DCH 300 Charity Commission
BRIEFING PAPER FOR THE JOINT COMMITTEE
ON THE DRAFT CHARITIES BILL
THE COSTS OF THE BILL FOR THE CHARITY COMMISSION
1 This document provides further information:
- on the costs of the Bill for the Charity Commission,
and
- the demands the Bill's proposals will place on
the Commission, with specific reference to excepted and exempt
charities.
A Costs of the Bill for the Charity Commission
2 The Regulatory Impact Assessment, which accompanies
the draft Bill, outlines the estimated costs to the Charity Commission
of implementing the Bill. The Charity Commission's Spending Review
2004 settlement assumes that the Commission will absorb the effects
of the implementation of the Bill, by reallocating resources internally.
In summary these costs fall into three categories:
- start-up[46]
costs (estimated as a one off cost of £1.70m);
- continuing costs (year to year baseline costs
for future years estimated at £1.02m per annum); and
- costs already being absorbed through efficiency
savings or previously identified[47]
SR02 funding. (£0.30m)
3 These figures exclude
resources already received under SR02 for pre-legislative changes
(including the new governance arrangements for the Charity Commission).
In total, these amount to £0.61m already implemented, and
a further £0.95m due to be implemented from 2005-06.
4 The major areas of expenditure are as follows:
| Area | Start up costs
| Continuing costs
|
| Independent tribunal *
| £0.20m |
£0.20m |
| Excepted charities: registration
| £0.50m |
- |
| Excepted charities: regulation and monitoring
| -
| £0.225m |
| Exempt charities: registration
| £0.75m |
- |
| Exempt charities: regulation and monitoring
| -
| £0.345m**
|
| Public character checks
| £0.25m |
£0.25m |
| Total | £1.70m
| £1.02m |
* represents estimated direct cost to Commission
of 50 cases a year
** the costs for exempt charities also take into
account the fact that they are currently exempt from the regulatory
parts of the Charities Act 1993 unlike excepted charities.
B Excepted and Exempt charities
5 The Committee has also asked for further information
about the demands the draft Bill will place on the Commission,
with specific reference to excepted and exempt charities.
6 In essence, the proposals relating to these
charities, are designed to ensure that all charities are accountable
and transparent and subject to charity law regulation.
(i) Excepted Charities:
7 The Bill proposes that excepted charities will
now be required to register with the Commission above an income
threshold. (Unlike exempt charities excepted charities already
come under the scope of the Charity Commission's regulatory powers,
although we do not acquire monitoring information from them.)
Excepted charities include charities connected with the Armed
Forces, many Scout and Guide charities and many religious charities.
However, the current exceptions do not cover all religious charities,
only those connected to the denominations listed in the regulations.
For example, mosques are not excepted and are required to register.
Making Contact with Excepted and Exempt Charities
8 The Charity Commission has extensive and well-established
contacts with excepted and exempt charities. Since the publication
of the Strategy Unit report[48]
the Commission has been involved in detailed discussions with
those excepted and exempt charities likely to be affected by the
proposals, has listened to their concerns and has examined how
best to carry the changes forward. Together with the Home Office
we have made and maintained contact with representatives of excepted[49]
and exempt[50]
charities. In the context of exempt charities we have also met
with a range of potential alternative regulators.
9 In addition our day to day support activities
involve regular contact with excepted charities. For example,
we have worked with some excepted religious charities on a range
of issues and for many years we have had a dedicated team working
with Armed Forces charities.
Registrations
10 The Bill proposes a higher - £100,000
- threshold for excepted and exempt charities to ease the management
of the proposals.
11 The Charity Commission has experience of managing
bulk registrations following changes to registration criteria.
After the 1992 Charities Act, several groups of charities (for
example Women's Institutes and Pre School Playgroups) were brought
onto the register. This involved thousands of charities and was
managed in an orderly and efficient manner. We are confident that
we can make similar arrangements should the Bill proceed.
