- The Commission should have an up-dated statement of purpose that aims to: - increase public trust and confidence in charities;
- ensure compliance with charity law;
- enable and encourage charities to maximise their social and economic potential;
- enhance accountability to donors and beneficiaries.
- A new independent tribunal should be introduced for charities to challenge decisions of commissioners at a reasonable cost.
- The Commission should publish performance reviews of different charitable sub-sectors, with sector participation.
- The Commission should be renamed the Charity Regulation Authority, to better indicate its purpose.
- The board of the Commission should be enlarged to reflect a wider range of stakeholders.
- The Commission should hold open public board meetings and annual general meetings.
The rules about charity registration with the Commission should be updated.
The Strategy Unit proposes the following:
- The threshold for registration with the Commission should be raised to an income of £10,000 a year, and a new status of "small charity" should be introduced for those below £10,000.
- Some charities that are currently not required to register with the Commission should be monitored for compliance with charity law by their existing sector regulator or, where necessary, by the Commission.
- The "gateway" registration procedure should be refined.
The Charity Commission has often been criticised by the sector. Julie Pybus finds out what the experts think of new proposals to modernise it.
Criticisms of the Charity Commission have been rumbling away for years. Since the 1990s, it has been accused of not scrutinising charities effectively. Many organisations have argued that its staff are unapproachable, its procedures difficult to comprehend and its decisions hard to challenge.
In the past, there was a tendency for the Commission to go on the defensive when criticised, but it has recently made an effort to respond constructively.
Real improvements have been made to the accountability of the Commission with the introduction of an independent complaints reviewer in 2000. Steps have also been taken to provide more information about its decisions and to make the register of charities available publicly.
But these reforms have been carried out within the constraints of the Commission's existing structure, which dates back to 1960. The Government's review of the voluntary sector, Private Action, Public Benefit, outlines proposals that, if they are taken up, could help the Commission to respond better to the demands of a modern voluntary sector.
The Commission acknowledges in its official response to the review that, in some areas, it needs to be brought up to date. "As the review recognises, we have made good progress recently in turning ourselves into an effective modern regulator within our current statutory remit. But we agree that the time is right for Parliament to renew our mandate in modern terms."
Perhaps the people best placed to comment on what measures need to be taken are those at the front line of dealing with the Commission: the charity lawyers. Specialist lawyers have frequent battles with the Commission on disputed points of charity law and help charities ensure that they are complying with their duties.
Most charity lawyers are positive about the Strategy Unit report's proposals despite the document being compiled after only eight months of research.
Anne-Marie Piper, partner in the charities team at Farrer & Co, goes as far as saying it is "the best government report that I have ever read".
However, a report of less than 100 pages, produced in such a short time, cannot answer everyone's questions. The devil is in the detail.
Changes to the Commission
Under the Charities Act 1993, the Commission should be "promoting the effective use of charitable resources by encouraging the development of better methods of administration, by giving charity trustees information or advice on any matter affecting the charity and by investigating and checking abuses". The Strategy Unit argues that this statement needs to be updated so that the Commission has clear strategic objectives that can be measured (see sidebar).
Michael Scott, head of the charities group at Charles Russell, approves of this. "The Commission's tasks do need to be clarified and focused otherwise it will rush around trying to do everything," he says.
However, there is criticism of the proposed change of name from the Charity Commission to the Charity Regulation Authority. Robert Craig, trusts and charities partner at Finers Stephens Innocent, believes this could create confusion. "The change of name is pointless. The Commission has been around for years and there will be even less recognition of it if you change its name."
The Strategy Unit report also proposes that the number of commissioners is increased to nine. Francesca Quint, a barrister specialising in charity law and a former deputy commissioner, thinks this is a good idea. "It would bring in more views and prevent the commissioners from being as inward looking," she says.
The accountability of the Commission is addressed through a proposal that it should hold open board meetings and annual general meetings. Although this is widely welcomed, Scott warns: "It's a nice idea and very politically correct, but having open meetings restricts people from saying what they think."
The Commission points out in its response to the review that although it is anxious to be more accountable, open meetings will not always be possible. It states that "much of the decision making of a regulator in particular may need to take place in confidence if its effectiveness is to be safeguarded and duties of confidentiality to third parties are to be preserved."
