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Regulatory shifts: developing sector participation in regulation for charities in England and Wales

Published online by Cambridge University Press:  02 January 2018

Alison Dunn
Alison Dunn*
Affiliation:
Newcastle Law School
*
Alison Dunn, Newcastle Law School, University of Newcastle upon Tyne, 21–24 Windsor Terrace, Newcastle upon Tyne NE1 7RU, UK. Email: alison.dunn@ncl.ac.uk
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Abstract

Cuts in the Charity Commission's budget have caused it to retrench in its regulatory activity and re-prioritise its core functions. As a consequence, the Commission has promoted greater trustee self-reliance and charity-sector provision of regulatory services. This paper analyses these regulatory developments alongside a broader analysis of self-regulation in the charity sector. This paper argues that while self-reliance and self-regulation offer opportunities to the charity sector to create nuanced, sector-sensitive regulation, they could also compromise the credibility and quality of charity regulation. This paper further argues that the charity sector needs to address as a matter of priority the drivers for regulatory reform, the purposes and priority of charity regulation, and the shift in the balance of power that results.

Type
Research Article
Information
Legal Studies , Volume 34 , Issue 4 , December 2014 , pp. 660 - 681
Copyright
Copyright © Society of Legal Scholars 2014

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Footnotes

*

An earlier version of this paper was delivered at the International Society for Third-Sector Research's 10th International Conference, University of Siena, July 2012. I am grateful to Mark Sidel for organising the conference panel, the participants and Anthony Zito for discussion, Ann Sinclair for research assistance and the journal's anonymous referees for their helpful comments.

References

Notes

1. New Zealand's Charities Commission core functions were taken over by New Zealand's Department of Internal Affairs.

2. Strategy Unit Public Bodies Reform – Proposals for Change (December 2010) p 4, available at http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/documents/digitalasset/dg_191543.pdf (accessed 1 June 2013) or http://www.number10.gov.uk/wp-content/uploads/2010-10-14-Public-bodies-list-FINAL.pdf (accessed 1 June 2013).

3. HM Treasury Spending Review 2010 Cm 7942 (London: The Stationery Office, October 2010) Table A12 p 88. A further 6% reduction was made in the latest Spending Round; see HM Treasury Spending Round 2013 Cm 8639 (London: The Stationery Office, June 2013).

4. Charity Commission Charity Commission Seeks Views on Future Strategy Press release (27 October 2010).

5. Dibble K The Charity Commission: a New Regulatory Approach Charity Law Association Annual Conference (13 October 2011).

6. These connect to the Commission's key priorities for the period to 2015: Charity Commission Strategic Plan 2012–15 (7 December 2011) p 1.

7. Charity Commission Risk Framework: Our Regulatory Approach to Protecting the Public's Interest in Charity – How We Assess and Manage Risks (January 2012). Charity Commission, below n 10; Charity Commission, above n 6.

8. Charity Commission News Special Edition – the New Commission (October 2011) p 3.

9. Charities Act 2011, ss 14–16.

10. Charity Commission Charity Commission's Strategic Review – Conclusions and next Steps (16 February 2011) p 1.

11. Quoted in Brindle D ‘Charity Commission enters new phase’ The Guardian 27 October 2010.

12. Charity Commission Charity Commission Strategic Review: Written Submissions (2011) p 179 (National Fraud Agency).

13. Ibid, pp 8, 10, 150 (Almshouse Association, Association of Charitable Foundations, Lord Joffe).

14. For example: National Audit Office Giving Confidently: the Role of the Charity Commission in Regulating Charities. Report by the Comptroller and Auditor General HC 234 Session 2001–2002 (25 October 2001) p 3; Committee of Public Accounts Charity Commission: Regulation and Support of Charities 28th Report, HC Session 1997–1998 (London: The Stationery Office, 1998); Mason T ‘Sir Stuart: Charity Commission leaders have lost sector's respect’ Civ Soc'y Online (8 May 2013).

15. Charity Commission Charity Commission Opens Statutory Inquiry into the Cup Trust and Appoints Interim Manager Press release (1 May 2013).

16. Charity Commission Charity Commission Strategic Review: Online Survey Results (2011). Charity Commission, above n 12, pp 21, 192–193 (Big Lottery Fund, RNIB) and for opposite views pp 40, 172 (BOND, National Council for Voluntary Organisations).

17. Charity Commission, above n 12, pp 193, 197, 56 (RNIB, Royal Society of Wildlife Trusts, British Red Cross).

18. Charities Act 2011, s 14.

19. Hodgson, Lord Trusted and Independent: Giving Charity Back to Charities. Review of the Charities Act 2006 (London: The Stationery Office, 2012) para 3.16.Google Scholar

20. Charity Commission, above n 10, p 1.

21. Locke D Keynote Address: Changes at the Charity Commission and the Review of the 2006 Charities Act Association of Charity Independent Examiners Annual Conference (24 June 2011).

