The Charity Commission - Public Accounts Committee Contents

Conclusions and recommendations

1.  The Commission is the independent regulator of some 165,000 registered charities in England and Wales. It is funded entirely by, and is directly accountable to, Parliament. Its budget for 2013-14 is £22.7 million. The contribution charities make to our society is hugely important to all of us and the Commission has a key role in preserving public trust in charities. The annual income of the charitable sector is around £60 billion, and charities deliver around £14 billion worth of public services annually, funded through central and local government grants and contracts. The Commission's statutory objectives include increasing public trust and confidence in charities and regulating their compliance with charity law.

2.  The Commission has no coherent strategy for delivering clearly defined priorities within its broad remit. The Commission does not know how much its activities cost and has not focused its resources on its priorities. Lacking strong leadership and a strategy for effective and efficient regulation of the charity sector, the Commission has been buffeted by external events. It has responded to budget cuts by salami slicing its activities rather than radically rethinking its purpose. It has therefore failed to fulfil its duties to register, regulate and intervene in charities effectively.

Recommendation: The Commission should develop a clear strategy detailing how it will deliver its responsibilities as a regulator effectively, and set out how it will use its budget to implement that strategy. If it is being asked to do too much with too little it should clearly set out its case for additional resources to Government.

3.  The Commission has not regulated the charity sector effectively. The Commission has placed insufficient emphasis on the monitoring and investigation of charities relying mainly on receiving information from others, rather than actively generating its own information and intelligence to identify risks in individual charities. The Commission is too willing to accept what charities tell it, without verifying or challenging the claims made, and it does not appropriately prioritise its limited resources to investigate the most serious cases of potential abuse of charitable status. In the last 3 years, the Commission has not removed any trustees, it has only suspended a trustee twice and it has only restricted charities from entering into specific transactions 17 times when it is responsible for overseeing 165,000 charities. The Commission has continued to make poor use of its powers, its internal processes and whether, for example, with the Cup Trust or the Afghan Heroes investigations are too slow and inefficient, and when faced with clear cases of abuse, it has failed to act promptly and robustly, or use the full range of powers to intervene that it has available.

Recommendation: The Commission needs to use its statutory powers to regulate charities more effectively. This should include making better use of the intelligence it already holds on charities to identify risks, improving how it prioritises the use of its resources, and responding more quickly to serious concerns in individual charities.

4.  The Commission's leadership has consistently failed to tackle poor performance and ongoing weaknesses in the organisation. In response to critical reports from this Committee, and our predecessors, over the past 26 years, the Commission has repeatedly said that it will get things right. In practice, it has failed to implement our recommendations, its performance has not improved, and the Board has not exercised adequate oversight of the Commission's leadership when it failed to deliver the necessary changes. The Commission's strategic review in 2011 failed to achieve a fundamental transformation of the organisation, and it remains weakest in identifying deliberate wrongdoing by charities and in taking effective action. The Board is searching for a new Chief Executive and that person will need to bring about the much needed radical change in the Commission's culture and operations, to restore confidence in the organisation's ability to regulate charities effectively.

5.  Recommendation: The Commission needs to introduce a determined and focused new leadership to radically transform the Commission's culture and operations, and the Board needs to have sufficient grip on the Commission's performance and operations to hold the executive effectively to account.

6.  We have little confidence in the Commission's ability to put right its problems and failings. Nothing we heard convinced us that things have changed significantly since we last examined the Commission, and we are concerned that it does not possess the capability to put right its problems and address its failings. The Board is developing a change management plan, with the intention of tackling its engrained problems. We intend to return to review the Commission's progress in a year's time.

7.  Recommendation: The Commission needs to act decisively to finalise and put into action a robust change management plan to tackle effectively its enduring failings.

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Prepared 5 February 2014