Library Dissertation Showcase

‘Has the breadth of charitable status impacted the effectiveness of regulatory bodies to enforce law? An empirical study on UK Charity and its governance.’

  • Year of Publication:
  • 2019

In recent times charities in the UK have been adopting practices from the capitalist system in response to the implementation of government ‘market-based policies’ and the diversification of the more aptly named ‘third sector’ (Bruce and Chew, 2011). The term ‘charity sector’ has been replaced by what is now known as the ‘third sector’, which refers to the part of our economy comprised of wide-ranging organisations who are deemed neither part of the public nor private sectors. Such organisations are independent from government and value-driven, reinvesting any surplus income in pursuit of their goals. They include, but are not limited to, voluntary and community organisations (registered charities, associations, self-help groups), social enterprises, not-for-profits, trusts and co-operatives (NAO, 2010). Consequently, charity law and regulation in England & Wales has undergone more change over the last 25 years than during the previous century (McGregor-Lowndes and Wyatt, 2017). The ‘status’ of charity has been revised by countless acts and policies aiming to legitimise its application and restore public confidence after charitable practises have been questioned in the past. Reasons for the decline in public confidence have involved financial scandals, extortionate chief executive salaries, unethical fundraising practises and politically motivated lobbying and advocacy (McDonnell and Rutherford, 2017, p107). To become a charity in England and Wales you must have at least 3 trustees and the charitable purpose(s) must comply with the public benefit test set by the Charity Commission. Then once a name, structure and governing document have been agreed upon, the charity may be registered with the commission if annual income exceeds £5,000, or alternatively a Charitable Incorporated Organisation (CIO) is established (Gov.uk, 2018). However, the breadth of charity status has complicated the governance of the sector and intensified competition for resources. As mentioned previously, the third sector involves nonprofit making, non-governmental organisations, including social enterprises such a leisure trusts, health and social care enterprises, development trusts and trading charities (Spear et al, 2009, p252). The amalgamation of different organisations operating within the third sector has created a diverse range of regulatory frameworks that require impartial governance. For example, consumer co-operatives, housing associations and voluntary and community organisations have created their own codes of practice and all have contrasting regulatory requirements, yet they often compete for the same funding and resources much the same way companies do in the private sector (Spear et al, 2009, p255). Despite law reforms aimed to consolidate charity status, concerns still remain around charity regulation. The commercialisation of charity is starting to be recognised by stakeholders. Many are beginning to question the statutory and fiscal benefits bestowed upon charities by the government, as well as other concerns such as equal funding opportunities, the percentage of donations reaching the end cause and the fairness of the sector as a whole. This has initiated a wider debate on the current regulation of charities and the public demand for a more comprehensive regulatory framework to ensure that governance of all charities in the UK is law abiding and ethical. Concerns have also been raised regarding accountability standards within organisations. Accountability is considered a principle factor in addressing present and future scandals to help breed confidence which, in turn, may increase charitable giving (Connolly, et al. 2013, p59). After all, the privileges of charitable status require a charity to be accountable for its own regulatory authority and must operate within prescribed limits (Dawson et al, 2005, p112). Although impartial regulators monitoring charitable activities from outside the organisation is essential, the external accountability pressures which stem from expectations of the public can often drive the internal effectiveness and efficiency of the organisation (Hyndman and McDonnell, 2009). Therefore, this paper will present the argument that regulators and charities themselves must succumb to public demand by developing enhanced regulatory procedures and accountability standards to ensure effective regulation. In doing so, this will provide transparency for stakeholders seeking accurate information on governance practises, whilst strengthening the relationship between the commission and the organisation which will hopefully consolidate what is deemed best practise across the whole of the third sector and increase public confidence in the long run.

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