The Regulator for Charities in England and Wales

Providing the Best Possible Regulation of Charities - Managing the Risks

December 2003

Contents

What is this document about?

1. In common with all Government Departments, the Charity Commission has produced a framework for managing the major risks to achievement of its objectives - in our case those which impact directly on our aim to provide the best possible regulation of charities in England and Wales in order to increase charities’ effectiveness and public confidence and trust.

2. This initiative has its origins in the Turnbull report, which recognised the need for good risk management as a key component of effective corporate governance. The Government’s commitment to ensuring that these principles were equally applied in the public sector was set out in its White Paper on "Modernising Government" in March 1999.

3. Action to implement this commitment includes a requirement for all Departments to make public the framework and procedures used for controlling the risks for which they are responsible. This document represents the Commission’s response to meeting this requirement. It sets out a summary of:

  • the role and responsibilities of the Charity Commission
  • key risks to achievement of our aim
  • the impact of these risks if they occur
  • what we are doing to control and mitigate these risks

The role and responsibilities of the Charity Commission

4. Before considering the risks we have identified, it is important to place the work of the Commission in context. The overall aim of the Charity Commission is "to provide the best possible regulation of charities in England and Wales in order to increase charities' effectiveness and public confidence and trust." Our legal powers, role and functions necessary to achieve this aim are set out in the Charities Act 1993.

5. Under this legislation we are specifically responsible for registering charities, providing charities with advice, support and guidance, and tackling abuse. To meet these responsibilities and achieve our aim, we have established a framework of regulation, support and active supervision to help ensure that the resources available to and utilised by the sector are deployed to maximum effect, and are not mismanaged or misused.

6. Our activities within this framework include:

  • Determining the charitable status of organisations
  • Monitoring charities’ financial and other activities including enforcing submission of annual returns
  • Working with charities, umbrella bodies and the rest of government to develop the legal and accounting framework within which charities operate, and to develop and promote appropriate standards
  • Promoting efficiency, good trusteeship and effective administration by providing trustees and others with guidance both to specific charities and in the form of leaflets, presentations and - increasingly - by electronic means
  • Keeping the register of charities up to date and accurate, and providing public access
  • Evaluating, and where appropriate investigating, allegations and suspicions of maladministration or abuse
  • Taking legal decisions in order to empower transactions or change governing provisions, where doing so will improve the administration of charities or allow their resources to be used more effectively.

7. In considering the risks to our objective of providing the best regulation, it is also important to recognise that there are limitations to what the Charity Commission can do. For example:

  • we do not have the power to make or change the law (the main legislative responsibilities impacting on the sector rest with the Home Office, DTI and other Departments)
  • we are not a prosecuting authority and we are not the supervisory authority for fundraising on the streets and elsewhere (this is the responsibility of the police)
  • while registration is evidence of legal status as a charity, it does not represent accreditation of the charity and its activities
  • while we can and do refuse charitable status to some applicants, provided that an applicant’s objects and activities are charitable in law our powers to refuse entry onto the register are limited
  • while we can appoint a receiver/manager to run charities where we consider that this is necessary to safeguard the interests of beneficiaries, we do not have the power to administer charities and cannot normally interfere with the day-to-day decisions and actions of trustees
  • we cannot object to trustees on grounds beyond the very limited ones laid down in section 72 of the 1993 Act
  • our responsibilities in respect of exempt charities (those that Parliament has specifically decided do not need to be regulated by us, typically because other arrangements already exist for their supervision, eg universities, colleges of further education and many national museums and galleries), are very limited.

What risks have we identified and what are we doing about them?

8 . This document focuses on the external risks faced by the Commission and the way in which we plan to deal with them. We have taken the Commission’s overall aim as our starting point, together with our experience of events that have occurred in the sector in recent years and the public reaction to them.

9. Our Strategic Risk Management Framework sets out what we think are the key events or incidents that, if they occurred, could lead to a loss of public confidence in charity. These are listed under two main headings, ie

  • those risks that are relevant to the charitable sector, and
  • the key risks which relate to control exercised by the Charity Commission itself.

10. The second column of the annex sets out the possible impacts and consequences of these risks; and the third some of the actions we have already taken, or have in hand, to ensure that, as far as possible, the risks and their potential impact are minimised.

Where do we go from here ?

11. The narrative above and the accompanying Risk Management Framework provide a picture of how we manage the key risks that could undermine public confidence in charity. We will look to improve this through consultation with stakeholders and review within the Commission.

12. We also have arrangements in place to manage risks that are internal to our business but could, to varying degrees, impact upon our ability to meet our objectives and responsibilities.

13. As part of this process we aim to ensure that all our staff are aware of, and actively manage, the risks that could have an impact on their own area of activity. This exercise is more detailed than the identification and management of the high level risks covered in this publication. It is, however, a complementary process that should help to ensure that, as far as possible, we are aware of the risks that we encounter in providing the public with the service that they both require and expect, and have measures in place to deal with them or contain them at an acceptable level.

14. Further work we have carried out to develop formal and robust risk management arrangements for the Commission includes:

  • identifying the lower level (ie day to day) risks (the countermeasures for which will support the higher level ones in the framework)
  • enhancing the systems in the organisations by which risks are identified, monitored and dealt with, and
  • raising the level of risk awareness in our managers to enable them to take a full part in meeting these requirements.

15. In doing all this we recognise that there is a lot of work on risk management taking place within the charitable sector itself. Where appropriate, we will seek to use this to complement the work being done within the Commission.