INTRODUCTION
AND SUMMARY
OF CONCLUSIONS
AND RECOMMENDATIONS
1. Charities have an important role in the nation's economic and
social well being. The 184,000 registered charities have an annual
total income of around £16 billion and assets of some £35
billion. Charities increasingly help to provide public services,
and more than a third of charity income arises from contracts
with government, government grants and tax reliefs.[1]
2. The Charity Commission supports and supervises charities in
England and Wales and its activities include the maintenance of
a register of charities, the monitoring of charities and the provision
of advice. It has extensive powers to safeguard resources for
beneficiaries and to investigate suspected charity fraud and maladministration.[2]
3. Previous Committees of Public Accounts have examined and reported
on the Charity Commission's monitoring and control of charities
in England and Wales on two previous occasions in 1988 and 1991.[3]
In the first of these reports, the Committee expressed concern
about the Commission's failure to undertake effective monitoring
of charities. In the second report, the Committee was particularly
concerned about the accuracy of the register and the low percentage
of charities submitting accounts.
4. In December 1997 the Committee took evidence from the Charity
Commission on the basis of a more recent report by the Comptroller
and Auditor General on the regulation and support of charities.[4]
Two general conclusions emerged from the examination:
- disappointment at the lack of active management of the Commission's
responsibilities; and
- worry that the Commission is failing to strike an appropriate
balance between its responsibility for regulating charities and
its role in advising them.
5. On the first of these points, we are concerned at the slow
progress made in the six years since our predecessors' 1991 report,
particularly since the Commission now has much stronger powers
of regulation. We do not believe that the new powers are being
used to anything like their full potential, and we consider that
the Commission should manage its affairs more actively. It achieved
only half its targets in 1996-97.
6. On the second point, it is our view that the Commission is
paying too little attention to enforcing the accountability of
charities, and to the importance of promoting public confidence
in the charitable sector. We note the Chief Commissioner's emphasis
that the Commission's original function was to take the place
of the Chancery Court in providing legal services to charities.
Clearly, this is still part of its role. However, the Commission
also needs to recognise that its role has evolved and that there
is now a strong expectation in Parliament and among those who
make charitable donations that it will maintain an effective scrutiny
of registered charities. We expect them to have regard to this
expectation and act accordingly.
7. Our more specific conclusions and recommendations which support
the general views above are as follows:
on management
(i) The Commission achieved only 8 out of 22 performance
targets in 1995-96 and only half of its targets in 1996-97. We
consider that this continued failure to meet the majority of its
existing targets shows a lack of management grip, as does the
failure to realign performance indicators and targets in the light
of the Charities' Act 1993. We urge the Commission to show more
drive in exploiting the opportunities for greater effectiveness
which the 1993 legislation provides (paragraph 17).
on the accuracy of the Commission's register of charities
(ii) The Committee recognises the importance of registration
in preventing ineligible organisations from obtaining charitable
status, but consider that the Commission needs to do more to ensure
that charities already on the register continue to merit registered
status. The twenty-eight per cent of charities on the register
with no income, and which are therefore potentially inactive,
looks unacceptably high. We expect the Commission to take steps
urgently to identify inactive charities and remove them from the
register (paragraph 26).
(iii) It is unacceptable that many charities consistently
fail to respond to the Commission's requests for information about
their activities. In 1996 almost one quarter of charities failed
to provide annual returns and one third failed to provide annual
accounts. We are concerned at the Commission's failure to develop
a policy for dealing with this lack of co-operation by so many
charities. We consider that it has been too passive (paragraph 27).
(iv) Given the public's reliance on the register for
information about charitable activity, it is unacceptable that
by 1997 the Commission had only achieved 76 per cent accuracy
in its register. This falls well short of the 90 per cent
target promised to our predecessors (paragraph 28).
(v) We are concerned that the Commission seems unclear
about the appropriate target for accuracy, and about the likely
effectiveness of its planned measures to improve the register.
It should come to a clear conclusion quickly, and set targets
accordingly. It should also make more extensive use of its powers
to ensure that the targets are met (paragraph 29).
