The NAO and the Charity Commission: where next?

Posted on December 4, 2013 by Karl Wilding
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The National Audit Office report into the Charity Commission is an uncomfortable, damning read for anyone interested in the health of Charity. The same goes for the NAO’s report into the Cup Trust. (Our summary of the reports is here) Both, I believe, are stark but fair. The NAO’s observation that this is their fourth successive report to highlight the same concerns is only trumped by the bluntest of conclusions: that the Commission is neither regulating charities effectively nor providing value for money. There is much wrong that needs righting. But we need to remember that the Commission is doing a number of things well: it remains a model that many other countries aspire to.

The focus now has to shift to getting charity regulation right – and I think the Commission itself is right to call for a debate on the implications of the report. The starting point for us is clear: a strong charity sector needs a modern, independent and expert regulator. This has to be the Charity Commission: there have been all sorts of mutterings  over the last year that the Commission’s role could be taken on by HMRC. This morning, The Guardian is reporting that some PAC members take this view.

Such an action has not been recommended by the NAO. Good. Such an approach would be a disaster for charity regulation and public trust and confidence. Charity, and its regulation, is about more than tax relief. Whatever our misgivings about the Commission’s failure of delivery, we should not forget this important point.

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Post-NAO: let’s debate the future of charity regulation

What does a modern regulator look like? A starting point is probably what it doesn’t look like. The NAO report is probably the definitive end of what might be called the Commission’s T-Shirt period, where it’s focus on friendly advice and guidance, including charity effectiveness, seemed to us to jar with its role of regulator. But my concern at times like this is that public perception – and policy – overshoots in the opposite direction. Yes, we want an effective, strong regulator. But we don’t want to return to Commission days of old – largely before my time – where the perception of the regulator was one of a distant, unhelpful and unapproachable body. Neither do we want our national newspapers to become the de facto charity regulator. This is particularly important because the Commission often is regulating voluntary effort and, often, things go wrong because charities and trustees make mistakes, not because they are intent on committing fraud.

The Commission should still provide advice and support in relation to matters of law. A great example is its CC9 guidance on campaigning, one of the many things the Commission has done well. But beyond this limited role, it’s the responsibility of umbrella bodies, including NCVO, to promote good practice, offer advice and guidance and take up the baton when it comes to self-regulation (which, internationally, is becoming more important). The Commission can make sure charities aren’t skipping school – but it’s our role to help them get good grades.

So, it’s important that the Commission doesn’t simply turn into a policeman. And where it is policing what charities do, what better model than the model of law enforcement in Britain: policing by consent? Based on regular engagement with the sector, an open, connected Commission can achieve even more by sharing more of the data that it collects about charities and by making that data easier to use: what I think is termed co-regulation. Better regulation begins with all of us taking responsibility for spotting mistakes and, yes, wrongdoing. It’s worth mentioning here that HMRC have a responsibility to share information: if charities are claiming Gift Aid, for example, why can’t this be linked to the Commission’s register and be made public?

The NAO itself has argued that modern regulation makes much better use of data. The Commission’s role in collecting and publishing information wasn’t the focus of the NAO investigation, but I can’t highlight strongly enough how important this role is. I think that the way forward here is that umbrella bodies such as NCVO need to work with the Commission to increase our collective analytical capability, whether by sharing more data or developing more indicators and ratios. I don’t think that this should result in asking charities for more data: but I think that for larger organisations we need a debate about data, accountability and transparency.  I hope that self-regulation, in the form of more and better benchmarking, could head off more problems.

Some of these changes will require investment – clearly difficult following a period where the Commission’s budget has fallen by 40% over a seven year period. It will be equally difficult to make the case for additional powers when the Commission has not used those at its disposal. Neither case is without merit. I think it is important that the Commission works with umbrella bodies to make the case to government for both: after all, a decline in public trust and confidence in charity will leave society bearing a greater cost.

In conclusion, the Commission is worth fighting for. Its new strategy is broadly right: if anything, the NAO highlights a failure of delivery, not strategy. But the role of regulator must not be so tightly drawn that important functions such as gathering information prevent the opportunity for more co-regulation. The NAO has reignited an important debate – what sort of regulation charities need and want – we must now engage in that debate.

Update

Here are some of the responses I’ve received via Twitter


https://twitter.com/james_kirkland/status/408158318822035456

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Karl Wilding Karl Wilding served as NCVO's chief executive from September 2019 to February 2021.
All blog posts by Karl Wilding

2 Responses to The NAO and the Charity Commission: where next?

  1. Pingback: Questions on Charity Commission effectiveness | VoluntaryNews