a remedy.

"The Charity Commission’s acknowledged role is as both regulator and promoter of the sector, but there is an inherent tension between the two, and the commission has been forced recently to see itself as a regulator first and an adviser second," the university’s submission says.

"A structural split of its advice and regulatory functions would remove some fear among charities that seeking advice will attract regulatory attention with its attendant reputational risks. The advice function of the Charity Commission remains very important – the publications that it produces are heavily relied on in the sector."

The True and Fair Foundation, which has attracted heavy criticism from the sector for reports it has published on the operation of the charity sector, also responded to the call for evidence, and proposed sending charity reports and accounts to another body, citing HM Treasury as an example.

The submission says this system, which it says would be similar to those used in the US and Canada, could alleviate the administrative burden on the commission while requiring charities to abide by "the same levels of financial stewardship and transparency as all other businesses".

The True and Fair Foundation also suggests a "periodic three-year review of organisations’ charitable status to judge if they are operating as a true charity, a social business or a straightforward ‘for-profit’ entity". It says this would ensure charities have charitable status on merit.

Numerous other submissions, including those from the Charity Finance Group and the Association of Charitable Foundations, highlight the low level of funding the commission receives.

Paula Sussex, chief executive of the Charity Commission, wrote to the select committee to outline some of the commission’s general thoughts on the sector.

While discussing the commission’s three-year strategy, to be carried out between 2015 and 2018, she said that the first year focused on compliance.

"Given our limited resources, the board determined that the best way of carrying out our statutory duty of enhancing public trust and confidence in the sector was to be seen to be a firm and fair regulator," she wrote.

"However, as the commission moves into the second year, we are putting more focus on the enablement strand."

Asked if the regulator wanted to comment on the suggestions from the University of Liverpool and the True and Fair Foundation, a spokesman said it was for the committee to consider all the submissions it had received.

"We will continue to work with the committee and keenly await the committee’s findings when they report back in March 2017," he said.

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