The Regulator for Charities in England and Wales
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The Charity Commission Annual Report
1. The Charity Commission’s Aim and Objectives
The Commission’s aim is
"To give the public confidence in the integrity of charity."
- To ensure that charities are able to operate for their proper purposes within an effective legal, accounting and governance framework.
- To improve the governance, accountability, efficiency and effectiveness of charities.
- To identify and deal with abuse and poor practices.
It is an eventful time for charities, and for all voluntary organisations. More than ever, Government policies stress the importance of voluntary action as an independent third force in national life, different from both government and business. The Compact has been clarifying voluntary organisations’ entitlements and obligations on matters including commitment to consultation on Government policy and ground rules for public/voluntary funding relationships. The Review of Charity Taxation has widened the prospects for charitable giving. The Government has set itself the target of making substantial progress by 2004 towards 1 million new volunteers. Charities will be expected to drive and deliver a large part of this growth.
The largest charities (the largest 300 account for more than 40% of charitable income) can be as demanding to run as large multinational corporations. They need to have comparably high standards of professional management and to cope equally well with dynamically changing communications technology and proliferating consumer and stakeholder expectations.
The smallest charities (and two thirds of registered charities have annual income or expenditure of less than £10,000) have different challenges. For them, too, continuing to meet their beneficiaries’ needs as they develop and change is paramount. But the challenge of delivering charitable benefits is different, centring on the need to operate effectively on modest finances and often an exclusively volunteer management and workforce.
All sizes of charity can contribute fully and effectively to national life only if they command the confidence of their stakeholders, their beneficiaries and the public. The Charity Commission’s aim is to regulate charities, and the legal and governance arrangements in which they operate, so as to promote and justify that confidence.
This report covers the Commission’s activities for the 15 months to March 2000. It reflects a number of new and growing emphases in our work.
- Transparency. In an information age, the Commission must look to improve the supervision of charities by making more and better information about them publicly available. The Commission’s website, which includes the public register of charities, received more than 3.5 million "hits" during this report period, more than double the number for the last reporting year.
- A keener regulatory edge. The Commission carried out a thorough review of its investigations work. As a result we now, for the first time, routinely publish reports on the outcome of inquiries. Other recommendations are being implemented during the remainder of this year. The Commission plans to invest an extra £1 million a year in investigations work from April 2002.
- Modernisation. The Commission completed consultation on a revised framework for charity accounts, which provides the basis for financial monitoring of larger charities. To complement the forthcoming liberalisation of charities’ investment powers, the Commission announced in 1999 that it would consult on ways to allow charities greater flexibility in the allocation of investment returns, whether in capital or income form, between current and future beneficiaries (a "total return" approach to investment). The consultation period closed this autumn. The Commission also launched a further 6 consultations in its continuing review of charitable status issues, including one on maintaining the independence of charities from the state and another formally recognising that environmental conservation should be a charitable purpose.
- Managing the business. The Commission’s last Annual Report gave details of a comprehensive review of performance measurement. The year ending March 2000 was the first year of measuring achievement against indicators for timeliness, output and cost-effectiveness. The Commission met eight out of ten indicators (see Annex A), and used the new system to benchmark performance between its three sites.
- Accountability to the public. We increased accessibility to Commission services by introducing a single common telephone number covering all of our sites. We launched new procedures allowing complainants and those unhappy at administrative decisions of the Commission to have their cases reviewed by staff not previously involved. An arrangement was introduced on a pilot basis for the independent review of complaints where complainants remain dissatisfied after internal procedures are exhausted. We introduced improved "Service First" standards for service to customers, set out in Annex B.
- Investing in people. Our commitment to developing staff for their and our customers’ benefit was recognised by our accreditation as an Investor in People.
For the future, we hope to work yet more closely with charities and umbrella bodies where they have a contribution to make in promoting high standards and good practice in charities. We also intend to take a lead in encouraging charities to take action in fields which, though they lie outside our direct statutory authority, have a bearing on good practice and on public confidence.
In this connection, the Commission will be calling on charities to give greater attention to the scope for collaborative working. In surveys, more than three quarters of people felt that there were too many charities, reflecting unease at the proliferation of numbers in some popular areas of charity and at the perceived growth of competition in such sectors. The Commission will advise existing and prospective new charities on the many different ways of working together which can lead to more effective use of resources and simplify and rationalise the delivery of services to beneficiaries. The Commission cannot refuse registration or insist on mergers on grounds of oversupply - and diversity in charity is itself a strength. But we will be ready to enable and advise charities who want to explore or pursue the possibility of some form of joint working, including merger.
This is my first Annual Report as Chief Commissioner, and I would like to take this opportunity to pay tribute to my predecessor, Richard Fries, and to John Bonds, who retired at the end of 1999 after five years as a Commissioner. I am very pleased to welcome two new members of the Board - David Taylor, who was appointed as a Commissioner in April this year, and Simon Gillespie, who became Director of Operations in May.
John Stoker
Chief Charity Commissioner
3. Objective: to ensure that charities are able to operate for their proper purposes within an effective legal, accounting and governance framework
3.1 Registration as "the Gateway"
Over the last year the Commission has developed the concept of registration as the "Gateway" to a continuing relationship with a charity. It is committed to ensuring that charities admitted to the Register meet certain basic standards of governance and have a workable governing document. Trustees need to understand their duties and responsibilities and understand the financial implications of the work the organisation will do. The "Gateway" approach can help secure a sound basis for the future governance of organisations which are to be entered on the Register of Charities, and help protect the integrity of charity as a whole.
The Commission has also introduced risk assessment into the process. If a charity meets the legal requirements for registration, but there are remaining concerns about its governance, the Commission evaluates the extent of the risk. This information is then fed into the monitoring programme with the aim of identifying any difficulties at an early stage and working with the charity to overcome them.
The Commission has identified certain beneficiary groups who are particularly vulnerable to exploitation, and looked for ways to secure appropriate tests of competence of trustees, promoters, employees and volunteers working with such organisations. In particular, if an organisation involves direct access to children it expects trustees to have an appropriate child protection policy in place.
The Commission has incorporated certain checks on trustees and promoters of proposed charities into mainstream registration processes. Basic information such as the names, addresses and telephone numbers of the trustees and correspondent, and their eligibility to be trustees, are now checked. For those organisations involving direct contact with children, background checks of names are made, including a check against the Department for Education and Employment’s List 99, which lists those barred from working with children in education. Details may also be checked against other sources of information. While such checks cannot guarantee probity, they provide independent evidence for registration applications and help deter applications from undesirable persons.
3.2 Applications for Charitable Status
During the twelve months ending in March 2000, the Commission dealt with 8,271 registration applications. There were 5,409 new registrations during this period (1999 calendar year: 5,941), including 260 bulk registrations.
Applicants must complete an application form, sign a trustees’ declaration, provide a copy of the governing document, and supply supporting information about the proposed activities of the organisation. The Commission pursues this information so it can have a full picture of the organisation and can judge whether it is charitable, and whether it needs further guidance on governance and administration.
New charities are anxious to have a speedy decision on their applications - particularly where funding is dependent on the outcome. The Commission is committed to deciding on applications as quickly as possible, while still ensuring that decisions are made on sufficient information.
The Paddington Families Fund
Three days after the tragic rail accident at Paddington on 5 October 1999, the Sun launched an appeal to its readers to contribute to a charitable fund to help those affected. Later that day, solicitors acting for News International contacted the Commission to say that they would shortly be making an application to register the fund as a charity. The objects of the fund were agreed that day and followed the Attorney General’s guidelines about disaster appeals. Commission staff were in daily contact with the promoter’s solicitors to provide the necessary advice and support to ensure the registration experienced no delays. All the relevant documents were received on 14 October 1999 and the Fund was registered that day.
|
Registration performance results |
1998 |
1999 |
1/4/1999 - 31/3/2000 | |
|
Actual |
Actual |
Target | ||
|
Number of applications for registration processed |
8,776 |
9,231 |
8,271 |
8,000 |
|
% of successful applications given guidance on governance/administration |
56% |
58% | ||
|
Staff cost per application processed |
£104 |
£113 | ||
In 1998 the Commission launched a review to consider the scope of charitable status within the current law and in the light of changing social and economic circumstances.
During 1999, six new public consultations were launched.
