The Charity Commission is to launch a formal investigation into 12 charities that are in serious breach of reporting requirements, following criticisms that the watchdog was failing to take strong enough action on charities that bend the rules.
At the Commission's Annual Public Meeting (APM), which is being held today in London, chief executive Sam Younger will announce that the regulator has opened a class inquiry into charities that are in default of their statutory obligations to meet reporting requirements by failing to file their annual documents for two or more years in the last five years.
The first stage of the investigation is looking at charities with a last known income of over £500,000. It includes charities that have submitted an annual return but failed to submit a Trustees' annual report and accounts, and vice versa.
The Commission has been contacted defaulters, informing them that they will be moved into the inquiry should they fail to achieve full compliance by a specified date.
This exercise has identified 86 charities as being in double default with their reporting requirements. Of these, 16 had dissolved with Companies House; a further 32 were found to be in liquidation or in administration and the missing and final accounts will be prepared as part of the liquidation process; and two have ceased to exist.
The names of the remaining 12 who are still in default and are now part of the inquiry will be announced at this afternoon's APM.
The Commission has issued a formal legal direction to the trustees of these charities, ordering them to meet their reporting requirements within a set period of time. If they fail to comply, the regulator has put the trustees on notice that it will make a referral to the police for criminal prosecution unless it is evident that the relevant trustees took all reasonable steps for securing compliance.
In addition, the Commission says it may exercise its legal powers to appoint an interim manager to secure compliance, and may seek to recover the cost of that from the trustees personally.
Sam Younger, chief executive of the Charity Commission, said: 'This latest enforcement step sends an unequivocal message that we will not tolerate charities that demonstrate contempt for the public they are accountable to by failing to meet reporting requirements. We know that failures in this area are often linked to wider financial mismanagement. In some cases the excuses given by the charities are frankly poor.'
In a report published in June this year, the Charity Commission was strongly criticised by the Public Accounts Committee (PAC) over its handling of the registration and regulation of the Cup Trust charity, which was the vehicle for a tax avoidance scheme. PAC said the Commission's approach to enforcement 'lacks rigour', while its performance had 'severe shortcomings'.
In response, the Charity Commission accepted it had been 'too reticent' in using its powers during investigations and pledged to take 'a much tougher approach to charities that have repeatedly failed to file accounts'.