22. Young Nm ‘Half of small charities do not understand laws applying to them’ Civ Soc'y (8 December 2011).

23. Ipsos MORI Public Perceptions of Charity: a Report for the Charities Act 2006 Review (15 May 2012) p 28 (53%).

24. Ipsos MORI Charity Commission Strategic Review: Public Perceptions Qualitative Research (2 December 2011) p 15.

25. Ipsos MORI, above n 23, p 29.

26. Locke, above n 21. Locke noted that the Commission's dedicated telephone helpline was often used by legal advisors or accountants.

27. Charity Commission, above n 10, p 1; Charity Commission, above n 7, pp 3–7.

28. One-to-one advice will not be removed entirely. It will be provided in a limited number of cases, such as where the Commission is the only source of authoritative advice or where a failure to provide advice would cause trustees serious difficulties of compliance: Charity Commission Risk Framework: Application of the Charity Commission's Risk Framework (January 2012) p 17.

29. Charity Commission, above n 10, p 2.

30. It has been promoted by the UK's Better Regulation Task Force as a more cost-effective and less burdensome approach to regulation: see http://www.bis.gov.uk/bre/ (accessed 1 June 2013). See also The UK's Coalition Government's principles of regulation, available at http://www.bis.gov.uk/policies/bre/principles-of-regulation (accessed 1 June 2013).

31. Such as the Practical Quality Assurance System for Small Organisations (PQASSO, see http://www.ces-vol.org.uk/PQASSO); see Charity Commission Charity Commission Partnership Strategy (2006) p 6.

32. For a discussion of the development of fundraising self-regulation in England, Wales and Scotland, see Harrow J ‘Chasing shadows? Perspectives on self-regulation in Uk charity fundraising’ (2006) 21(3) Pub Pol'y & Admin 86.

33. See European Center for Not-for-Profit Law Study on Recent Public and Self-Regulatory Initiatives Improving Transparency and Accountability of Non-Profit Organisations in the European Union (April 2009).

34. Black, J ‘Constitutionalising self-regulation’ (1996) 59(1) Mod L Rev 24 at 27. Black's definition of self-regulation marginalises the individual and emphasises the collective.Google Scholar See also Ayres, I and Braithwaite, J Responsive Regulation: Transcending the Deregulation Debate (Oxford: Oxford University Press, 1992).Google Scholar

35. Compare Black's voluntary, coerced, sanctioned and mandated self-regulation, Bartle and Vass' tacitly supported or facilitated non-mandated self-regulation and devolved, delegated or cooperative mandated self-regulation, and Ayres and Braithwaite's enforcement pyramid: Black, above n 34; Bartle I and Vass P ‘Self-regulation within the regulatory state: towards a new regulatory paradigm?’ (2007) 85(4) Pub Admin 885 at 891; Ayres and Braithwaite, above n 34.

36. Charity Commission, above n 12, pp 18, 174 (Barnardos, National Council of Voluntary Organisations).

37. Charity Commission, above n 7, p 3, supported by Hodgson, above n 19.

38. The Independent Schools Council v the Charity Commission for England and Wales [2011] UKUT 421.

39. Report of the Committee on the Law and Practice Relating to Charitable Trusts Cmd 8710 (London: HMSO, 1952) para 637.

40. Charities Act 2011, s 20(2).

41. Above n 38.

42. Charity Commission, above n 7, pp 3–7; Charity Commission, above n 5, p 4.

43. Ranging from creating and running a charity, reporting and accounting requirements, fundraising, trading, managing conflicts of interest, reporting serious incidents, public service delivery, collaborative working and mergers, to specialist advice for types of organisations and fields of operation: see http://www.charity-commission.gov.uk/Charity_requirements_guidance/ccpubs3.aspx (accessed 1 June 2013).

44. See eg NCVO Civil Society Almanac 2013, available at http://data.ncvo-vol.org.uk/ (accessed 1 June 2013).

45. Charity trustees are supported by other statutory provisions, such as the power of a charity to purchase trustee indemnity insurance and Commission power to relieve a trustee from liability: Charities Act 2011, ss 189, 191.

46. Noted by a review of the operation of the Charity Commission against principles of proportionate regulation (particularly in the context of public benefit): see Department for Business Innovation & Skills Charity Commission: a Hampton Implementation Review Report (March 2010) pp 8–9, 13.

47. Hodgson, above n 19, para 4.45. See also Charity Commission, above n 12, pp 84, 175–176 (Charity Law Association, National Council of Voluntary Organisations).

48. Hodgson, above n 19, para 5.10.

49. Emphasised by the Upper Tribunal when it ordered the Commission's post–Charities Act 2006 guidance on public benefit be withdrawn and rewritten, above n 38.

