AIM OF THE REVIEW (asstated by the PIU):
To create conditionswhich enable the [charitable and voluntary] sector to prosper and grow. The review will consider whether the law oncharitable status needs changing and in what respects. It will also examine regulation and whetherit is appropriate to the task of promoting public confidence. Looking beyond charitable status, the reviewwill consider the need for new legal forms to encourage social enterprise.
Shaw Trust - General observations on the aim of thisreview
Shaw Trust welcomes this review and believes that it offerssubstantial opportunities for positive change.It may be that the PIU, after consultation, determines that the entirestructure of the charitable sector needs to be overhauled if it is to trulyfacilitate the charitable and voluntary sector to prosper and grow. It will undoubtedly be difficult to have alegal and regulatory framework which both provides satisfactorily for thehugely diverse range of charitable and voluntary organisations and at the sametime promotes public confidence in the sector.Nevertheless, we would need a great deal of persuasion to see merit inthe development of a sister organisation to the Charity Commission which wouldsupport and monitor the activities of the "non-charitable voluntarysector".
Perhaps this is the time to really grasp the nettle andbroaden the scope, invest in resourcing and rename the Charity Commission. Government recognises the value of thenot-for-profit sector in delivering public services. Clearly not all not-for-profit organisations are registeredcharities. It should be possible todevelop a framework within which organisations demonstrate their:
notfor profit status
socialpurpose
purposeserves the community it purports to
autonomyfrom government
Such organisationsshould be recognised in the way that charities currently are. A transitional or part- recognition could begranted to certain social firms which meet all but the first criteria.
A Commission for the Third Sector could then be born!
QUESTIONS BEING ASKEDBY THE REVIEW:
1. Are someorganisations excluded from charitable status that should be included?
Shaw Trust response:
The categories for registration seem somewhat outdated; therelief of hardship, advancement of education and the advancement of religionwhich form the first group of charitable purposes surely show their historicallegacy. The "catch all"second group, "other purposes for the benefit of the community" mayappear all embracing but the Charity Commission's own guidelines state that "Where an organisation is set up forSecond Group purposes, we do not necessarily assume that it will be for thepublic benefit". The clearlystated additional scrutiny applied to this group means that the pressure is onnew charities to either attempt to fall into the first group or perhaps, to notapply in the first place.
If the government wants to encourage the charitable andvoluntary sector to prosper and grow,then further clarification of the second group is surely calledfor. If the current structure is to beadjusted rather than totally changed then perhaps there is an argument for agrouping for organisations whose focus is "to ensure social inclusion forotherwise excluded groups"? ShawTrust would include disabled people within this definition.
The government may wish to include a very distinct group,which may also benefit from some aspects of charitable status, to provide forsocial enterprises/social firms/small co-operatives which are providingemployment for otherwise excluded groups.
2. Is it too difficultto register as a charity?
Shaw Trust response:
Shaw Trust doesnt have recent experience of registering sois unable to comment on this question from organisational experience.
3. Is the regulatoryburden on small organisations too great?
Shaw Trust response:
Whilst any business would argue that the regulatory burdenplaced upon it is too great, perhaps the main issues for charities is that therange of regulatory burdens placed upon them can be so diverse. Shaw Trust is a registered charity with aturnover in excess of 35 million per annum; we would argue very strongly thatthe regulatory burden is not an issue for small organisations alone.
We will focus our comments particularly on the regulatoryburden of various funding regimes, an area in which Shaw Trust is particularlywell-placed to comment.
Shaw Trust has a wide experience of working for a variety offunders, including central government departments, local government(particularly social service departments), European funding, SRB, NLCB (nowCommunity Fund) and various charitable trusts and commercial sponsors.
Local Authorities seem particularly obsessed with measuringinputs rather than counting outputs in terms of their assessment of Best Valuewhen it comes to working with the charitable sector. This may well stem from the days when Local Authorities awardedgrants to local charities to enable them to undertake particularactivities. However, those days aregone, the contract culture prevails but the mindset remains unchanged. The same local authority that awards acontract to a cleansing contractor on the basis of measurable outputs alonewill insist on seeing individual itemised project based accounts from a charity that is delivering a contract forone tenth of the size. We would arguethat Local authorities in particular need to move towards measuring outputsrather than counting inputs. Charitiesdelivering contracts could provide operational evidence against these outputsand Local Authorities could refer tothe Charities audited accounts to ensure that proper systems of financialmanagement are in place.
The level of bureaucracy surrounding SRB and Europeanfunding can also be breathtaking but at least has the merit of being consistentto all funding applicants. We wouldargue that government should take a hard look at the regulatory burden that isbeing placed by these funds on all those delivering services within them. It seems a great pity that funds that areset up specifically to attend to the needs of the most disadvantaged sectors ofsociety require the creation of tiers of administration within the deliveryorganisation in order to manage them.It is undoubtedly the case that the regulatory burden of these fundingroutes does inhibit smaller charities from participating.
The range of financial reporting that is required bydifferent funding organisations is time-consuming and therefore costly forcharities to administer. We would arguefor funders to focus on the results or outputs from their funding and to trustthe Charity Commission/Commission for the Third Sector to oversee theproduction of adequate reports and accounts.
As a separate point, very few funders are willing torecognise that the costs of managing an organisation are a legitimate part ofthe cost of delivering the service.This is despite the self evident fact that if the central support wasnot there it would not be possible to deliver the service. Shaw Trust supports the argument for fullcost recovery for all services delivered by a charity from those it contractswith.
4. Should changes bemade to the regulation of fundraising?
Shaw Trust response
Shaw Trustrecognises that the Charity Commission guidelines on the regulation offundraising exist to offer recourse to donors and are intended to ensure thatfunds are spent as the donor intends.If the remit of the Commission was substantially altered we would expectall organisations to be able to clearly demonstrate their not-for-profit statusbut specific regulations should only apply to income derived from grants orindividual donation. There should be noadditional attempt, outside the requirement to produce auditable accounts, toregulate for income gained from the delivery of contracts. Our comments about funding in general arecontained in our answer to question 3.
4. Do existing legalforms inhibit entrepreneurialism and innovation?
Shaw Trust response
The short answer is yes!
We would argue that, if the government wants the charitablesector to continue to be a key partner in the delivery of public services thenthere must be an opportunity for organisations to generate a return on servicesdelivered. This return would of coursebe re-invested within the organisation and would fund such activities asresearch and service innovation. Thisnot-for-profit focus would be a continuing difference between the charitableand the commercial sector.
As suggested in our response to question 1, there may be anopportunity to extend the definition of charity to enable the inclusion ofcertain types of social firms and co-operatives within the charitable sector.