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FUNDING THE CHARITY COMMISSION

TO FEE OR NOT TO FEE

17 January 2018

The Charity Commission is expected to launch a consultation on introducing a mandatory charge, with the Commission’s Chief Executive seeking to raise £7 million per year from charities.

In this paper, CAF argues that there is a clear need for the Commission to be better funded if it is to adequately carry out its regulatory responsibilities. But we also reason that donations made to support important causes should not be used to pay for the work of a statutory regulator.  Instead, we set out alternative proposals which would help the Commission stem its funding shortfall while improving regulation.

Read and download 'Funding the Charity Commission'

WOULD A MANDATORY CHARGE DAMAGE PUBLIC TRUST?

CAF is warning that forcing charities to divert some of their donations to fund the regulator may damage public trust, compromise the Commission’s independence, and deter some people from donating because they do not want to see their money used to pay for additional overheads. We fear that even the introduction of a nominal charge now would set a dangerous precedent, with costs for charities likely to increase over time.

The regulation of charities in the UK has traditionally been funded by government; however HM Treasury funding for the Charity Commission has halved since 2008. The Commission has argued that charges would allow it to carry out more “advice and enabling work”. In a response to the Lords Select Committee on Charities the Commission last week its said it “believes it is fair that the charities make a modest contribution to a system that benefits them”.

CAF Chief Executive Sir John Low commented:


“It is crucial that the regulation of charities is adequately resourced. Significant cuts in funding from the Treasury in recent years mean there is now a clear need for additional money if the Commission is to be able to do its important job properly.

“However the idea of a levy on charities to fund the Commission does throw up problems - millions of generous people who give to charity will not want the money they donate to a their favourite cause diverted to a regulator instead of the front line.

“We believe there are a number of better ways to solve the problem of funding an effective charity regulator. With the issue of charging firmly on the agenda, and governance changes at the Commission, we believe now is the time to look at all the alternatives.

“One of the inherent roles of the Charity Commission is to improve the governance of charities. Introducing a charge for those late filing their accounts would not only provide much-needed additional funding, but would also provide a very real incentive for charities to improve their governance.”

ALTERNATIVE FUNDING OPTIONS

One option is to introduce a charge for charities that miss deadlines for filing their accounts, similar to fees charged to businesses which are late filing accounts. We argue that this would encourage better governance and reduce costs for the Commission if it encouraged more charities to file accounts on time. An average fine of £250 for the 10,000 charities that missed deadlines for filing accounts or annual returns with the Commission this year would generate £5 million.

Other alternatives that CAF is encouraging the Commission and Government to consider include charging for specific advice or additional services for charities which request them, funding charity regulation through Libor fines or providing additional Treasury funding, as part of a new settlement aimed to bringing communities together.

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