- The Recreational Charities Act 1958- to consider the scope of this Act, which provides for some recreational facilities which are provided "in the interests of social welfare" to be charitable.
- The Promotion of Community Development - to consider the proposal that the promotion of community development should be accepted as a charitable purpose.
- The Maintenance of an Accurate Register - to consider the steps to be taken by charity trustees and the Commission to ensure that property dedicated to charity continues to be used for charitable purposes whenever the purposes of the institution no longer appear to be charitable.
- The Public Character of Charity - to consider what is meant by the principle that charities must benefit the community; including issues relating to the availability of benefits, the ability of charities to charge, and what is acceptable as incidental private benefit to individuals.
- The Independence of Charities from the State – to consider how to establish whether a body has sufficient independence from local and central government to be a charity.
- Preservation and Conservation - to consider the proposal that conservation of the environment should be recognised as a charitable purpose in its own right.
The next stage of the Review will see the announcement of the results of those consultations, and published guidance. Further consultations are planned on the Promotion of Sport, and Museums and Galleries. The Review consultation documents and publications are also available on this website on the Review of the Register page.
Many charities must register. However for some smaller ones registration is voluntary. In addition there are an estimated 100,000 charities in England and Wales which Ministers decided in the 1960s only had to register voluntarily. All these charities remain within the Commission’s jurisdiction, are subject to its regulatory powers, and can ask for advice. They must follow the same rules for the preparation and scrutiny of accounts as other charities. However they do not have to make annual returns and are not subject to the monitoring regime. They do not appear on the Register.
The original decisions on the policy behind voluntary registration were taken in the early 1960s. The purpose of registration has now changed, with the introduction of monitoring under the Charities Act 1993. Some of the current rules on voluntary registration expire next year. As matters stand about 25,000 religious charities will then have to register. The Commission and the Home Office have recently consulted on the future basis of voluntary registration.
3.5 Human Rights / Data Protection / Freedom of Information
Like all government departments and public authorities, the Commission has been preparing itself for the implementation of the Data Protection Act 1998, the Human Rights Act 1998 and the planned introduction of a new Freedom of Information Act. This new raft of legislation will place new responsibilities on organisations that hold personal information, and on public bodies, to act compatibly with that legislation. The Commission has therefore embarked on an extensive programme of staff training.
The definitions of public bodies contained in this legislation are wide, but clearly embrace at least some charities. The Commission has therefore sought to ensure in commenting on the developing Freedom of Information legislation that the interests of charities are considered. Also, while it is not the Commission’s direct responsibility to prepare charities for the Act’s implementation, it does have a role in alerting charities to their possible obligations. It has therefore been working with the Home Office in preparing their guidance for private and voluntary bodies, and has used its own charity newsletter to raise trustees’ awareness of the implications this legislation may have for their organisations.
The review of the Statement of Recommended Practice (SORP) for charity accounts has continued throughout the period of this report, being managed by the SORP committee under the chairmanship of John Bonds, who retired as a Charity Commissioner at the end of 1999. They considered the areas where the 1995 SORP needed amendment or clarification, in the light of responses to the preliminary consultation. The overall view was that the 1995 SORP would benefit from a re-write, including changes to the sequence of paragraphs, in order to eliminate inconsistencies, reduce repetitions, and make the recommendations clearer. This was substantively achieved in the Exposure Draft of a revised SORP published in December 1999. The proposals in the Exposure Draft also emphasised the importance of the trustees’ annual report and of reporting the economic substance of transactions. The Commission also produced Welsh and audiocassette versions of the Exposure Draft to improve access during the consultation phase, which ended in March 2000. Most respondents to the consultation expressed support for the proposals.
The Charities Act 1993 gives the Commission powers to act in certain circumstances in place of the High Court. In general it exercises this legal authority in two ways:
- to enable charities to keep their purposes up to date in a modern environment; and
- to authorise transactions which are in the interests of charities.
When it registers a charity, the Commission will ensure it has a relevant and workable governing document. However over time some charities encounter problems in operating effectively on the basis of their original governing documents.
The difficulty is often that social changes have made the original objects no longer relevant or achievable. The Commission’s role here is to facilitate a change to the objects that will allow the charity’s funds to be applied more effectively. The Commission has to abide by what is known as the cy près principle. This requires that any change to a charity’s objects keeps faith with the spirit of its original trusts.
