The long-delayed regulatory case reports by the Charity Commission on the funding of the advocacy body Cage by the Roddick Foundation and the Joseph Rowntree Charitable Trust were probably intended, in part, to draw a line under a protracted controversy that has damaged all those involved. The fact they were published amid the welter of electoral results last Friday also suggests the commission did not want to draw too much attention to them.
Certain aspects of the reports are relatively unremarkable: no funds are said to have been misapplied or misappropriated; the trustees co-operated fully; the commission recommended improvements in monitoring and due diligence when making grants to controversial non-charities such as Cage; and the charities have made such improvements.
But two issues have not been entirely resolved, the first of which concerns the funding by charities of the core organisational costs of non-charities. The reports make it clear that the commission considers that core costs can be funded only insofar as they relate to the activities of the recipient that are consistent with the terms of the grant, which in turn must reflect the charitable purposes of the grant-maker. In the cases of Roddick and the JRCT, the commission says there was insufficient evidence that this was the case, and the work of people whose salaries were funded by the charities might have included non-charitable activities. It concludes, however, that it would not be proportionate to pursue the matter further, which presumably would have been by seeking restitution of funds.
This point has also been addressed by the commission in draft guidance on grants to non-charities that it has recently issued in response to these two cases. The guidance says, like the reports, that a charity can allow a grant to a non-charity to cover overheads only that are, and can be shown to be, directly connected to the activities it has agreed to fund.
Sector bodies including the Association of Charitable Foundations have objected that this will inhibit the development of socially useful organisations, force some such bodies out of existence and fetter the discretion of the trustees of grant-makers. This is therefore a controversy yet to be resolved, but one suspects that the commission’s view will prevail. It seems a fair principle that non-charities receiving charitable grants should be able to use them only for such core costs as can be demonstrated to relate to the charitable activity being funded.
The second issue is the distinction drawn by the commission in both reports between human rights activities that fall within the charitable purpose of promoting human rights and those that do not. "Under charity law, whilst the charitable purpose of advancing human rights can be supported in a number of ways, not all activities to support or promote human rights activities will be capable of furthering a charitable purpose," it says. There had been no assessment, it goes on, of whether Cage’s campaigns, lobbying and case work had been confined to advancing human rights "as understood under charity law".
It would be useful at this point for the reports to define, with examples, what this crucial distinction is between human rights activities than can be charitable and those that cannot, and which of Cage’s activities fall into which category. But explanation comes there none, although there are dark hints such as "Cage’s work on counter-terrorism issues, however, does not appear to be limited to, or entirely related to, human rights issues… there was nothing to constrain Cage, given that it is not a charity, from using the grant funds to carry out activities that did not further a charitable purpose".
The main published guidance from the commission on this question comes in the 2005 publication RR12, which takes a fairly wide approach to the advancement of human rights, including on the ever-sensitive topic of political campaigning. "Inevitably, a charity concerned with promoting human rights will have considerable scope for engaging in ancillary, incidental political activities," it says. "Where a charity is concerned with relieving the victims of human rights abuse, for example, in the course of doing so it may well identify measures which might be taken by the government in question, or other governments, to prevent that abuse. It may properly undertake ancillary political activity to that end."
Perhaps the commission will give further information in due course about its current view of non-charitable human rights activities. A spokesman for the commission was not able to provide any further information about what steps it may take next within Third Sector's deadline. Better still might be a definitive court judgment on the question when an opportunity arises in due course. A ruling by the charity tribunal against the commission’s refusal to register the Human Dignity Trust as a charity in 2014 provided some guidance, but the tribunal’s judgments do not qualify as binding legal precedent.
The JRCT case, of course, provoked a High Court judicial review by Cage of whether the commission had directed the charity to undertake, as it had done under pressure, never to fund Cage again, and whether it had the power to make such a direction. The court did not make a ruling, but the commission agreed a statement before the Lord Chief Justice that it did not have the power, in the circumstances, to fetter the future discretion of trustees. In the JRCT case report, the commission repeats its claim that it made no direction – in court it asserted that it was using its advisory powers only. Anyone who reads the documents would find that hard to credit, and if the commission were really confident of this point, surely it would have claimed the costs of the case against Cage. It did not.
The final paragraph of both reports suggest that the commission has no regrets over the aggressive and overbearing way it treated both charities once Cage’s past association with the Islamic State executioner Mohammed Emwasi came to light, igniting the ideological passions of some of its board members. "It is clear to other charities and the public that the commission, as regulator, will probe robustly how charities spend charitable funds in order to ensure transparency and accountability and to preserve public trust and confidence in charities," it says. This sounds like code for "we’d do the same again".
Stephen Cook is contributing editor of Third Sector