I think it is true to say that we are pleased that a robust and objective review of charities was commissioned and Lord Hodgson took up the challenge. My own view is charities have come a long way from support groups of people getting together to relieve suffering. They have evolved into sometimes large and extremely commercial organisations; in some instances charities are clearly taking on the private sector, providing services and using ‘charity wrappers’ to do so. The fact that his report I believe tends to address this ‘commercialisation’ of the sector is welcomed.
Since his report was published, we have now had the benefit of various responses from interested parties followed by the Hurd interim report by way of his letter to Lord Hodgson. Nick Hurd has responded with a very practical ‘traffic light’ system to either approve recommendations (green) disapprove of them and effectively kick them into the long grass (red) or suggest that the jury is still out and more work needs to be done (amber). This is clearly effective for him to set out how his office feels about the proposals.
So where does that leave the report and what might happen? I believe one of Lord Hodgson’s aims was to address the recruitment of trustees and their retention. I am pleased to see that the Government has shared my own view that to remunerate trustees of larger charities would have been a mistake. My personal view is that a fundamental defining feature of a charity is that those charged with ultimate governance do so without financial motive. Therefore to remunerate a large number of trustees would fundamentally change this and I do not believe would be any particular benefit.
I am not aware that large charities experience difficulties in recruiting experienced and able people to act as trustees and in certain limited cases if they do need to remunerate particular trustees they can apply to the Charity Commission for exemption. This clearly regulates what is going on and ensures that they make a sound case for remunerating them. I also believe that the charities which really struggle with recruiting trustees are those at the small end of the sector who would not have been able to enjoy the exemption anyway.
The strongest green light would seem to be Government and Lord Hodgson are in agreement over the definition of charity and public benefit. This comes as no great surprise given the high profile cases which have taken place over the last year or so regarding fee paying schools. The Charity Commission has clearly had difficulty in trying to come up with any sort of framework for defining public benefit. Recently we have seen these disagreements spill over into the religious sector and it will be interesting to see how these cases develop. I am in agreement though with both Lord Hodgson and the Government that it is simply too big a task to try and distil years of case law and guidance into a statutory definition and the answer has to be reliance on the tribunals and courts to adjudicate on the matter as quickly as they are able. I have no doubt that this is an area which will become increasingly relevant as the nature of the charitable sector continues to change both in areas in which it operates and the manner in which it does so.
It is interesting to see that overall the role of the Charity Commission is agreed between Lord Hodgson and the Government in that it should remain an independent body. I also agree that the name of the Charity Commission should not be changed as I think it is only recently that it has increased significantly in public awareness. I understand that Lord Hodgson believes the Charity Commission should focus on being a regulatory body and not used by charities for free professional advice. I have to say I would strongly disagree on this point in that I believe the fundamental difference between the Charity Commission and other bodies such as Companies House or H M Revenue & Customs is that it does provide a ‘soft’ regulatory body for charities which is an essential feature of the sector.
For smaller charities I believe this is an invaluable service and if it helps them to be compliant when otherwise they would have carried on regardless as they would not be able to afford suitable professional advice that has to be a benefit. In my experience the large charities will take professional advice before proceeding in these situations in any event.
One area which received an amber light was Charity Commission fee charging. Whilst Lord Hodgson was researching his report I was fortunate enough to attend one of the meetings of interested parties with him. The discussions on fees reflected the view that paying a filing fee such as that charged by Companies House for companies would not be too bigger burden for charities and if this helped to provide funding for the Charity Commission to continue providing advice then surely that must be a good thing.
In his response Nick Hurd introduced a fourth category of ‘green / amber’ and as an accountant I am delighted to see it is not just us who sit on the fence! One of the areas getting a ‘green / amber’ was social investment and I find this disappointing. I believe this is one of the most exciting elements in the charity sector that we have seen for a number of years and this is something I would like to see encouraged as much as possible. I appreciate it will need careful development and regulation but should be encouraged to the greatest possible extent and surely it is a win- win for all concerned.
The final area I would refer to is that of fund raising regulation and charity collections in public places, both of which receive green lights. Broadly, I share the view that fund raising is generally well controlled and regulated and also take the view that the one area that does need tightening up on in the dreaded ‘chuggers’ trying to get us to sign direct debit forms on the High Street. These have been operating in a largely unregulated regime to date.
So I would give Nick Hurd and the Government a green/amber light overall, clearly the sector needs to change if it is to move forward and I feel positive that those changes are generally for the better of the sector.
Article first seen on Charities Management magazine
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