St Dunstan’s
St Dunstan’s is a charity with an annual expenditure of over £11 million. It was established in 1915 to care for ex-Service personnel blinded in ‘war or warlike’ conflict. Recently, the trustees became aware that these limitations meant that many ex-Service personnel who urgently needed help, but who could not prove that their condition was directly caused by their service, and those whose sight became impaired for other reasons, could not be helped by the charity.
In 1999, in order to meet the needs of all blind ex-Service men and women, St Dunstan’s sought approval from the Charity Commission to widen the charity’s objects to enable it to benefit all blind ex-Service personnel, irrespective of the cause of their visual impairment. The Commission therefore approved this change to the charity’s objects, which will enable the charity to make the most effective use of its funds.
Charities can also find that the administrative structure provided in their governing document becomes unworkable. Again the Commission’s role is to facilitate appropriate changes so that the charity can be more effectively governed.
In addition to authorising administrative changes for a particular charity, the Commission uses its powers to facilitate mergers between charities where this will enable funds to be applied more effectively.
The Most Venerable Order of the Hospital of St John of Jerusalem (Order of St John)
This charity runs ambulance and first-aid services in many countries and also an eye hospital in Jerusalem. In 1998 the charity decided to improve its service delivery to beneficiaries by restructuring its operations in England to make them more streamlined, and by re-aligning its relationship with its overseas partners so that it could carry out an international co-ordinating role most effectively. The Commission worked closely with the charity to advise on the best way to achieve this end. A scheme was established to make the necessary changes to the Royal Charter, in conjunction with the Privy Council.
In England, a new charity was created and decided to conduct most of its charitable work through a separate charitable company, now registered as St John Ambulance. A further scheme was made to transfer over 600 properties from the Order to St John Ambulance, which saved the charity about £60,000 in legal costs.
In addition to authorising long-term changes to the objects or governance structure of a charity, the Commission will often be asked to authorise particular one-off transactions which the trustees judge to be in the charity’s interests, but which are outside their own powers. Provided it agrees that the proposal is in the best interests of the charity and that it is inappropriate to amend the governing document, the Commission will issue an order to authorise the transaction.
It is clear that charities can gain financially from the Commission’s exercise of legal authority. During 2000/2001, the Commission is piloting a new performance indicator, which is designed to measure the gains in financial terms.
|
Legal authority Performance Results |
1/4/1999 - 31/3/2000 | |
|
Actual |
Target | |
|
Number of times legal authority exercised |
4,309 |
4,500 |
|
% of such cases which arose at Commission instigation |
10% |
5% |
|
Staff cost per legal authority exercised |
£117 |
£186 |
3.8 Developing the Legal & Fiscal Framework
3.8.1 Review of Common Investment Funds
Following public consultation, the Commission proposed changes to the regulation of charitable common investment funds (charities which comprise the pooled funds of a number of participating charities), in particular to improve the protection of the charitable assets invested in them. Parliament agreed this in December 1999. The new structure, and the requirement from June 2000 that trustees of common investment funds must be authorised by IMRO if they are carrying out investment management business, has increased the protection available for charities who invest their assets in these funds.
3.8.2 Wider Powers of Investment
The Commission is keen that charities’ investment powers should provide them with an effective framework within which they can operate. Historically many charities have had relatively limited powers, often based on the provisions of the Trustee Investments Act 1961. The effect of these limited powers has been estimated to reduce charity investment returns by an average of 5% a year. In December 1999 the Commission announced that it would be prepared to use its powers on a charity by charity basis to extend the investment powers of trustees subject to certain safeguards. This approach will automatically be extended to many more charities next year by the new Trustee Act.
Looking further ahead, the Commission has been consulting on ways to allow charities greater freedom to release capital growth in their endowment to deliver benefits to current beneficiaries.
The Commission also registered the first property-based Common Investment Fund in 1999.
The Commission has been working to strengthen the legal framework within which charities operate. For example:
- During 1999 it contributed to Home Office work on child protection matters - with the aim of ensuring that anyone banned from working with children should also be prevented from acting as a trustee of a children’s charity.
- Its work with the Department of Trade and Industry led to the Commission being included as a body to which public interest disclosures relating to charities could be made.
