The Charity Commission has been too focused on the legal risk of taking action against charities rather than the potential reputational damage to the sector, the regulator’s chief executive has told a committee of MPs.
Sam Younger appeared as a witness before the Public Accounts Committee in the House of Commons yesterday, along with Nazo Moosa, one of six new members appointed to the commission’s board in May, at a session on the effectiveness of the Charity Commission as a regulator.
The session was held in response to the highly critical report from the National Audit Office, which said the commission was failing to regulate charities effectively and was not providing value for money.
Younger was criticised by committee members about the length of time the commission has taken to act in cases such as the Cup Trust tax avoidance scheme and charities associated with terrorism, and its "weak" response to a list of 13 other charities where there have been concerns about misuse of Gift Aid.
Margaret Hodge, the committee’s chair and the Labour MP for Barking, questioned why the regulator did not "bung in an interim manager" in cases where there were serious concerns about charities and the activities of trustees.
Younger said that "taking the risk" of appointing an interim manager at charities that the regulator had concerns about was "precisely one of the things we are looking to do".
"One of the big factors has been that we are too focused on the risks as opposed to wider public interest, reputational issues," he said. The commission was putting interim managers onto more cases and had recently departed from previous policy that said interim managers could only be put in place if charities had the funds to pay for it, he said.
Younger said there were two cases last year where interim managers were put in and the commission was paying for it. "I think there has been too strong a sense of privileging the legal risks of getting involved rather than the public interest risk in not doing something," he said.
Hodge raised the case of the charity Afghan Heroes, which she had received a letter about. The charity only spent 4 per cent of its income on charitable activities, she said. Younger said he could not comment on individual cases, but later said the commission had opened a statutory inquiry into Afghan Heroes, which it announced today.
Hodge ordered the commission to appear before the committee again before the general election in 2015. Over the intervening period, the committee wanted to see "real evidence of improvement", she said.
Younger admitted that the regulator had been too risk-averse and had got it wrong in the case of the Cup Trust, which raised £176m in donations, claimed £46m in tax relief, but spent only £55,000 on charitable activities over two years. However, he said: "We’ve made the effort to turn around the culture – it is getting better, people are becoming bolder."
The regulator was beginning to use its powers significantly more and the board was focused on "holding the executive’s feet to the fire", he said.
Ian Swales, the Liberal Democrat MP for Redcar, said that the commission’s culture could only be changed if the people working there were changed.
Moosa said: "I would disagree that the way to change the culture is to remove people. A new board has come in; we know incremental as well as radical changes are needed. It is not a simple problem to address."
The commission has had a "split identity" between being a friend and a regulator to charities, she said. There were areas that needed to be focused on that had been neglected, including investigations.
Moosa said the regulator was in the process of hiring a new chief executive to replace Younger when he stands down in August. "The tone has got to change," she said. "The sector is not terribly happy with the fact we are taking a more rigorous approach, but it has got to be right that we increase the public’s confidence."