50. Strategy Unit Private Action, Public Benefit (London: Strategy Unit, 2002) para 4.56.

51. Pensions Act 2004, ss 247–248. The duty applies at a higher level for corporate trustees.

52. A code of practice is issued by the Pensions Regulator: Pensions Regulator Code of Practice No 7, Trustee Knowledge and Understanding (Tku) 2nd Issue (2009), available at http://www.thepensionsregulator.gov.uk/codes/code-trustee-knowledge.aspx (accessed 1 June 2013).

53. Pensions Act 2004, s 241 sets out a requirement that one third of the trustee board should be comprised of member-nominated trustees.

54. Including a suggestion that the Commission outsource screening of complaints and enquiries: Charity Commission, above n 12, pp 114, 125 (Fundraising Standards Board, Institute of Chartered Accountants in England and Wales).

55. Public Administration Select Committee Regulation of the Charitable Sector and the Charities Act 2006 Written Evidence (2013) NAVCA (CH 55); Charity Commission Charity Commission News Issue 38 (spring 2012) p 2.

56. Hodgson, above n 19, paras 5.12, 6.14, 6.16, 7.10–17.11.

57. Charity Commission, above n 31, p 5.

58. Charity Commission, above n 31, pp 1, 2, 6.

59. Charity Commission Annual Report and Accounts 2011–2012 (London: the Stationery Office, 2012) pp 27–28.

60. Sector bodies have provided specialist knowledge and undertaken review visits on the regulator's behalf, see Charity Commission, above n 12, p 7 (Almshouse Association).

61. ACEVO Taskforce on Better Regulation Public Impact Centred Regulation for Charities (London: ACEVO, 2010) p 15.

62. Charities get the benefit of faster registration where governance structures are approved or endorsed by the Commission.

63. The INGO Charter group is comprised of International NGOs. Its charter raises awareness and provides transparency via a reporting requirement: see http://www.ingoaccountabilitycharter.org/ (accessed 1 June 2013).

64. Better Regulation Task Force Better Regulation for Civil Society: Making Life Easier for Those Who Help Others (November 2005) p 47.

65. Scott, C ‘Private regulation of the public sector: a neglected facet of contemporary governance’ (2002) 29(1) J Law Soc'y 56 at 61.Google Scholar

66. Phillips, Sd ‘Canadian leapfrog: from regulating charitable fundraising to co-regulating good governance’ (2012) 23 Voluntas 808 at 811, 823ff.Google Scholar

67. Hodgson, above n 19, para 8.15.

68. Ibid, paras 7.10–7.11.

69. This accounts for the view that it is better to regulate the sector by a body independent of members: Wjm van Veen ‘Comparing regulation of fundraising: self-regulation or governmental regulation?’ in Hopt Kj and T von Hippel (eds) Comparative Corporate Governance of Non-Profit Organizations (Cambridge: Cambridge University Press, 2010).

70. Caron Bradshaw, chief executive, Charity Finance Directors' Group quoted in Mair V ‘Umbrella bodies critical about taking Charity Commission advice role’ Civ Soc'y (26 September 2011).

71. House of Commons, above n 55, IOF (CH 30). The cost of joining the FRSB is tiered, starting at £30 and increasing to £5000 per annum, depending on the income of organisations.

72. Hodgson, above n 19, para 8.20.

73. Ibid, para 6.13.

74. Less than 1500 of 45,000 fundraising charities had joined: ibid, para 8.14.

75. Ibid, para 8.14.

76. Ibid, p 102, Public Administration Select Committee The Role of the Charity Commission and ‘Public Benefit’: Post-Legislative Scrutiny of the Charities Act 2006 Third Report of Session 2013–2014 HC76 (6 June 2013) pp 38–39.

77. Hodgson, above n 19, paras 8.16–8.18, p 102.

78. These roles have now been clarified: see Public Administration Select Committee, above n 55, IOF, FRSB and PFRA (CH 19).

79. Ipsos MORI, above n 23, p 4, reported that 90% of its respondents had not heard of the FRSB.

80. Retrenching on provision of advice and guidance through individual engagement with organisations also removes an informal source of compliance monitoring.

81. Public Administration Select Committee, above n 76, pp 38–39.

82. See http://www.theinformationstandard.org/about (accessed 1 June 2013). A more formal example is independent examination of charity accounts, albeit this is less apposite given that it stems from a statutory requirement under Charities Act 2011, ss 145, 152.

83. Mair V ‘Charity Commission expects all charities to join an umbrella body’ Civ Soc'y (23 September 2011); Younger S ‘Commission comments no cause for concern’ Engage (26 October 2011), available at http://www.beengaged.org/opinion/commission-comments-no-cause-concern/ (accessed 1 June 2013).

