Charity Commission verdict on sector

5 Jan 2015 Nick Garbutt    Last updated: 7 Jul 2015

Charity Commission Chief Executive Frances McCandless talks to Scope about CEO pay, governance and registration.

At least 350 charities have closed in Northern Ireland over the past three years. Is this a sign that the sector is in meltdown, or is this kind of figure normal?

Nobody knows the answer. It’s just one of many discoveries the Charity Commission for Northern Ireland is making as it sets out to regulate the sector.

The closures have been uncovered as part of the registration process: all charities in Northern Ireland have to be registered with the Commission and so as staff follow up on HMRC lists and other sources, they are documenting those that have fallen by the wayside.

Charity Commission Chief Executive Frances McCandless says she genuinely does not know if this high-sounding figure should give us cause for concern.

“Charities are born and they die in a cycle,” she says. “That’s perfectly normal. It is a natural process for a charity to achieve what it set out to achieve and then to go away.

“However we also know that there are huge issues with pensions in the sector and we are very much aware of the pressures in the current funding environment: so we can see the maelstrom that charities face, but it’s just not possible to draw any themes or conclusions from the bare facts.

“It could be the sign of a crisis, but it also could be business as usual.”

This is just one fascinating insight into the difference that regulation will make to the sector: before the Commission was set up there wasn’t even a comprehensive list of charities here: there were those registered with HMRC, but there are plenty of others out there who for whatever reason are not on the HMRC’s radar.

The Commission has just come to the end of its first year in building its own register of charities. It is compulsory for all charities to be on that register and the Commission will track and then take legal action against any charities that do not make themselves known.

“It has been an incredibly busy year,” says McCandless. “The sector was very welcoming about having regulation but it is only when the thing lands on your desk that you really, really focus. That’s generated a lot of work for us: we have either run or taken part in more than 200 events to explain the process and we’ve developed resources to walk people through the process.

“The most rewarding thing of all is the feedback we’ve had – people have been coming back and telling us that the process  was not as hard as they had expected, and can be done from scratch in around one and a half hours provided you have all the documentation to hand."

To date around 650 organisations are on the register. Another 4,500 have been called forward of which 1,800 are now on the system.

McCandless doesn’t know precisely how many charities there are in Northern Ireland. There are 7,500 on the old HMRC register (of which 350 have closed) and around 1,000 others not known to HMRC have been in touch.

The deadline for those “unknown” organisations has now passed.  Any that do not come forward and are found will be pursued through the courts by the Commission which will target their trustees.

McCandless said: “If you are a charity in law then you must come forward. It is a legal requirement. So if you are not registered you can be sure we are looking for you – and we will find you.”

The Commission was in the news recently for the action it took against the Disabled Police Officers Association, suspending the chief executive and four trustees whilst in concludes an investigation into its affairs.

The case acted as a strong wake-up call to the sector, giving a first glimpse of the formidable array of powers at the Commission’s disposal.

The Commission has been carrying out regulatory investigations for three years now and regularly posts reports on its website, drawing out lessons. The latest is around trustees and addresses issues such as longevity, expenses and numbers of trustees. The reports are very simple, user friendly and use anonymous case studies which help to bring the issues to life.

So what is her verdict? How is the sector performing? How good is governance?

“I haven’t got a very different view as regulator than I had when I was working in the sector. On the whole charities are being well run by people who are trying to do the best they can with limited resources And if they get things wrong then that can often be put right.”

“We know that occasionally people do the wrong things deliberately: that’s why we have a regulator. We have seen examples of that, but not disproportionately, certainly we’ve not seen anything that would undermine the hard earned trust people have in charities."

But she does expect the highest standards of governance and does not believe trustees of charities should be treated more leniently than paid directors of private companies.

“Because a board isn’t paid doesn’t make it amateur: trustees can and do have the expertise, the values and the drive which are much greater motivation than money. Good governance is not a luxury it is at the heart of what charities do.

“And when you think about it, never mind being lenient on trustees: to deliberately mismanage a charity is almost worse because you are not just doing something to make money you are doing something for which the public has often given money so the trust invested in you and the standards you should be held to are even higher in the public eye. So do not expect us to go easy because trustees are bot paid.”

Which brings us, rather neatly to the question of how much chief executives get paid.

McCandless is very clear on this. “It is the job of trustees to set appropriate remuneration of staff and we would expect trustees to have a reasonable policy on why it is what it is. We would not interfere in this unless CEO pay amounted to mismanagement: if, for example, a CEO’s pay was a very high proportion of the organisation’s income we might take an interest."

She was aware of press coverage last year but has not taken any action as a result.

“From what I’ve seen in opinion polls I think there is a major misunderstanding of what many modern charities are. Many are highly complex organisations and the trustees must have the right people with the right skills and we understand that they are buying these skills in the market place."

She counsels greater transparency.

"As the regulator we’re not asking charities to do that but we encourage the maximum transparency and frankly the more a charity can explain itself to the public the fewer problems it is going to run in to. You are seeing transparency on pay across the public sector and it would be very sensible for charities to consider what the public expect good practice to be. It’s up to them but I think charities are doing themselves no favours when they are not being as transparent as they can. I think this is an issue which will continue to run.”

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