- The Commission also worked with Department of Trade and Industry, and its Company Law Reform Advisory Group, on the possibility of developing a new form of legal structure specifically designed for charities. Following public consultation earlier this year, the Commission has now set up an advisory group to consider the responses.
4. Objective: To improve the governance, accountability, efficiency and effectiveness of charities
The total gross income of registered charities in 1999/2000 was estimated at £24 billion - larger than the GNP of many countries. Supervising a sector of this size is a major task, capable of consuming any amount of resource.
Section 5 deals with the Commission’s programmes for dealing with mismanagement and misconduct. But the Commission aims as far as possible to avoid such difficulties arising, or to remedy them before they become serious enough to warrant the use of formal powers of intervention. This section covers the Commission’s attempts to achieve this through monitoring, through making information about charities accessible to the public, and through providing advice and guidance both on best practice and on the basic legal and administrative standards with which charities must comply.
Figures 1 and 2 show how the number and income of registered charities is distributed among the income bands. The pattern has remained consistent with the previous year, showing that although concentration of numbers is in the lower income bands, the concentration of income is in a relatively few very large charities.
The Commission’s financial monitoring concentrates on the one third of charities with gross income above £10,000 a year, and special attention is paid to the 10% with income above £100,000.
fig.1
fig.2
4.3 Monitoring
Charities above the monitoring threshold (currently those with income or expenditure over £10,000) are required to complete an annual return and send the Commission a copy of their accounts. These are subject to checks. Where necessary, issues are referred to the appropriate specialist units in the Commission. This monitoring programme is new: as yet there have been only two completed rounds of compulsory submissions. But it plays a crucial part in the Commission’s commitment to early identification and resolution of problems, and is high in its priorities for developing the future supervision of the sector.
A trading issue
The charity in this case is set up to advance the Christian religion and for relief in need purposes. Monitoring identified that it had loaned just over £100,000 to its subsidiary trading company, on interest free terms, with no specific repayment date, and with no security. That part of the charity’s assets was therefore put at risk.
Following the Commission’s intervention, the charity agreed to put the loan on a proper footing by securing it against the assets of the trading company, fixing a repayment term of 10 years, and charging a commercial rate of interest.
A case of trustee remuneration
The charity in this case is established for the advancement of education. Monitoring identified that it had made payments to a firm of solicitors, where one of the trustees was a partner. The payments were in breach of established principles of trust law and were specifically prohibited by the charity’s governing document.
The trustee concerned agreed to repay the amount received (in the region of £40,000) back to the charity.
The second cycle of monitoring annual returns and accounts ended in March 2000. At that point, 88% of charities within the monitoring threshold had made a return and submitted accounts. For charities with incomes exceeding £250,000, the rate of return was over 95%. Nearly 12,000 charities displayed an issue of potential concern. Most of these could be resolved using information available to the monitoring team. But over 1,200 cases were referred to specialist units in the Commission for further advice or to consider whether an inquiry should be undertaken. Those returns and accounts submitted after 31 March will still be checked and so improve further the overall response rate.
The three most common concerns referred for further action were fundraising, trustee benefits and charities’ relationships with trading subsidiaries. This type of analysis helps inform the Commission’s policy-making and outreach work, and helps shape the content of future annual return forms.
The key results of the Commission’s Monitoring activity for the 1999/2000 year are shown in the table below.
|
Monitoring results 1/4/1999 - 31/3/2000 |
Actual |
Target |
|
Number of charities monitored |
53,760 |
42,500 |
|
% of target group monitored |
91% |
85% |
|
Staff cost per charity monitored |
£14 |
£14 |
Over 11,000 accounts were also checked for compliance with the Statement of Recommended Practice (SORP) for charity accounts. In November 1999 this was followed up by a mailshot to over 39,000 charities with incomes between £10,000 and £100,000 in order to highlight the problems identified during the checks made on SORP compliance, and scrutiny arrangements, on this size of charity. The large majority of these were associated with the independent examination of accounts.