84. Used in schemes run in Australia, the Philippines and Pakistan: Lloyd R and L de las Casas Ngo Self-Regulation: Enforcing and Balancing Accountability, available at http://www.oecd.org/dev/devcom/44251309.pdf (accessed 1 June 2013) p 2.

85. For discussion of the challenges facing the FRSB's fundraising scheme, see Breen Ob ‘The perks and perils of non-statutory fundraising regulatory regimes: an Anglo-Irish perspective’ (2012) 23 Voluntas 763.

86. Sidel, M ‘The guardians guarding themselves: a comparative perspective on nonprofit self-regulation’ (2005) 80 Chi-Kent L Rev 803 at 811.Google Scholar

87. Department for Business Innovation & Skills Charity Commission: a Hampton Implementation Review Report (March 2010) p 15.

88. See Ogus, A ‘Rethinking self-regulation’ (1995) 15 Oxford J Legal Stud 97 at 98.Google Scholar

89. Bartle and Vass, above n 35, pp 898–899. Under the Hampton principles, regulators should act proportionately and employ a cost–benefit analysis to intervention, using risk assessment as a means to better target resources to where they are needed and to minimise burdens upon those who are regulated: Hampton P Reducing Administrative Burdens: Effective Inspection and Enforcement (London: HM Treasury, March 2005).

90. Sidel, above n 86.

91. See Scott, above n 65, for a broader discussion.

92. For a discussion of the review of decision making of self-regulatory associations, see Black, above n 34. For application of the Human Rights Act 1998, s 6 see: R (Heather) v Leonard Cheshire Foundation [2002] 2 All ER 936; Aston Cantlow and Wilmcote and Billesley PCC v Wallbank [2003] 3 WLR 283; YL v Birmingham City Council [2007] 3 WLR 112.

93. House of Commons Public Administration Select Committee Work of the Charity Commission: Oral and Written Evidence 25 October 2011 HC1542-I (London: The Stationery Office, 2 April 2012) EV2 Q8 (Dame Suzi Leather).

94. Charities Act 2011, s 13(3), (4) reinforces the autonomy of the regulator as an independent body accountable to Parliament but free from government interference.

95. Charity Commission, above n 7, p 3.

96. Phillips, above n 66, p 823, notes the beginnings of this ownership process in Imagine Canada's sector-designed and -led accreditation programme of good governance.

97. Bartle and Vass, above n 35, p 896.

98. Rutzen, D ‘Global perspectives on the legal framework for civil society and relational governance’ in Phillips, Sd and Rathgeb Smith, S (eds) Governance and Regulation in the Third Sector: International Perspectives (London: Routledge, 2011) p 272.Google Scholar

99. Strategy Unit, above n 50.

100. Hodgson, above n 19.

101. Ibid, paras 6.45, 6.55, 7.8.

102. Dunn A ‘Lord Hodgson's Charities Act review’ (2013) 4(1) Volunt Sec Rev 127.

103. Rutzen, above n 98, p 261.

104. Bies Al ‘Evolution of nonprofit self-regulation in Europe’ (2012) 39(6) Nonprof & Volunt Sec Q 1057 at 1073.

105. See Panel on the Independence of the Voluntary Sector, available at http://www.independencepanel.org.uk/ (accessed 1 June 2013).

106. Such as the Good Governance: A Code for the Voluntary and Community Sector (London: NCVO, 2005) created under the auspices of the then National Hub of Expertise in Governance.

107. Phillips, above n 66, p 824.

108. The Public Administration Select Committee, above n 76, p 39, recommended that the Commission promote self-regulation as part of its statutory duty to promote trust and confidence in charities. The Communications Act 2003, s 3(4)(c) requires the Communications regulator Ofcom to have regard to ‘the desirability of promoting and facilitating the development and use of effective forms of self-regulation’. Ofcom also has power to delegate under the Communications Act, Part 1. Lord Hodgson recommended that the Charity Commission be provided with delegation powers, with the caveats that it should retain its investigation powers, be satisfied that any delegated regulation is substantially comparable in standard and have the ability to terminate the delegation as appropriate: Hodgson, above n 19, paras 5.29, 6.16.

109. For details, see http://www.charitycouncil.org.sg/ (accessed 1 June 2013) and http://www.charitycouncil.org.sg/downloads/COG/Code_of_Governance_for_Charities_&_IPCs%20(English)%202011.pdf (accessed 1 June 2013).

110. O'Halloran, K, McGregor-Lowndes, M and Simon, KW Charity Law and Social Policy (London: Springer, 2008) p 359.CrossRefGoogle Scholar

111. Hodgson, above n 19, paras 6.57–6.60. This proposal was rejected by the Public Administration Select Committee, above n 76.