As part of its inquiry, the Committee visited the London offices of the Charity Commission for England and Wales on 1 November 2016.
The Committee heard from:
Sarah Atkinson (Director of Policy and Communications), Nigel Davies (Head of Accountancy Services), Kenneth Dibble (Director of Legal Services), David Holdsworth (Chief Operating Officer & Registrar of Charities), Carl Mehta (Head of Investigations and Enforcement), Michelle Russell (Director of Investigations, Monitoring and Enforcement), William Shawcross (Chairman) and Paula Sussex (Chief Executive).
The following Members took part in the visit:
Lord Bichard, Lord Chadlington, Lord Foulkes of Cumnock, Baroness Gale, Baroness Jenkin of Kennington, Baroness Pitkeathley, Lord Rooker, Baroness Scott of Needham Market and Baroness Stedman-Scott.
They were accompanied by the following House of Lords staff: Matt Korris (Clerk), Simon Keal (Policy Analyst) and Gabrielle Longdin (Committee Assistant). Also attending was Rosie Chapman (Specialist Adviser).
The Chairman of the Charity Commission, William Shawcross and the Chief Executive, Paula Sussex, welcomed Members of the Committee and introduced some of the subjects for discussion: operations and enablement, compliance, risk and proactive regulation. Mr Shawcross said that the Commission had sought to become more proactive and that it saw its role as protecting charities’ beneficiaries and assets where they may be at risk.
The Committee was told that the Commission saw its priority as being seen to be an effective regulator. The Commission said that there had been an increase in the number of applications to register a charity, from 5,949 in 2012/13 to 7,192 in 2014/15. They said that their application process had improved with the introduction of a new, user-centred, online registration system, which had reduced the processing time for registration, and that, while there had been a backlog of applications previously, this had been cleared.
The Commission said that applications were now separated into low, medium and high risk, to allow for better assessments to be made. They said that the system was designed to ask specific questions for different types of charities doing different activities, which helped to proportionately test the applications. The Committee asked if this would allow the Commission to identify during the application process whether an existing charity was doing similar work or operating in the local area. The Commission said that while this was not currently possible, it was a long-term goal.
There was a discussion about how the Commission measured the impact of its work. The Committee heard that the Commission used surveys and website hits to measure impact, as well as other measurements such as the number of whistle-blowers and reports of serious incidents that they received.
The Committee raised the issue of diversity and noted with concern the lack of diversity within the Charity Commission, with no black or minority ethnic directors on the Board.
The Committee heard about the Commission’s compliance work. The Commission said that poor governance was the root cause of many issues in charities and they had identified that financial distress and fundraising were major issues in 2016. They said they undertook proactive analysis of charities where finances suggested there was a risk of financial distress and that they were moving to a more risk-led approach to casework, based on improved use of data. The Commission said that 1,804 cases were opened in 2016 to assess concerns about charities, and that 2,117 serious incidents had been reported to the Commission by charities in the same year. There were 1,248 incidents in which the Commission used its legal powers. Whenever the Commission used its intervention power, detailed justifications were required and senior officers would need to approve the decision. The Commission said they welcomed early approaches from charities on compliance issues.
There was a discussion about data sharing. The Commission said they worked closely with prosecuting authorities and collaborated with other organisations and agencies to facilitate data sharing.
There was discussion about guidance available for charities and trustees. The Commission presented research undertaken by nfpSynergy that showed that when trustees sought advice on improving governance, 62% said that they would go to the Charity Commission. The same research found that 91% of respondents were aware of Charity Commission guidance on law and best practice, and 84% found the guidance “quite valuable” or “very valuable”.
The Commission said that they were working on a new advice portal to improve the guidance available to charities and that they were reviewing their enablement work and their processes, advice and guidance. The Committee was told that the Commission did not have the resources to provide one-to-one advice.
The Committee heard that the Commission did not assess the skills or experience of potential trustees, but did check whether they were legally able to serve as a trustee. There was a discussion about whether there could be qualifications for trustees of large charities.
The Commission explained that funding cuts had resulted in a reduction in staff levels, but said that their work to improve their processes would allow them to be an effective regulator nonetheless. The Commission noted that charities were not charged to register with them, but that they were exploring the possibility of introducing a charge. They suggested that if they had additional resources to provide advice it could reduce the dependence of charities on paid sources of advice elsewhere.
The Committee was told that the legal framework in which charities operated was complex, with different legal requirements for different types of charities, and this could cause trustees to feel constrained in how they could respond to challenging circumstances. The Commission said that the effectiveness of charities was impeded by an inability to adopt modern governance provisions and a lack of power to reform and merge. They said that they were working with the Law Commission to help modernise charity law to alleviate some of these constraints.