The Commission is determined to pursue actively those charities over the monitoring threshold that fail in their legal duty to comply with the statutory ten-month deadline for Annual Returns and accounts. Only 50% of charities currently comply with their obligations within the time limit, and this is not acceptable. Those with incomes over £100,000 not responding to initial reminders are referred to the dedicated Enforcement Section within the Investigations Division. The table below shows the overall results for those charities that have a legal obligation to submit their accounts.
|
Accounts submission - Results as at 31/3/2000 | ||
|
Charity Income |
Accounts for financial year ends 28/2/1997 - 27/2/1998 |
Accounts for financial year ends 28/2/1998 - 27/2/1999 |
|
Over £250,000 |
94% |
95.42% |
|
Between £100,000 and £250,000 |
84% |
92.84% |
|
Between £10,000 and £100,000 |
79% |
86.13% |
4.4 Enforcing the submission of charities’ annual returns and accounts
The 1998 Annual Report mentioned the establishment of a small enforcement team to pursue the submission of overdue annual returns and/or accounts from charities with an income of £100,000 or more. Persistent failure, without sufficient excuse, to submit returns or accounts is an offence under Part VI of the Charities Act 1993.
Between January 1999 and March 2000, 527 charities with financial years ending on or after 28 February 1998 were referred to the enforcement team, because they had failed to comply with the requirement to submit either an annual return or accounts within ten months of their year end. In 57% of cases the team either secured submission of the overdue documents within a month of referral, or established that they were not required because the charities concerned had wound up or had otherwise become inactive. The team achieved a 79% result within three months of referral.
The Commission decided initially to use its inquiry and protection powers under sections 8 and 18 of the Act to deal with defaulting charities, rather than instigate prosecution. The potential consequences of an inquiry, which can include suspension or removal of defaulting trustees, are severe. The Commission is exploring with the prosecuting authorities concerned the feasibility of future prosecutions under section 49 of the Act. During 2000/2001, the Commission will be taking robust action against repeat defaulters.
|
Enforcement unit results |
1/4/1999 - 31/3/2000 | |
|
Actual |
Target | |
|
% of enforcement cases cleared within 1 month of referral |
57% |
50% |
|
% of enforcement cases cleared within 3 months of referral |
79% |
75% |
4.5 Providing access to the Register
The introduction of the Commission’s website has enabled anyone who wishes to do so to access the Central Register of Charities on line (see Register/Register of Charities page). The register pages on the website attract a consistently high level of interest and over the report period nearly 900,000 enquiries were made
Enquiry services relating to the Central Register of Charities are now centralised at the Commission’s London site. Staff there deal with all telephone queries regarding the Register, provide information regarding charities’ registered details, produce copies of charities’ governing documents and accounts, and can also provide lists of charities, tailored to the customer’s requirements. At all sites, customers can view any registered charity’s governing document and accounts, and access the register database and the Commission’s website.
The website provides quarterly analyses of the total number of registered charities and their income, and also breaks them down into income bands. At the end of March 2000, there were just over 185,000 charities on the register. Just over 159,000 were main charities - the remainder being subsidiaries, branches or constituents of group charities. The register showed that the total recorded annual income of the charities on the register at that date was a little under £24bn. (Recorded income includes grants received by one registered charity from another.)
4.6 Review of charity classification
The Register of Charities contains a system for classifying all charities by reference to their purposes, beneficiaries and method of operation. However, the Commission has recognised that the information was becoming difficult to keep accurate and up to date, and recently undertook a review of the classification system. Following a successful pilot study, the system has been simplified so that in future charities can classify themselves. The information will be gathered via a new section on the annual Database Update Form, starting with the 2000 mailing programme. Trustees will simply be asked to select (from a list of classification categories) which combination of categories best describes their charity’s beneficiaries, its purpose and the methods used to achieve it. The new system should make the database easier to use and more reliable for all who want to research issues that are more complex than information about particular charities.
4.7 Keeping the Register accurate
The Charities Act 1993 requires any registered charity to notify the Commission if it ceases to exist or if there are changes to its trusts or to any of its particulars entered on the register. The register’s accuracy is critical for charities’ accountability.
