Select Committee on Public Accounts Minutes of Evidence


Examination of Witnesses (Questions 1-19)

MR JOHN STOKER AND MR SIMON GILLESPIE

WEDNESDAY 28 NOVEMBER 2001

Chairman

  1. Good afternoon, and welcome to the Public Accounts Committee. This afternoon we are looking at the Comptroller and Auditor General's Report on the Charity Commission's regulation of charities. We welcome Mr Stoker, who is our witness today. Would you like to introduce your colleague?
  (Mr Stoker) My colleague is Simon Gillespie who is the Director of Operations, Chairman.

  2. Thank you very much. This is a very important subject. There are 185,000 charities, two million trustees. In the past this Committee has been quite critical but there have been improvements. I will not ask you to detail those improvements but you will have the opportunity during the course of the afternoon to show what progress you are making. I will go straight into asking a few questions so that I can open up some issues for my colleagues. There has been some criticism in the past and it is mentioned again in this report that when problems arise in charities the Commission's investigations are not always as rigorous and thorough as they should be. What assurances can you give us on this matter, Mr Stoker?
  (Mr Stoker) The assurances I can give you, Chairman, are that we recognise and have done something about the difficulties. Over the past 18 months we have actually reviewed the procedures for carrying out investigations pretty much from top to bottom and for the first time we have put the result of that into a comprehensive manual for investigations staff which addresses a great many of the particular points which are raised in the NAO's Report, including issues like selecting and allocating resource to investigations on the grounds of a structured analysis of risk, such things also as regular monthly reviews in the management line of each investigation as it proceeds, the construction of a proper study plan for each investigation and an organised and consistent approach to follow-up once investigations are closed. The other thing is that we made investigations very much a main feature of the bid that we put into the Comprehensive Spending Review for 2000 and, as a consequence of that, we are having a substantial increase of the order of one million pounds being spent on investigative work which comes on line next spring in April 2002. Those, I would say, are the headlines.

  3. Thank you very much. There is a criticism raised in paragraph 2.10 of the report that sometimes your inquiries do not go beyond the original cause for concern. I think there is a particular case, I think it is case two, which mentions the problem. Would you like to answer that question? How are you ensuring you do not get your people just to look at the original cause for concern but actually seek to go behind the picture, as it were, and see what is causing the problem?
  (Mr Stoker) The thing here is that a lot of attention is paid in the new procedures to what happens at the outset of an inquiry. Among other things there is a prompt there for study officers to consider what they need by way of professional advice. A feature of the way that things are working, and will work in the future, is you will have little running teams which will include a manager who is overseeing the study officer generally, plus often a lawyer and/or an accountant, and from that process you will get a more rounded picture and a more rounded initial study of the issues in the report. The other thing that the regular monthly review by line managers in the line is supposed to achieve is exactly to keep track of where the investigation is going, what issues are coming up and always what the exit strategy or the next step should be. These new procedures are very much designed to have a broad mind, where that is required, on the subject at issue.

  4. Let us just stay on case two for a moment, which is on page 18, and refers to unauthorised street collection and a concern that we have, presumably you have, to help local authorities combat these. Would you like to share with the Committee the name of the charity involved in case two?
  (Mr Stoker) I will indeed share it with the Committee if that is what you and they would wish, but I would just point out that to my knowledge the charity concerned has not had any prior notice that they are likely to be identified this afternoon in a public forum.

  5. We will deal with that in private session, thank you very much. Do you want to make any general comment about unauthorised street collections?
  (Mr Stoker) Yes, I could say a fair bit about unauthorised street collections but perhaps what I would say on case two is this is definitely not one of our best or better cases. It has been followed up and the review that is referred to at the end in the commentary has been carried out but there are continuing concerns with this charity and an inquiry is now open into it.

  6. We will come back to that in private session, if we may, at the end. There is some concern that sometimes once you have made these inquiries, and I know you are doing your best on that front, you have difficulty ensuring that the charities are actually implementing the agreed recommendations. Is this a concern for you? What steps are you taking to overcome this problem?
  (Mr Stoker) It is a concern for me that before we had the new procedures codified there was not a consistent approach to this issue. What the new instructions now include is consistent arrangements for closing inquiries which specifically require an action plan to be put in place and revisited a suitable period on. The failsafe would be six months but it might be more or less in a particular case. I think this is a message that we have picked up and are very much trying to build into the way that we do this work.

