CHARITY COMMISSION: REGULATION AND SUPPORT OF CHARITIES
THE ACCURACY
OF THE
COMMISSION'S
REGISTER OF
CHARITIES
18. Registration is an important safeguard to prevent
unsuitable organisations from gaining charitable status. It is
also intended to provide assurance by making information about
charities accessible to the public and demonstrating that a charity
has clear objectives in terms of its intended beneficiaries, and
has independent trustees with sufficient powers to oversee its
operation.[23] Most
removals from the register are because the charity has ceased
to exist. A small number are removed by the Commission because
they are judged not to qualify to register as a charity. Action
or investigation by the Commission might indirectly lead the charity
to wind up and therefore to be removed. Deliberate abuse by individuals
working on behalf of, or as employees of, a charity does not mean
that the charity itself can be removed, but the Commission may
take remedial action, for example by removing and replacing trustees.[24]
19. The National Audit Office found from their analysis of charities'
income that more than 51,000 (28 per cent) had no recorded income.
They considered that this raised doubts over whether all such
charities could be active.[25]
The Commission told us that it had made a sample check on 15,000
charities with no income and had obtained a 50 per cent response.
Some were found to be inactive and had been removed from the
register; 700 were referred for possible amendment or amalgamation,
and, in around 400 cases, the Commission drew the charity's attention
to the powers in the 1993 Act to use their endowed capital.[26]
The Commission did not have a target for reducing the number
of charities with no recorded income, and explained that there
were likely to be a lot of inaccuracies, particularly at the smaller
end of the charitable sector. The Commission would be carrying
out a sample survey of 1 per cent of charities accounts below
the £10,000 threshold for routine monitoring to test the
accuracy of returns. The Commission's further response would
depend on what the survey showed.[27]
20. The Committee asked the Commission about the extensive failure
of charities to respond to requests for information to update
the register and the apparent lack of action to pursue them.
Between 1990 and 1996 the Commission mailed charities on five
occasions to check that they were active and that their details
on the register were still valid, but the National Audit Office
found that some 46,000 charities had not responded to the last
complete (fourth) mailing.[28]
Around 37,000 charities (24 per cent) had not provided annual
returns and 36,000 (31 per cent) had not provided accounts
in response to its fifth mailing programme in 1996. The Commission
said in evidence that a charity could not be removed from the
register merely because it did not reply.[29]
21. This state of affairs means that the Commission has failed
to deliver the accuracy of the register promised to our predecessors.
The Commission had set itself target of obtaining comprehensive
information on at least 90 per cent of all active charities by
1993; but by 1997 it had only achieved 76 per cent, based on the
response rate to the mailing programme. The Commission told us
that it was very unlikely, even under the new statutory framework,
that it would be able to achieve the target. With the new database,
non-returns would be followed up and the Commission would try
to ensure a 100 per cent return from larger charities. There
were no statutory powers to enforce returns from smaller charities,
but the Commission told us that it did not intend to develop a
policy to address the difficulties which might arise until after
the first complete cycle at the end of 1998, when it would take
a view in the light of experience.[30]
22. The Commission estimates that there are over a million trustees
nationwide. Trustees are legally responsible for the activities
and good management of a charity. The new powers under the 1993
Act were intended to enable the Commission to learn more about
charities and their trustees' activities, but a person may be
disqualified only in certain limited circumstances. For example
a criminal conviction does not necessarily disqualify a person
from becoming a trustee.[31]
23. The Commission is required to keep a publicly available register
of all persons removed as trustees by the Commission or the courts,
but the National Audit Office found that Commission staff were
unaware that such a register existed. The Commission was not
making full use of information on unsuitable trustees, and standard
procedures were not in place to check prospective trustees of
newly registering charities against records of unsuitable trustees.[32]
24. We suggested to the Commission that this situation amounted
to neglect, and asked what was being done to improve matters.
The Commission said that it was now seeking to assess on registration
whether there were any doubts about a charity, including doubts
about trustees, so that they could be closely monitored.[33]
The new database and monitoring would give it the kind of information
about trustees which it had not had before. It was improving
the lists of trustees who came to notice as being unsuitable,
and the list of trustees removed was now accessible and being
used routinely.[34]
It was only now that the Commission had the new database that
it could begin to develop a comprehensive strategy on unsuitable
trustees.[35]
25. Other organisations hold information on charity trustees,
but the Department of Trade and Industry is the only organisation
with whom the Commission has a specific agreement to obtain information
routinely, namely on bankrupts and disqualified directors.[36]
The National Audit Office had noted that the Commission had no
formal procedures with the revenue departments for exchanging
information on their respective investigations.[37]
In evidence the Commission said that it was taking action to
improve relations. It now had an active relationship with the
local authority associations, recognising the common interest
arising from authorities' involvement in, and funding of, charities.[38]
It was seeking access to the police national computer for the
third time, but in the meantime relied on general co-operation
with the police where criminal activity was suspected.[39]
Conclusions
26. 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.
27. 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.
28. 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 their register.
This falls well short of the 90 per cent target promised
to our predecessors.
29. 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.
30. 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 Court. 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.
31. 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.
23
C&AG's Report para 2.4 Back
24
C&AG's Report paras 2.3 and 2.6. Qs 40-43. Evidence, Appendix
1, p19 Back
25
C&AG's Report para 2.29 Back
26
Q 38 Back
27
Q 39 Back
28
C&AG's Report paras 2.24, 2.29 and Figure 15 Back
29
Q61. Back
30
Qs 5-7, 61-62 Back
31
C&AG's Report paras 2.17-2.18 Back
32
C&AG's Report paras 2.19-2.20 Back
33
Q 80 Back
34
Qs 15-18 Back
35
Q 28 Back
36
C&AG's Report para 2.21 Back
37
C&AG's Report para 4.28 Back
38
Qs 29 and 32 Back
39
Qs 19-21 Back
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