Each year since July 1998 every charity has been sent a separate form containing pre-printed extracts from the register. This provides a regular means by which charities can fulfil their legal obligations to update their entry on the register. During the period of this report the Commission processed over 157,000 completed forms. The results from the latest annual exercise are in the table below - returns were 10% more than for the previous cycle.
|
Obtaining database update information - Results for the last monitoring cycle as at 31/3/2000 | ||
|
Charity Income |
% Received |
Target |
|
Over £250,000 |
94% |
100% |
|
Between £100,000 and £250,000 |
91% |
92% |
|
Between £10,000 and £100,000 |
88% |
85% |
|
Under £10,000 |
81% |
80% |
During the 1999/2000 year there were over 9,000 instances where charities were given guidance on action they needed to take for the Commission to record a change to their register entry.
The Commission has been keen to develop ways of measuring the accuracy of the register. It has developed two measures of accuracy. The first is based on the percentage of update forms returned. Higher targets apply to those charities with higher income levels, as shown in the table above.
The second target is based on a regular audit conducted by the Commission’s internal auditors on a similar basis to that used by the National Audit Office in their report in 1997. A sampling exercise in March 2000 showed that 94% of key database fields were accurate. The Commission continues to seek to improve register accuracy, and the results from the first formal audit by its internal auditors will be included in its Annual Report for 2000/2001.
The Commission has also been concerned about the effect on register accuracy of the number of inactive charities. In September 1999 the Commission set up a team to examine 18,800 charities that had failed to send in an annual return or database update form in the last 4 years. Contact was re-established with 4,000 charities, and 4,500 have been removed from the register. A further 1,900 were found to be either active, or inactive (and thus removed), by other parts of the Commission during the normal course of their business. 8,400 remain under consideration.
This exercise has been a major factor in the increased number of charities removed from the register. During the period of this report, a total of over 10,500 charities were removed, compared with around 4,400 for each of the previous two calendar years.
The Charities Act 1993 gives the Commission duties to offer guidance and advice to charity trustees and to promote the effective use of charitable resources through the development of improved methods of administration. This work is intended to minimise risk, and to help trustees use funds efficiently and effectively in support of their charity’s objects. Where trustees encounter difficulties the Commission tries to help them resolve their problems in a pragmatic way which seeks the best outcome in the interests of the charity beneficiaries.
A mistaken use of funds
An Army Regiment used money from the Regiment’s charitable welfare funds to purchase a residential training centre for use by the Regiment for military efficiency purposes. This was not a proper use of the charity’s money.
Commission staff advised that the charitable funds would have to be restored to the position that they would have been in had the money not been withdrawn. A total of £160,000 (representing capital and lost interest) was repaid to the charity.
A wide range of issues is covered by the guidance - including financial control, trustee responsibilities, and the disposal of property. Sometimes the advice needed is straightforward, and can be found in Commission publications. Often detailed research is needed (and consultation with a Commission lawyer or accountant) for the charity to be given the appropriate guidance.
The Commission does not interfere with the proper exercise of the trustees’ discretion - the Charities Act 1993 forbids it to act in the administration of a charity - but will provide advice to help them reach an informed decision. Where the Commission gives advice where the safety of the charity assets is an issue, the Commission will follow through to ensure that trustees have taken action to safeguard the assets.
The Commission deals with a wide range of charities in its advisory work. Queries come not only from organisations on the register, but also from charities that are not required to be registered including charities whose income is below the limit for registration, or charities which are statutorily exempt from registration, such as University funds. The Commission has found that certain types of charities benefit from being dealt with by specialist units. In the London office there is a dedicated unit advising 200 or so of the larger charities. All Armed Forces charities are served by a specialist unit in Taunton and all NHS charities by one in Liverpool. Both the NHS and Armed Forces units operate "one-stop shops" covering registration applications as well as advice work.
|
Guidance performance results |
1/4/1999 - 31/3/2000 | |
|
Actual |
Target | |
|
Number of cases where guidance given on governance or administration |
21,849 |
12,000 |
|
% of such cases which arose at Commission’s instigation |
10% |
10% |
|
Staff cost per guidance case |
£117 |
£186 |
4.9 Developing Charity Standards
During the year the Commission took forward several projects aimed at improving standards in charity trusteeship.
4.9.1 Guidance to new trustees
In late 1999 the Commission introduced a short leaflet for all trustees of newly registered charities - "Welcome to Trusteeship". Taking on the trusteeship of a charity is a valuable way of contributing voluntarily to the local community or to society more widely - and it can be personally very fulfilling. At the same time it carries legal responsibilities which trustees must carry out diligently. The leaflet aims to
- acknowledge the commitment that they are making voluntarily;
- give them a realistic view of the benefits and demands of trusteeship, and of what is expected of them as trustees;
- signpost them to sources of further help.