  7. Case five on page 21, I think, shows different parts of the Commission are operating different policies. Would it be fair to say that your investigatory staff are under enormous pressure? We are talking about 185,000 charities. Do you think they have the resources to deal with the problem adequately and to reassure the public that in this huge area things are not happening that should not be happening that you are not aware of?
  (Mr Stoker) This is page 21?

  8. Case five. You do not have to worry too much about finding your place in things, just deal with the general point. It is the pressure on your investigatory staff given the vast area they have to cover.
  (Mr Stoker) Yes. You are always going to have a problem of where you put your resource if you have got 500-odd people and £21 million and 185,000 charities in the catchment that you are trying to regulate. Inevitably that means priorities and choices, including some things taking lower as well as higher priorities. The way that we think this needs to be managed is actually to apply resources as smart as we can. Examples of that would be the extent to which we rely these days on information technology. Five years ago we did not have a website and now we have a website with extensive information and guidance on it, together with other relevant information including, for example, reports on our investigations for the first time since last year. That has had a considerable effect in pre-empting what might previously have come to us as specific case inquiries. We have also done a great deal of work on reviewing and integrating the helplines through which we give guidance to telephone enquirers. That is now an integrated operation and we are moving towards the aspiration of a full contact centre approach for aspects like that. The common feature in this, and in many other features of the work that we are trying to do, is we are trying to get the maximum return from what we spend and to reach the maximum number of people through all the avenues open to us, including the website.

  9. That is all I want to ask you on that subject, investigating charities, because colleagues can come back on those points. I want to ask you a couple of questions on registering and supporting charities. The charities themselves have to carry out their own checks to ensure that all new trustees are suitable. What evidence do you have that these checks are being carried out properly and are effective, or indeed that they take place?
  (Mr Stoker) The evidence that we have so far is that the picture is patchy. We have done some survey work on this for the purpose of a study that we are piloting for our thematic reports. We do think that it is an area where advice needs to be codified and brought together and we are planning to do that this financial year.

  10. Okay. Can I ask you one question about administration. I was sitting in the International Development Standing Committee yesterday when the Minister said that the administration costs for charities range from five to 12 per cent, quite a wide range. Are you happy with that very wide range?
  (Mr Stoker) I think a wide range is inevitable given the enormous diversity of charities and the kind of work that they do. If I could just give a couple of examples. If you have a charity which is a hands-on operator which is delivering a service, like care for the disabled or elderly, the chances are that is going to have quite a high administrative cost level. If, on the other hand, what you have is a charity which is a large, old-fashioned endowed charity whose business is to give grants you would expect to see a very, very much smaller percentage of total cost going on administration. You have to look very carefully at categories of charities within charity as a whole and the picture is a complex one. On the wider question though, I think that there is certainly scope for bringing pressure to bear and certainly scope for bringing attention to bear on the performance of charities in this and in similar respects and we intend to do our bit in developing that.

  11. The important thing here is transparency and the vital role of the annual reports. What role do you see for your Commission in ensuring greater transparency in comparing the performance of different charities with regard to the annual reports?
  (Mr Stoker) Part of it is the basic ground work of having the accounting standards and reporting standards codified and out there. Before accounting periods beginning in early 1997 there was no standard consistent set of accounting standards that charities observed. We introduced those in 1995 for periods subsequent to early 1997 and we updated them in 2000. The introduction of that was itself a big forward step, and there were changes in 2000 aimed to encourage charities to give a better and more rounded picture of their activities than had been the case up to then. The cases in the NAO Report show, and I think I would agree that they show, a general need, that transparency and accountability has not yet taken root as much as it needs to in that area. We intend to keep up the pressure through our general contacts with charities to improve the standard of narrative reporting as far as we can. We are also in discussion with the Performance and Innovation Unit who are, of course, considering this as one of the matters in the study that they are doing that they have rightly, I think, seen as an area for priority.

  12. Figure three shows that one of the risks faced by the charitable sector is poor governance. What is the Commission doing to tackle this risk of poor governance?
  (Mr Stoker) I think that practically everything that we do has got a bearing on this. The work that the Commission does is aiming to produce good governance and good practice generally on matters of regulatory concern through the life cycle of a charity. The way that we deal with registrations is aimed at spotting and handling risks of this kind at that stage. A lot of the work that we do in the mainstream charity case work is involved with, if you like, preventative work to give charities the advice and guidance that they need to operate properly within governance parameters which are acceptable. We monitor an awful lot to see what the actual picture out there is on the ground and we do that with the accounts each year of every charity which raises or spends more than £10,000. Of course, if all else fails there is evaluation and investigation. The whole thing is a continuum which addresses governance issues right across everything that we do.

