Charity Commission consults on implementation of Risk and Proportionality Framework
March 2009
In July 2008, the Charity Commission published a Risk and Proportionality Framework for its compliance work...
...where charities assets or beneficiaries are at risk[1]. This followed an informal public consultation on the framework between September and November 2009, and the July paper incorporated the responses received.
The Commission accepts that it ‘cannot eliminate, or seek to control, all risks as a regulator….it would place an unacceptable regulatory burden on charities and would stifle the innovation and adaptability that characterises the sector.’ The ‘enhanced’ approach to determining risk moved away from a prescriptive points-based system, to a more flexible traffic light model categorising risk into:
- Green (low)
- Amber (medium)
- Red (high)
In order of priority, the most serious issues and areas of greatest risk for charities are:
- significant financial loss to the charity;
- serious harm to beneficiaries and, in particular, vulnerable beneficiaries;
- threats to national security, specifically terrorism;
- criminality and/or illegal activity within or involving a charity;
- sham charities set up for an illegal or improper purpose;
- charities deliberately being sued for significant private advantage;
- where a charity’s independence is seriously called into question;
- issues that could damage the reputation of an individual charity or class of charities or the wider charity sector; and
- issues that could damage public trust and confidence in charities or in the Commission as an effective regulator.
A consultation launched on 13 March 2009 outlines how the Commission applies the principles of risk-based regulation to its services such as providing advice and legal consents and dealing with applications to go onto the Register of Charities.[2] The Charity Commission’s Charity Services function provides advice and support to charities on a one-to-one basis. This work ranges from high volume telephone and email queries to in-depth and complex case work focused on supporting charities in resolving challenging issues or undertaking significant projects. Respondents have the opportunity to express how well they understand the Commission’s approach to risk management, and the proposed framework for providing support and advice.
For example risk can be modified from ‘low’ to ‘medium’ or ‘high’ and the consultation document sets out the factors that increase the level of risk for providing legal consents and advice (such as giving trustees power to lease land held for a particular purpose) and applications for charity registration (where the potential impact of the organisation would be taken into account, along with what it does and what public benefit it can demonstrate). Respondents are invited to comment on whether the Commission has got all the ‘modifying factors’ in section D4 right.
David Locke, executive director of charity services at the Charity Commission, said: ‘Regulation and risk have rarely been under such scrutiny. The importance of getting the balance between supporting charities and taking tougher regulatory action when needed is particularly important when it involves the significant voluntary effort that characterises the sector.’
Those wishing to respond should read the questions set out in the introduction[3], having read the consultation document (see note 2) and the original framework (see note 1) and send their comments by email with the subject heading ‘Risk and Proportionality Consultation’ to: enquiries@charitycommission.gsi.gov.uk
The consultation period is 12 weeks and responses will be accepted up to 23 June 2009.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from Cass Business School. She has been one of the judges for the non-profit category of the Chartered Institute of Marketing's Excellence in Marketing Awards for the second year running.
She has also acted as clerk to the trustees of a small almshouses charity and as a member nominated trustee to a pension scheme of a multinational publishing company.
Click here for other articles written by Clarissa Dann
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