A new appeals process
At present, the only way a charity trustee can contest a decision made by the Commission is through the High Court. This is not an easy process as John Weth discovered when he decided to contest the Commission's decision to remove him as a trustee of the Little Gidding Trust in 1997. Weth fought a long legal battle through the High Court and appeals process which cost him £100,000. "The practical difficulties of an appeal against a Commission order appear so formidable that an attempt to reach the summit of Mount Everest might appear an easier task," Weth said at the time.
Weth was unsuccessful in his contesting of the Commission's decision.
But damaging situations such as this could potentially be avoided if the Strategy Unit's suggestion for an independent tribunal is taken on board. Piper welcomes the creation of such a body. "There is going to be a fundamental shift in the balance of power if we get an independent tribunal," she says. "At the moment the Commission has very wide powers and is not frightened of exercising them."
Stephen Lloyd, partner at Bates, Wells & Braithwaite, agrees that "the capacity to appeal will shake-up the Commission".
However, Craig is concerned about the effects of such a tribunal. He points out that, at the moment, commission officers are often happy to discuss with charities how their application may be improved and fears the introduction of a tribunal could change that.
The process of registering with the Commission is complicated and often too costly for small charities with limited resources. The Strategy Unit suggests that charities with an income of less than £10,000 a year should not have to register.
It does, however, recognise that being a registered charity gives organisations credibility and helps them access funding, so it suggests the introduction of a new official title of "Small Charity". To qualify for continued tax breaks, these charities need only go through a simple registration process with the Inland Revenue.
While charity lawyers are in favour of a lighter touch for smaller charities, there is widespread concern about removing them from the register altogether.
Craig argues that there will be confusion among members of the public about what the word "charity" means. "This could lead to a lack of confidence in the sector when we are trying to build it," he says.
Craig points out that people may not take the idea of a "junior" charity as seriously as taking on proper charity status. He also argues that the system is open to abuse as people controlling large amounts of charity cash could escape regulation by forming several small charities. "To remove thousands of charities from the register - probably in the interests of saving costs - seems to be a folly," he says.
The 'gateway' registration procedure
A new "gateway" registration procedure was introduced in 1999 and requires applicants for charitable status to provide, along with their constitutional documents, a range of information about their actual or proposed activities, plans for funding and trading, and details about their trustees.
While the Strategy Unit report is cagey about its opinions on this process, most lawyers argue that the Commission is doing something forbidden under English and Welsh law by taking into account the viability of an organisation at the same time as deciding whether it is charitable. It is a well-established right that if an organisation is set up with an accepted charitable purpose then it gets charitable status, whether or not there could be difficulties in running such an organisation.
The lawyers, therefore, welcome the Strategy Unit's proposals of separating the process of judging whether or not an applicant qualifies as a charity from that of assessing its viability.
"This proposal is important because we will hopefully be going back to the proper legal position rather than the Commission making its own subjective decisions," says Scott. This should also speed up the registration process.
The Strategy Unit report's recommendations could push the Commission into becoming more of a hands-on regulator, but the report doesn't address one of the consequences of this change - the inevitable lessening of the Commission's role as a friend and adviser to charities. Lloyd argues that it is important to consider whether an umbrella body, such as NCVO, should take on such a duty.
Another key debate missing from the report is the question of resources for the Commission. If the Commission is going to carry out these new roles properly, it will need much greater resources than it has currently.
While most charity lawyers are preparing responses to the Strategy Unit report, their criticisms are focusing on the minutiae of the proposals.
By and large the broad thrust of the report has been welcomed. "There is a great deal of work still to be done, but I hope it doesn't get watered down too much. It deserves to have a fair go," says Quint.
And while some of the proposals may see radical changes in the way that the Commission works, Quint doesn't anticipate that charities will find themselves dealing with a strange, new body. "The Commission is unlikely to change its character; it has a long tradition in the way that it deals with things, and it is going to have many of the same people there in the future. I can't imagine it turning into a completely different sort of animal."
THE STRATEGY UNIT'S PROPOSED CHANGES TO THE CHARITY COMMISSION
The Strategy Unit wants to see independent, open and proportionate regulation by a modernised Charity Commission that has clearer goals and greater accountability. To achieve this, it proposes the following: