The Charity Commission should consider fining organisations that fail to file their accounts on time rather than introducing a charging structure for all charities, the Charities Aid Foundation has said.
In a paper published today, CAF says it disagrees with the notion of the regulator charging charities an annual fee for its services and calls on the commission to consider other options, such as fining late filers or introducing fees for particular activities.
CAF’s paper says that 10,000 charities failed to file their accounts on time last year and an average £250 charge on those organisations could raise £5m over two years.
The commission has been making the argument in favour of asking charities that use its services for some financial contribution and is expected to run a consultation on the notion soon.
The regulator says it needs to consider charging charities for its services in order to deal with a significant fall in government funding, which the commission says has roughly halved in real terms in recent years and is frozen at £20.3m until 2020.
CAF’s paper says it accepts that the commission cannot fulfil its obligations without securing additional funding, but the regulator should explore options other than a fee-paying structure.
It says charging charities an annual fee could damage public trust in the sector if organisations are being policed by a regulator they pay for.
The fact that a proportion of public donations could go to the regulator might deter people from giving to charity, says CAF, and it also raises fears that the burden of payment will only increase over time.
The paper adds that many charities receive public funding and it seems "illogical to furnish charities with a portion of government funding, only to ask them to pay some of that back to a government regulator".
CAF suggests three further alternatives to a standard fee structure other than a fine system: charging for specific advice or additional services; using any future Libor fines or similar regulatory fines to finance charity regulation; and simply increasing funding from the Treasury.
Sir John Low, chief executive of CAF, said: "One of the inherent roles of the Charity Commission is to improve the governance of charities. Introducing a charge for those filing their accounts late would not only provide much-needed additional funding, but would also provide a very real incentive for charities to improve their governance."
A spokeswoman for the regulator said it was pleased to see a healthy debate on the issue of its funding.
"The commission has looked at a range of funding proposals in detail and there are significant practical barriers to other proposals, including those put forward by CAF, which we have shared with them," she said.
"We hope to be able to consult soon on our preferred approach, including both the type of enabling services the sector would like to see from the commission, and the method and model for potential sector contributions. We continue to work with government and charities to encourage an open conversation."