(vi) It is unsatisfactory that the Commission has not
had procedures in place to check that the prospective trustees
of newly registering charities had not previously been removed
from such posts by the Commission or the Courts. We consider
that the Commission should have taken a stronger line in promoting
safeguards against unsuitable trustees. With the new charity
database, the Commission now holds detailed information on charity
trustees. We urge it to make better use of this information (paragraph 30).
(vii) Several public sector organisations may hold information
on trustees and potential trustees which could be of use to the
Commission, but the Commission has been able to agree only one
arrangement to receive such information routinely. We consider
that the Commission needs to make stronger efforts to agree similar
arrangements with the other organisations which hold this kind
of information (paragraph 31).
on the submission of accounts and the monitoring of charities
(viii) It is disappointing that the Commission has
not met its target to obtain 80 per cent of charity accounts.
The Commission expects to set more demanding targets for larger
charities' returns, including a 100 per cent rate for charities
with an income of £250,000 or more; but this is not enough.
We urge the Commission to consider a target of obtaining 100 per
cent of accounts from all charities with an income of £10,000
or more, in line with the legal requirement, and to use its wide
ranging powers to ensure submission (paragraph 40).
(ix) Following a re-deployment of resources the 1996-97
target for reviewing accounts was met. The National Audit Office
found, however, that potential matters for concern were not always
being followed up in a timely and thorough manner. We expect
the Commission to attend to this (paragraph 41).
(x) We are concerned at the Commission's lack of rigour
during the testing of its new monitoring arrangements and its
failure to use the material generated about individual charities.
While there is always a need for development work on new systems,
we attach importance to following cases through to a conclusion
as part of a properly conducted trial. We expect the Commission
to ensure that the arrangements now in place comprehensively track
potential causes for concern and confirm that they have been fully
investigated (paragraph 42).
(xi) We expect the Commission to make effective use of
the new integrated information systems to identify charities at
risk and to pursue doubtful cases vigorously, using where necessary
its powers to require charities to respond. For this to be done
effectively, the Commission must have a clear policy for dealing
with charities which consistently ignore its requests for information
about their activities and financial standing (paragraph 43).
(xii) We welcome the Commission's offer of information
on the progress which it expects to make over the next two years
in developing an effective monitoring relationship with charities
(paragraph 44).
on support and investigation
(xiii) The Committee is disappointed at the time
taken by the Commission to generate management information about
support work. We expect the Commission to exploit fully the information
now being collected to maximise the impact of the substantial
resources used on charity support (paragraph 57).
(xiv) The Commission is now exceeding its target for
responding within 20 days to charities' requests for support,
but requests which fall outside the target have previously been
accorded low priority. We look to the Commission to monitor closely
the effectiveness of new arrangements for ensuring that both the
timeliness and quality of support work is sustained for all cases
(paragraph 58).
(xv) Whilst levels of customer satisfaction have improved,
we consider that the Commission needs to demonstrate that it is
responding to charities' suggestions for improvements in charity
support. We therefore recommend that the Commission should make
a senior member of staff responsible for evaluating the merits
of charities' suggestions and for assessing how they can be implemented
(paragraph 59).
(xvi) In its monitoring of the impact of support cases,
the Commission, in the first three months of the operation, had
rectified only 17 per cent of cases involving inefficiency
or irregularity. We consider that the Commission needs to set
meaningful targets with the aim of achieving timely results from
this important element of support casework (paragraph 60).
(xvii) Although increased resources have been devoted
to investigations, we are concerned that still only 8 per
cent of the Commission's staff are dedicated to investigation
work. We expect the Commission to review this allocation urgently
in the light of the throughput of investigations and delays, the
extra cases which are likely to arise from better monitoring,
and the public perception that this work is one of the main purposes
for which the Charity Commission exists (paragraph 61).
8. We note the Commission's views that abuse and administration
is a minor problem in the world of charities. But it is not clear
how much evidence there is for this view given the inaccuracy
of the Commission's register of charities, its inability to secure
proper accounts from many of them, and the relatively low percentage
of its resources applied to monitoring and investigating charities.
The Commission is reviewing the use of its statutory powers at
senior level. We expect this review to be completed with a due
sense of urgency, and to be informed of its outcome.
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