12 We will be helped taking forward this aspect
of the Bill by developments in the registration process, including:
- the use of model governing documents,
- streamlined registration forms and,
- from autumn 2004, online registration.
For example, we anticipate that the 7,500 currently
exempt Foundation and Voluntary school charities - whose status
is declared by statute - would benefit from online registration,
which would significantly reduce the cost of taking on the new
registrations.
13 The timing of the changes will also be designed
to help charities and the Commission to manage the transition.
For example based on the Home Office's implementation proposals
for the Bill there may a two, to two and a half year, gap between
Royal Assent and implementation of changes for excepted and exempt
charities. This would tie the changes to the expiry date of the
current regulations excepting many religious charities and would
be designed to allow charities - and the Commission - to adjust
to the new arrangements.
14 While the Commission will not finalise our
plans until the contents of any legislation is certain we will,
in the meantime:
- identify issues relevant to registration of exempt
and excepted charities and begin work to resolve them before the
changes are implemented; and
- with the co-operation of excepted charities,
and in order to manage the transition, begin a process of voluntary
registration. (This is not an option for exempt charities as they
cannot register voluntarily.)
(iv) Release of other Resources
15 We anticipate that the increase in the general
registration threshold to £5,000 (from £1,000) will
see a reduction in new registrations (albeit that voluntary registrations
will be permissible at any point) that will offset the resources
involved in these registrations.
16 An annex to this paper addresses a further
specific question from the Committee on excepted charities.
Charity Commission
15 July 2004
Annex A
Further Question on Excepted Charities
Some of the work needed to register previously
excepted organisations - for example, churches - will be
very intensive. For example, the RIA (Regulatory Impact Assessment)
refers to the Charity Commission working with a denomination to
develop model trust documents consistent with modern standards
of governance. The projected one off costs set out in the
RIA (Regulatory Impact Assessment) for this work are £350K-£650K.
There are (according to the RIA) at least 5,000 excepted charities
which will require to be registered. This is £130 set up
costs per charity. Given the likely amount of work involved,
is this credible?
Excepted charities are already subject to the Charity
Commission's regulatory powers, although they are not actively
monitored. The Commission already works with a range of excepted
charities as part of our advice and guidance role.
In many cases we anticipate that excepted charities
will have perfectly adequate governing documents. Others will
be able to review and modernise themselves. However, based on
our experience, we anticipate that we will be able to help others
to modernise their governing documents. The need to register
will both highlight these charities governance arrangements, and
will offer an ideal opportunity for the Commission to work with
such charities to improve their governance arrangements.
However, such issues would not prevent registration
and could be dealt with over time. Additional work in this area
could therefore be partly absorbed within existing support activities
or by the reallocation of existing resources should it be a priority.
The Commission will be working with groups of charities
with a great deal in common. Where these issues arise it should
be possible to resolve many of them via representative bodies,
making it easier for individual charities to adapt. While the
development of a new standard governing document, for example,
may clearly involve more than £130 of work it would, once
available, be simple for individual charities within a denomination
to adopt it.
Where this is done it should also reduce the costs
of registration both for the Commission and charities as they
will be able to use the online registration process that will
be introduced in autumn 2004.
46 Start up costs are described as occurring in
the first year after the Act comes into effect to get new initiatives
up and running, though Treasury could require the cost to be split
over two years, in which case future years would begin in year
3
Back
47
Spending Review settlement 2002 Back
48
Private Action, Public Benefit Strategy Unit (September
2002)
Back
49
Discussions with excepted charities began in the mid 1990's during
a review of review of exception under existing law. This was abandoned
in the light of the SU study but the extensive contacts made during
the review were maintained enabling the Commission to quickly
resume detailed discussions as the SU proposals emerged. Most
of these meetings have been with representatives of excepted religious
charities.
Back
50
Discussions with exempt charities began more recently than those
with excepted but now involve extensive contacts with both individual
charities and representatives of these groups of exempt charities
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