1 The Commission's strategy and leadership
1. In March 2013, we examined the Charity Commission
(the Commission) and HM Revenue & Customs, about their regulatory
response to the Cup Trust charity. We concluded that the Cup Trust
had been set up as a tax avoidance scheme and that it did not
meet public expectations of a charity. We found it unacceptable
for the Commission not to have been able to stop this abuse of
charitable status. On
the basis of two subsequent reports by the Comptroller and Auditor
General, we took evidence from the Commission on its regulatory
effectiveness and leadership.
This has been the fifth time that we, and our predecessors, have
examined the Commission since 1987.
2. The Commission is the independent regulator of
some 165,000 registered charities in England and Wales.
It is a non-ministerial department funded entirely by, and directly
accountable to, Parliament. Its budget for 2013-14 is £22.7
million. The Commission's core regulatory activities include registering,
monitoring and investigating charities; using its powers where
there is mismanagement or misconduct in charities; and providing
guidance to trustees of charities. Charities make an important
contribution to UK society 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 objectives include increasing public trust and confidence
in charities, and regulating their compliance with charity law.
Its objectives, functions and duties are set out in the Charities
Acts 2006 and 2011.
3. The Commission's budget will fall from £32.6
million in 2007-08 to £20.4 million by 2015-16, a reduction
of 48% in real terms.
In response to its declining budget, the Commission carried out
a strategic review in 2011. It told us that it had consulted a
broad range of external stakeholders including the charity sector,
the Government, Parliament and the public about whether the Commission
was carrying out any activities that it should not be doing. However,
this consultation did not enable it to identify any significant
activities which it could discontinue or pass to other bodies.
A key conclusion of the review was that the Commission should
focus on what only a regulator can do.
4. The Commission's strategic plan for 2012-15 reflects
its new approach to focus its activities on accountability and
compliance. The Commission restructured and put new processes
in place aimed at improving efficiency and reducing demand for
its services. However, its approach to restructuring did not involve
an assessment of the costs, benefits and risks of different models
for regulating charities and meeting its statutory objectives.
The Commission accepted that its strategic review had not been
radical, and had not produced a fundamental transformation of
the organisation. It acknowledged that this would have required
a whole range of options to have been on the table, including
a fundamental look at its processes and their costs.
5. The Commission aimed to cut spending in two areas.
The first was to seek to change the thresholds above which charities
are required to seek formal permission from the Commission, before
undertaking certain actions, with the long-term objective of removing
some of this activity entirely.
The second was to stop providing advice and guidance to individual
charities. The Commission told us that over the previous three
years it had sought to reduce pressure on its resources by encouraging
charities to use its online advice and guidance. As a result,
the number of incoming calls, e-mails, and letters had reduced
by around a third. However, the Commission acknowledged that it
still had a long way to go in focusing its reduced resources on
its accountability and compliance functions.
6. The Commission accepted that it has been under
severe financial pressure and told us that it did not have the
resources to do the job which Parliament requires of it. It considered
that it had been asked to do too much with too little. Despite
this, the Commission acknowledged that it had not determined a
figure for the resources it needs to deliver what Parliament requires.
It described its approach as aiming
to do the best possible job with the resources it has.
The Commission considered that it would not be worth determining
how much funding it needed as this would be unlikely to lead to
any change in resources. It felt that this would be like trying
'to challenge an overwhelming tide of austerity'. As a result,
its approach had been to aim to cope within the amount it had
7. The Commission does not know how much it spends
on each of its key functions, and it does not have a system for
recording the time spent by staff on different activities.
The Commission agreed that it needed to develop unit cost data
for each of its key processes such as registration, compliance
checks and visits. It confirmed that accurate cost data would
be essential to inform any proposals for a radical transformation
of the Commission to ensure that all recommendations were properly
costed. It would also help the Commission determine the total
resources required to deliver its functions under each alternative
option for the effective regulation of charities. The Commission
recognised that cost data were also necessary to understand which
of its activities could be more efficiently provided by other
bodies, whether through outsourcing by the Commission, or directly
by different organisations.
The Commission told us that it was still at the very early stages
in costing its activities, and had only just started this work.
So far, it had established a steering committee which was exploring
ways to generate cost data and it was trying to bring in outside
expert advice, as it does not possess the skills internally.
8. The Commission recognised that there was significant
scepticism about its leadership and its current capability to
achieve its objectives. The current Chief Executive's term is
coming to an end and the Commission has sought external help in
its search for a new Chief Executive, whom it hopes to have in
place by Spring or Summer 2014. The Commission told us that there
were three characteristics it would seek in a new Chief Executive,
namely someone who: could examine situations strategically; had
successfully delivered business transformation elsewhere; and
would be able to secure support from the Commission's stakeholders
and staff for the organisation's transformation.
9. In 2013, the Commission gained a new Board, which
is leading the development of a change management plan to tackle
the Commission's engrained problems.
The Commission considered that its Board was very focused on holding
the current Executive to account. The Commission said it was clear
that it had to transform its culture and change its tone with
charities, by taking a more rigorous approach in its investigations,
and recognising and dealing swiftly and decisively with abuse
of charitable status. It is also implementing all the recommendations
in the National Audit Office Report.
However, the Commission acknowledged that changing its culture
would be difficult and would take time.
1 HC Committee of Public Accounts, Charity Commission:
The Cup Trust and tax avoidance, 7th Report of
Session 2013-14, HC138, June 2013 Back
C&AG's Reports, The regulatory effectiveness of the Charity
Commission, HC 813, 2013-14, 4 December 2013 (hereinafter
referred to as the C&AG's Report); The Cup Trust, National
Audit Office, HC 814, 2013-14, 4 December 2013 Back
HC Committee of Public Accounts Giving Confidently: The Role
of the Charity Commission in Regulating Charities, 39th Report
2001-02, HC 412, July 2002;HC Committee of Public Accounts
The Charity Commission: Regulation and Support of Charities
28th Report 1997-98, HC 408, April 1998; HC Committee of Public
Accounts 116th Report, 1987-88; HC Committee of Public
Accounts 85th Report, 1990-91 Back
Qq 77, 120 Back
C&AG's Report, paras 1.1-1.2, 1.8, 1.10 Back
C&AG's Report, para 1.12 Back
C&AG's Report, para 1.15 Back
Qq 1, 4, 18, 33 Back
C&AG's Report, paras 1.14-1.16 Back
Qq 34-35 Back
Q 33 Back
Q 33 Back
Qq 12, 82-84 Back
Q 81 Back
C&AG's Report, para 1.20 Back
Qq 34-35 Back
Q 35 Back
Qq 35, 65, 127 Back
C&AG's Report, para 1.10 Back
Qq 14, 120 Back
Qq 2, 18, 34 Back