The disproportionate use by the Charity Commission of its proposed power to issue official warnings to charities could undermine public confidence in the sector, a group of charity bodies and lawyers has warned.
A joint submission to the committee of MPs scrutinising the Charities (Protection and Social Investment) Bill from the charity umbrella bodies Acevo, the Charity Finance Group, the Association of Charitable Foundations and Bond, the training and publishing body the Directory of Social Change and the law firm Bates Wells Braithwaite, says that the bill lacks sufficient safeguards over the new powers that it would grant the regulator.
The bill proposes giving new powers to the commission including the ability to issue official warnings to charities, to disqualify those with criminal records relating to sexual and terrorism offences from serving as trustees and to direct charities to be wound up after investigations.
The joint submission to MPs says the organisations understand that the power to issue official warnings in cases including low-level misconduct and mismanagement would allow the regulator to take a more proportionate approach in such situations than opening a statutory inquiry.
But they said they had serious concerns that the provisions in the bill as drafted lack sufficient safeguards.
"As such, their disproportionate application could threaten to further undermine public trust and confidence in charities," the submission says.
"The bill provides the Charity Commission with absolute discretion to publish a warning to a wider audience," it says. "If warnings are published they could have unforeseen or unintended consequences (such as a loss of opportunity or funding, or unwarranted reputational damage) for charities.
"Experience suggests the publication of a complaint often creates more publicity than any findings of a compliance review, and the commission could use the ‘threat of publicity’ to encourage compliance by charity trustees."
The submission proposes amending the legislation so that the warning may not be published to a wider audience.
"If the committee feels that lessons could be learned by the wider charitable sector through the publication of a warning, the commission could make details of the warning public without referencing the charity by name, or a charity trustee by name," the submission says.
It says that the legislation should be amended so that if a warning is to be published then the commission must give a charity at least 28 days’ notice before it is made public.
It also calls for charities that receive warnings to be able to appeal to the charity tribunal, which would not be available under the bill as proposed, and says the current option of judicial review is "an expensive, protracted route to challenging the commission’s decision".
"The tribunal was introduced with the specific purpose of allowing charities to challenge the commission without going through the expensive and time consuming process of involving the High Court," it says.
"If the warning power is to be used for low-level misconduct and mismanagement the right to appeal to the charity tribunal is much more proportionate, rather than through a judicial review, which is known to be a remedy of last resort for public bodies."
The Charity Commission has previously said that its proposed new powers would be used proportionately and only in a small number of cases.
It said that the new powers would strengthen the commission’s ability to tackle the most serious forms of abuse.
On the power to issue a warning, it said: "This power fills a crucial gap and is a simple, expedient, reasonable and proportionate way of dealing with lower levels of breaches where the risks and impact on charitable assets and services are not as serious so as to warrant more severe regulatory action."