Early in 2000 the Commission published "Users on Board" (CC24)" detailed guidance for charities wishing to involve their users or beneficiaries directly in the governance of the charity. The introduction of users as full members of the Board of trustees can be an effective way of making the charity more inclusive and of improving the quality of its services. But if not handled carefully, it can also lead to conflicts of interest giving rise to legal and management problems. The guidance helps charities to foresee and avoid those problems.
The voluntary principle of trusteeship continues to be the subject of debate. The Commission responded to this debate in autumn 1999 with a consultation document on trustee remuneration. The document did not offer the possibility of any change in the basic legal presumption against the remuneration of trustees, but sought views on whether or not the Commission should expand the range of circumstances in which it authorised remuneration. There was a large response to the consultation document - about 1,000 copies were sent out and a further 1,900 enquiries were made on the website. The Commission received 225 written replies from a large range of charities, umbrella and representative bodies, professional firms and individual trustees.
The consensus was that the principle of voluntary trusteeship is still compatible with the efficient running of today’s charities, and that it is a significant asset for the charitable sector as a whole. There was a feeling that charity trustees have an increasingly difficult job to do, and some charities were undoubtedly finding it harder to attract the right people to be trustees. However, respondents did not, in general, believe that offering payment would be a solution to these problems or would lead to higher standards of trusteeship. There was some sympathy for the view that, while trustees should not be paid for their work as trustees, they should be paid for any professional or other services they provide to the charity on top of their work as trustees.
Revised guidelines on payments to trustees (CC11) were published in September 2000.
During 1999/2000 the Commission added eight new or substantially revised publications to its range, almost all of which are available both in hard copy and from its website. It produced new guidance on a range of practical subjects such as managing financial difficulties, and resolving charity disputes - in addition to the guidance for new trustees and on users as trustees. The Commission also substantially revised its guidance on investigations of charities.
As part of its commitment to meeting the needs of customers whose first language is not English, the Commission has produced four booklets of summary guidance in a total of nine languages (Arabic, Bengali, Chinese, Gujerati, Kurdish, Somali, Urdu, Vietnamese and Welsh). It has also continued to expand and update its range of publications in Welsh, in Braille and on audiotape.
A full listing of the current range of publications available is given in the booklet CC1 (Charity Commission Publications) and on the website. This list is updated at least three times a year.
|
Publications results |
1998 |
1999 |
1/4/1999 - 31/3/2000 | |
|
Actual |
Actual |
Target | ||
|
Number of substantially new Commission guidance leaflets issued |
3 |
9 |
8 |
7 |
|
Number of Commission guidance leaflets revised |
3 |
31 |
35 |
30 |
During the report period, over 400,000 enquiries were made of the Publications section on the Commission’s website. A range of other material is being added to the website. This includes guidelines on particular issues. During this report period, eleven new sets of guidelines were added, on subjects as diverse as "Charities and the Millennium Timebomb" (now withdrawn), "Paying for Wills with Charity Funds" and "Open Government - access to Charity Commission records".
As part of its commitment to openness, the Commission has also started to place on its website the Operational Guidance it provides to staff on key issues of charity law, policy and best practice.
In addition it is publishing on the website a range of information on particular cases. This includes key registration decisions (so far that of the Commissioners in the case of Scientology) and also reports produced following formal inquiries.
During the report period, the Commission re-organised its telephone service following a call-handling review. It introduced a General Enquiry Line and a number of specialist helplines. Staff on the General Enquiry Line give consistent and swift answers to the more straightforward queries and can direct more complex matters to specialists with the depth of technical knowledge to provide a quality service on more difficult issues. Accountants at the Liverpool site provide detailed professional guidance on a wide range of technical issues to charities, accountants and auditors. Feedback from this has been valuable in informing the revision of the Statement of Recommended Practice (SORP) on charity accounts.
Minicom services are available for customers with hearing difficulties, and customers whose first language is not English can access a three-way telephone translation service.
The number of calls dealt with by the helplines during 1999/2000 were: