Briefing Paper For The Joint Committee On The Draft Charities Bill
Charity Commission - The Future

(September 2004)

1. The Joint Committee has asked for a further paper setting out how the Charity Commission will develop its internal processes (or be given a ‘new lease of life’), and the structural changes we are making in the light of the Bill. This paper focuses on the implications of the draft Charities Bill for the Commission’s work. In essence the core principles informing what the Commission does and the way we do it will be:

• Transparency and accountability
• Learning and continuous improvement
• Improved regulation through better use of knowledge and information
• Targeted and focussed management
• Proactive dialogue with the sector
• A regulator which listens and learns

Taken together these will build trust and confidence.

2. We also have to recognise that other critical factors affect the context in which we work, and these include:

Non legislative recommendations made in the Strategy Unit Report (Private Action, Public Benefit - September 2002) and the Government’s response (Charities and Not-For-Profits: A Modern Legal Framework - July 2003). The Commission is implementing some of the changes recommended which did not require legislation for example by:

• opening a Welsh Office,
• piloting a Standard Information Return for larger charities (The Standard Information Return is a SU recommendation asking the largest charities (those with an income over £1m) to say how they set their objectives and measure their success), and
• moving to new governance arrangements, by separating out the governance and management functions of the current Chief Charity Commissioner role. (See Annex)

Changing expectations of the role of modern regulators. These expectations (Imaginative thinking for better regulation Better Regulation Task Force (September 2003)) emphasise:

• regulators working together to create frameworks which enable and encourage self-regulation and streamlined approaches
• better regulatory principles - including risk and proportionality.

E-Business developments.

• From autumn 2004 online registration will be available for new applicants for charitable status
• From 2005 all charities will be able to complete their Annual Returns to the Commission online.
• We have piloted making governing documents and accounts for certain charities available electronically and we are working with Guidestar UK (Guidestar UK is a charity which will provide a website providing comprehensive information about charities and the not for profit sector) to extend this coverage.
• Spending Review 2004. Our settlement assumes that expenditure for 2006/07 and 2007/08 remains at the 2005/06 level. This includes the costs of implementing the Bill. The Commission has commenced a strategic review to ensure we meet these tight targets and are a fit for purpose organisation.

3. Our plans will be developed by the new governance and management team whose responsibility it is to agree a strategy for the future in consultation with the public and charities. Our high level vision is a Commission which:

• Establishes and operates a clear regulatory framework which encourages good practice and self regulation by charities, and is accessible and fair
• Seeks to measure impact and encourage sustainability
• Demonstrates open communication, through dialogue with charities, the public and others with an interest in our work
• Operates as an organisation which has a culture of learning and sharing knowledge to ensure continuous improvement
• Reinforces its partnerships with other regulators across sector boundaries to avoid duplication and provide added value

4. When the Bill is enacted our work will build on our four new regulatory objectives:

• Public confidence - to increase public trust and confidence in charities
• Compliance - to increase compliance by charity trustees with their legal obligations in exercising control and management of their administration of their charities.
• Social and economic impact - to enable and encourage charities to maximise their social and economic impact.
• Accountability - to enhance the accountability of charities to donors, beneficiaries and the general public.

Public confidence

5. We have commissioned research to understand better what determines public trust and confidence in charities and how that relates to the Commission. We will set in place an on-going process which uses this research to inform the Commission's practices and our relationship with charities in an evolving way

Compliance objective

6. Our priorities and allocation of resources focus on intervening where we can make most difference to charities and the people who benefit from them. The proposals within the draft Bill will enable us make a step change in developing this approach. (See submission DCH 19)

7. We have already made considerable progress in developing our regulatory approach, for example by:

• Focussing more of our review visits and regulatory assessments on larger charities;
• Self-certification procedures for trustee remuneration and trustee indemnity insurance, and once the Bill is enacted, trustee payments.

8. We will achieve a greater regulatory impact by taking a more tailored approach to certain groups of charities because of their specialised nature. We already do this for NHS, armed forces and Common Investment Fund charities. In the future the approach could include:

• groups of charities previously excepted from registration such as some church groups; and
• distinct groups of charities, such as the Scrutiny Committee’s observation about grant-making charities.

9. We work closely with regulators who have an interest in charities. We host a Forum of twenty-five regulators connected to the sector. We will build upon these relationships, working more closely with other regulators who may be better placed to regulate on our behalf. In the short term we do not anticipate this work affecting the overall number of regulators and their activities, although in the medium term we believe there may be merit in exploring broader alliances of not for profit regulators.

10. Examples of our existing joint working include:

• Holding joint seminars with the Charity Finance Directors Group on the draft accounting requirements for charities,
• Collaborating with the charity trustee networks on improving charities’ governance arrangements.

11. We will explore ways in which a better or more cost effective service can be provided through using charities and their umbrella bodies.

12. We are developing a customer network to improve our service delivery to different groups. As part of this work we are building an inclusive list of faith, black and minority ethnic and secular groups to consult, test products and publications and provide general feedback on our work.

Social and economic impact

13. The draft Bill provides opportunities for charities to make themselves more effective by giving them freedom to:
implement decisions about administrative arrangements in their trusts,
use a power to spend capital or to wind up through more streamlined mechanisms.

14. We will:

• develop processes to respond effectively to charities when our approval or authority is needed (for example authorising Schemes)
• adapt our monitoring procedures to fit with the legislative requirements
• continue to identify inactive charities, with a view to bringing their assets properly to account or remove them from the register where appropriate, releasing dormant funds.

15. Our communication is proactive. We use our newsletter and website to explain the progress of the draft Bill. We will also continue to publicise other initiatives of benefit to charities – such as our work with the Giving Campaign - and we will seek further signposting opportunities with other organisations to enable charities to be more effective.

16. The aim of this new objective is to describe how we work with charities to promote the effective use of charitable resources. In answer to the query posed by the Scrutiny Committee we would not object to a different form of words, if they still secure the effective use of charitable resources by enabling us to help charities which want to increase their impact by changing and adapting.

Accountability objective

17. We support charities by providing information, guidance and advice on what the law requires and on good practice. We have a good base line for providing information direct to all charities. In 2003/04 there were:

• 18.5 millions hits on our website
• 60 key publications
• 220,000 calls to our Contact Centre
• 10,000 responses to email requests
• 28,000 pieces of tailored advice through individual casework.

18. We will make the distinction between what is a regulatory requirement and what is good practice clearer by, for example:

• using web developments; and
• new forms of presentation and layouts for our booklets.

19. Primary legislation provides the high level framework for accountability. This is supported by secondary legislation covering detailed requirements for accounting and reporting. We will work in partnership with charities to develop a relevant framework and appropriate forms of accountability.

Conclusion

20. The process leading up to the Bill has broken new ground with positive and inclusive consultation with the sector. We want to continue to promote that new way of working, in meeting our new regulatory objectives. In summary we will be accountable for our work and that of charities which will in turn lead to public trust and confidence.

Charity Commission
15 July 2004

Annex
Charity Commission – New Governance arrangements

The SU report’s recommendations and the draft Bill’s proposals enable the Commission to adopt governance arrangements which improve strategic oversight of the organisation, protect our independence and act as a real impetus for driving through change. Specific changes include:

(i) Splitting the role of Chair and Chief Executive. The Commission has moved to the new governance arrangements which shadow the changes proposed in the draft Bill, by appointing, in July 2004, Geraldine Peacock as Chair designate and Andrew Hind as Chief Executive. The separation of governance and management reflects current best practice, giving improved checks and balances within the organisation.

(ii) A corporate structure with a larger non-executive Board. We will recruit up to five new non-executive Board members, using co-option in advance of the Bill to ensure a broader range of skills and experience. This will enable us to better reflect and benefit from the diversity of the sector and of society.

(iii) Open Meetings. The draft Bill includes provision for an open AGM at which to present our report and answer questions. As part of our commitment to open and outward facing communication we will hold open Board meetings from September, complemented by regional meetings to provide increased access to the public.