In a highly critical report into the work of the commission, published today, the government’s spending watchdog says that the regulator does not do enough to deal with abuse of charitable status, fails to take tough enough action where there are serious regulatory cases involving charities and can be slow to act when investigating regulatory concerns.
This means that the commission is not meeting its statutory objective of increasing public trust and confidence in charities and is not delivering value for money, the report says.
The report, The Regulatory Effectiveness of the Charity Commission, says that the NAO found cases where the commission was slow to recognise the seriousness of the situation, gave trustees regulatory advice in serious cases rather than opening an inquiry and allowed a lack of cooperation by trustees to delay investigations for periods of more than a year.
It says that the NAO discovered statutory inquiries and operations cases "where periods of several months passed during which the commission took no action".
This was sometimes explained by external factors, such as waiting for another body to act or litigation, but "reduced staff numbers and a lack of prompt action were also significant factors in some cases".
The report says that the commission is reactive rather than proactive and makes insufficient use of the information it holds to identify risk. Almost all of the commission’s investigations are prompted by concerns from external sources rather than by its own data analysis, it says.
It says that the commission too readily accepts what it is told by trustees and should do more to check whether they have complied with the regulator.
The regulator removed 26 trustees from charities in 1997, the report says, but has not removed a single trustee since 2008/09. It suspended only two trustees in 2012/13, the report says.
"In many of the registration and operations cases we saw, the commission relied solely on information from trustees or their professional advisers that they had acted to address the commission’s concerns," the report says.
"The commission does not follow up a sample of these cases to check whether trustees have done what they say they have. Nor does it do enough to identify those trustees who may be seeking to abuse charitable status so it can check the information they provide."
The NAO says that the commission’s budget, which is £22.7m in 2013/14, has fallen by 40 per cent in real terms since 2007/08. Although the regulator has reviewed how it operates and reduced demand for its services, it has not identified the budget it would need to regulate charities effectively.
The NAO recommends that the Cabinet Office should "help the commission to focus on its core regulatory functions by removing or reducing those activities that add little regulatory value" and help the commission to gain legislative changes that would address deficiencies and gaps in its powers.
A statement from the Cabinet Office said that the department would launch a consultation to address any gaps in the commission’s legal authority.
Amyas Morse, head of the National Audit Office, said the commission was too passive in pursuing its objective of protecting the good name of the charity sector and in making the case for the resources needed to allow it to do so.
"We welcome the early plans for a reset of its approach and strategy being proposed by its new board, and encourage them not to fall short of the radical change of pace and rigour which is evidently needed," he said.
Read the Charity Commission's reaction here.