  13. Can I ask you about charity support cases. We see from paragraph 3.13 that the average time taken to clear cases has increased from 80 days to 112 days.
  (Mr Stoker) Yes.

  14. Are you happy with this trend?
  (Mr Stoker) I am not happy with that trend but the hard truth is if you are in a position where your resources and budget are capped for six years so you are being cut in real terms by 11 per cent over a period then something sometimes has to give if at the same time you are getting a case work increase in demand of 42 per cent. I am not happy with it. The comfort I take from it, to the extent that I do take comfort, is that the customer surveys which we have now started to do—we did the first last year—showed that 83 per cent of our customers were content with the standard that we delivered and only two per cent were dissatisfied.

  15. A very last question to wrap up. This Committee in the past has been critical of you, that your attitude has been to enforce legislation, you have not had a sufficiently proactive role. Of course, charities operate under a very traditional framework, many of them have been set up for a long time, but we live in a very different world now and charities are really business organisations. Are you satisfied that you are changing the whole culture of your Commission to take this proactive role to seek out and deal with abuses?
  (Mr Stoker) I am, Chairman, yes. We have got a major increase in activity coming up next spring. If you look at the areas where that is happening, it is happening in IT, which is partly connected to the Government targets but which has a big spin-off in terms of communications and influencing the world out there, there is putting a more proactive and structured approach, a regulatory approach, on to the visits that we make to charities, there are investigations where, as you will have seen from the figures in the report, one of the trends here historically is that more and more of what we do is generated from our own monitoring and our own resources, and we are also doing for the first time thematic reports taking a leaf, if you like, out of the NAO's book to take a cross-cutting look at issues in the sector out there and use that to highlight good practice, bad practice and areas that need attention. I think those are all very proactive things.

  Chairman: Thank you very much, Mr Stoker. Mr Alan Williams.

Mr Williams

  16. Thank you, Chairman. May I apologise to Committee colleagues and to the witnesses for the fact I have to leave early, and that is why I have come in early, but today is the day of the great parliamentary occasion of the year, the Welsh Grand Committee. I have already missed a part of it and I want to be in for the end, my apologies. May I say it is good to see someone new here because my recollection is your predecessors were not happy. I remember the Committee being infuriated by the complacency and the lack of responsiveness. I am hopeful from what I have read that will be a thing of the past. In the spirit of wanting to help you, which is the purpose of this Committee as well as having to monitor what you are doing, I see that you are seeking access to the Police National Computer to check the suitability of prospective trustees for new charities. Is that application going favourably to the best of your knowledge?
  (Mr Stoker) This is a long running story, Mr Williams, and the person who is most up-to-date on it is my colleague, Mr Gillespie.

  17. In that case, to save us going over the same ground twice, can I ask the second part of the question which is what puzzles me is that you are not seeking a role relating to the suitability of trustees appointed by existing charities, only new charities. Can you encompass in your answer, if possible, both aspects of this?
  (Mr Gillespie) I will take them both together, if I might do. Firstly, the Police National Computer is something of a long running saga. I think it is true to say that we would welcome any support that is given by this Committee in continuing our negotiations for access.

  18. What is the obstacle? Is it data protection?
  (Mr Gillespie) There are elements of data protection. The Commission does not have a clear statutory mandate to have access to this information so, therefore, it is a question of persuasion and convincing rather than being able to hit with an Act of Parliament, for example. That access will be available to authorised Commission staff if we are given access in the first place and that will be available for all aspects of the Commission's work but it will obviously all be carefully controlled and the Police National Computer Authority will make sure that we are properly regulated in that respect. As far as checking trustee details generally is concerned, we do conduct a number of checks at the moment as far as the visits programme, checks into trustees that are already in charities. There is a huge scale issue here. As the Chairman has mentioned, there are a large number of trustees and in many cases those turn over quite regularly, sometimes as often as annually in the case of Parent-Teachers' Associations, for example. Trying to keep track of everyone I think would be an impossible task, so we will be looking to target our resources and our access on areas of risk, not just on those trustees coming on to the Register of new charities.

  19. I can understand the logic of wanting to deal with new appointees but I would have thought the same logic applies under new charities or old charities, the same principle applies, and at least if you cannot deal with the backlog you can start ensuring that newcomers to both sections, old and new charities, are monitored effectively.
  (Mr Gillespie) We are trying to approach this on a risk basis. We already do trustee background checks into all of the charities that are visited as part of the review visits programme. That is being piloted at the moment with 150 visits and as part of the new money that goes up to 600 visits next year, so we will be looking at the trustees of 600 charities.


 
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