Charity Commission not fit for purpose, warn MPs
The Charity Commission is not "fit for purpose" and has persistently failed to tackle abuses of charitable status properly, MPs have said.
In a damning report, the Public Accounts Committee said it had "little confidence" in the watchdog's ability to turn its fortunes around.
The regulator failed to challenge charities about their activities and had no "coherent strategy", it claimed.
But the watchdog rejected this, saying "rapid progress" was being made.
The cross-party committee also expressed concern about what it said was the substantial abuse of Gift Aid and other tax schemes designed to encourage charitable giving by individuals and companies.
Abuse of charity-related tax reliefs cost an estimated £170m in 2012-13, the report said, and risked "giving the charity sector a bad name".
The MPs' criticism of the Charity Commission comes just weeks after the National Audit Office, the public spending watchdog, said it needed to up its game.
The commission oversees more than 160,000 charities in England and Wales.
But its annual budget has decreased by 40% in real terms to £22.7m over the past seven years and it is currently searching for a new chief executive after Sam Younger said he would step down in August.
The MPs said the Charity Commission had been "performing poorly" for many years but a strategic review in 2011 had failed to bring about the "fundamental transformation" needed.
It claimed it still struggled to identify and deal with deliberate wrong-doing by charities and "too willingly accepted" charities' version of events when investigating alleged abuses.
Enforcement powers were rarely used, the committee added, with the watchdog not removing any trustees in the past three years and only suspending individuals on two occasions while charities had only been prevented from entering into specific transactions 17 times.
"It is obvious that it has no coherent strategy and has been simply buffeted by external events," Margaret Hodge, the Labour MP who chairs the committee, said.
"It is clear that the Charity Commission is not fit for purpose... We have little confidence in the Commission's ability to put right its problems and failings.
"When the Commission finds its new chief executive, they will have to bring about radical change in the... culture and operations to restore confidence in its ability to regulate charities."
The commission was criticised last year for its handling of allegations against the Cup Trust, which was accused of operating a complex tax avoidance scheme on behalf of its wealthy donors and giving only a fraction of its income to good causes.
The National Audit Office said the commission failed to check the Cup Trust met the legal requirements when it registered it as a charity and was then too slow to act when problems emerged.
The Public Accounts Committee said the watchdog's investigation into the charity's affairs had been "feeble" and illustrated the need for change.
The commission said it did not accept this, arguing that its inquiry had led to an interim manager being appointed to run the charity "to the exclusion of the trustees".
Mr Younger told the BBC in December the body had generally been "too cautious" and was changing its approach but it was impossible to "individually invigilate" every charity, particularly in light of large budget cuts since 2008.
Responding to the MPs' report, the Charity Commission said it "completely rejected" claims it had no strategy and insisted it was launching more statutory inquiries and had used its enforcement powers 657 times since last April.
"I am confident that we are taking the Commission in the right direction," said its chairman William Shawcross.
"We recognise that we must strengthen our approach to identifying and tackling the most serious abuses of charity and we have asked for new powers to enable us to do this.
"We also have to ensure that the few cases of serious mismanagement and abuse do not undermine public trust and confidence in charities more widely. It is a shame the committee hasn't recognised this progress."