Policy paper

Where we monitor charities

Published 23 May 2013

Applies to England and Wales

The public expects the Charity Commission to maintain regulatory oversight of concerns about harm and abuse and non-compliance in the charity sector. Regulatory supervision and monitoring is an important tool in the identification and detection of harm and abuse within charities, and in disrupting the activities of those seeking to abuse them.

1. About the commission’s monitoring work

This work primarily focuses on three strategic risks:

• safeguarding beneficiaries
• counter-terrorism
• fraud

The primary purpose of monitoring is to monitor charities where there are concerns relating to serious non-compliance, or where it is believed that there is a significant risk of serious non-compliance within a charity or class of charities. This work is conducted using the information and knowledge the commission has about the sector and abuse taking place in it, and through its experience of dealing with these concerns and with non-compliance.

Regulatory supervision and monitoring of charities is carried out in a proportionate way and targeted where intervention is most needed to stem abuse in the sector. This includes:

• close liaison with other government regulators and law enforcement agencies
• reviewing information that charities supply to the commission, along with appropriate and targeted scrutiny of accounts
• formal monitoring to ensure that trustees have complied with regulatory advice and guidance following the conclusion of the commission’s formal regulatory engagement with a charity
• proactive monitoring of the sector in areas that the commission identifies as high risk and proactive engagement with those charities that may operate in high risk areas and may be facing problems
• conducting compliance visits to charities identified as potentially at risk so that the commission can establish if there are any serious regulatory concerns, and if so, provide regulatory advice and supervisory support

In some circumstances the commission monitoring work may identify serious regulatory concerns which warrant formal investigation by one of its Investigations teams or corrective regulatory advice and guidance from one of its Operations teams.

Monitoring a charity may also be appropriate where the commission is unable to take immediate action, or is restricted in the action it can take to address regulatory concerns, because a law enforcement investigation takes primacy to the commission’s own, and where its intervention may prejudice or frustrate the criminal investigation.

2. Compliance visits

Compliance visits are an important monitoring and investigatory tool, providing the commission with an opportunity to directly engage with charities where it believes there may be serious risks to the charity or to the sector.

A compliance visit gives the commission the opportunity to observe a charity operationally, to check whether it is functioning in accordance with its stated objectives, and to ensure the trustees are complying with their legal obligations in exercising control and management of their charity. A compliance visit focuses on identified areas of risk, whether specific to the charity in question or in relation to risks affecting the wider charitable sector.

A compliance visit allows the commission to:

• gain a better understanding of a charity, its role and working practices
• establish whether the suspected regulatory concerns about a charity exist in practice, or whether there is a risk that serious regulatory concerns could arise (for example, because a charity is operating in a high risk area without sufficient oversight by the trustees which places it at serious risk of harm or abuse)
• assess the scale, nature and seriousness of the identified regulatory concern(s)
• collect and verify information and facts relevant to any regulatory concern(s), which may include scrutinising the charity’s financial and other records
• assess the charity’s management policies, procedures and practices
• verify whether the charity is complying with the legal and regulatory framework and whether the trustees are discharging their legal duties and responsibilities

As well as serving as a monitoring and investigatory tool, compliance visits also:

• enable the commission to provide direct and early supervisory support and regulatory guidance to help trustees protect their charity from abuse and enable them to comply with their legal obligations
• initiate and facilitate a transparent relationship between the commission and charities subject to monitoring
• promote public trust and confidence in charities through proactive, effective and targeted regulatory supervision

The commission will decide to conduct a compliance visit on a case by case basis and where:

• it believes there are concerns relating to serious non-compliance, or where it believes that there is a significant risk of serious non-compliance within a charity
• there is a clear regulatory purpose to the visit that is both reasonable and proportionate and in furtherance of the commission’s statutory objectives and functions
• the commission believes a visit is a necessary and appropriate means for the effective progress and direction of the case

Charities may be selected for a compliance visit where:

• the commission has identified an actual and serious regulatory concern directly related to a charity that is best addressed through face to face engagement
• the commission has identified a suspected serious regulatory concern in relation to a charity such as:
  1. when the commission receives a complaint or a referral from another agency and information is provided that suggests a serious concern but this is insufficient evidence to proceed to open an investigation
  2. where it operates internationally in high risk areas without adequate management and financial controls; for example in conflict zones, or in areas where terrorist groups or those connected to them are known to operate and can exercise significant influence or control, or areas with little infrastructure or banking facilities, or subject to widespread corruption and criminality, and/or to weaker or inconsistent regulation
  3. failure to comply and previous non-compliance with the statutory requirement to file accounts with the commission
  4. significant and/or unexplained fluctuations in the charity’s income and expenditure
  5. where the commission has identified a thematic or systemic risk through its regulatory work in respect of a certain type of activity or method of operation that may expose a charity to a risk of serious abuse

A compliance visit is likely to be necessary where these factors are present so that the commission can establish whether regulatory concerns arise in practice. If they do, it will consider how these may best be addressed and will provide regulatory advice and guidance to the trustees to help them protect the charity and prevent harm and abuse occurring.

The commission may consider a compliance visit to be appropriate if it needs to proactively assess whether a charity may be at risk of serious abuse or harm. A compliance visit may be the most appropriate means for the commission to ensure that any regulatory concerns identified from an operational case have been resolved, or any required actions have been carried out before the commission closes it.

By taking a proactive approach to assessing the type and nature of the risks affecting charities and the wider charitable sector, the commission will be better able to help prevent problems arising in the first place. It does this by using information and knowledge from a variety of sources (including from other government regulators and law enforcement agencies).

The commission regularly reviews these risks in the context of our understanding of changes to the environment in which charities are operating and developments within the sector, and in light of its own operational experience.