Select Committee on Public Accounts Minutes of Evidence


Supplementary memorandum submitted by the Charity Commission

Question 30: The number of Complaints turned down because they are out of time?

  The specification of the Independent Complaints Reviewer's (ICR) role and function provides that she will not normally investigate complaints received more than three months after the conclusion of the Commission's internal complaints procedures. She retains, however, a degree of discretion to take account of exceptional circumstances. To date she has declined to investigate three cases on the grounds that they are out of time. Of the three declined, two related to cases considerably predating the introduction of the ICR arrangements. The Commission will continue to keep the operation of the three month limit and of the ICR arrangements as a whole under review.

Questions 40-50 and 65-68: The four year trigger point at which potentially inactive charities are referred for examination and whether this would occur where a register update but not an annual return and accounts had been submitted (or vice versa); or whether in such circumstances the trigger would be disapplied?

  Submission of register update forms by charities is not a statutory obligation. Submission of Annual Returns and accounts is a statutory obligation only for charities with annual income or expenditure above £10,000. All charities receive a number of reminders (at least two) in relation to any financial year for which neither submission is received. In addition, charities with annual income or expenditure above £100,000 that do not submit a statutory Annual Return and accounts are referred to an enforcement team.

  From charities with annual income or expenditure between £10,000 and £100,000, the Commission continues to seek statutory Annual Returns and accounts in respect of each financial year, via the reminder process referred to above, whether or not a non-statutory register update for that year has been received. It does not pursue the non-statutory register update from charities in this category if the statutory Annual Return and accounts have been received.

  The four-year trigger (reference of charities from which nothing has been received for four years to a team which checks whether the charity is inactive) does not apply where a submission, either statutory or non-statutory, has been made within the past four years indicating that the charity remains active.

Questions 112-117: The Commission's powers to prevent a charity under investigation for irregularity shutting down, and the number of cases where charities had successful or unsuccessfully shut down in such circumstances?

  For reasons explained below, it is unlikely that a charity subject to a section 8 inquiry could succeed in dissolving and deregistering without the Commission's agreement in order to frustrate the inquiry. If, hypothetically, they were to achieve this, the trustees would still remain responsible for their actions during their trusteeship. The Commission would be able to continue to pursue breaches of trust and other outstanding issues, including financial restitution where appropriate. The police and tax authorities would remain in principle to take action in respect of criminality or tax evasion.

  Charities normally have the power to wind up on their own authority only if their governing documents contain a power of dissolution, although they may come to an end by applying all their assets. Whether or not a charity has a power of dissolution, the trustees are under a statutory duty to inform the Commission if it ceases to exist. In addition, statutory provisions forbid charities that are companies from amending their memoranda and articles of association in such a way as to render them non-charitable unless they have obtained the prior written consent of the Commission.

  Before removing from the Register a charity that is exercising a power of dissolution or has applied all its assets, the Commission seeks evidence that the assets have been properly disposed of in furtherance of the charity's objects. A charity which was under investigation under section 8 of the 1993 Act, and which was purporting to have exercised a power of dissolution or applied its assets without prior agreement with the Commission, would clearly come under extremely close scrutiny at this point, and there would be opportunity for outstanding questions, whether concerning assets or other matters, to be pursued.

  In any case, where it became apparent that a charity might be seeking to dissolve or apply its assets in order to frustrate an inquiry under section 8, use of a number of the Commission's protective powers might, depending on the circumstances, be appropriate. They include powers to suspend or remove trustees, or to appoint additional trustees; to appoint a Receiver and Manager to manage the charity in the place of the trustees; and to freeze bank accounts and make orders not to part with property.

  Dissolution of a charity is on occasion an appropriate outcome of a section 8 investigation, and takes place in some cases at the Commission's instance or with its agreement. The Commission has not, however, been able to identify from records or from the recollection of case managers any cases in the past two years where a charity subject to a section 8 inquiry has closed down without the Commission's agreement or has sought to do so. The Commission would be glad to look into any specific circumstances that may have given rise to Members' concerns on the point.

Mr John Stoker

Chief Charity Commissioner

Charity Commission

December 2001

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