Moving with the times

It is generally accepted that the requirement in the Charities Act 2006 that it be reviewed after five years was unusual. That review is now upon us, under the leadership of Conservative peer Lord Hodgson of Astley Abbotts. What then was a requirement built in to placate those concerned about certain aspects of the Act now seems like remarkable foresight on the part of those involved '“ provided the opportunity is not wasted.

The world is a very different place to what it was five years ago, not just because of the banking crisis and the economic climate, but because of the way we interact with each other through social media and the government's Big Society, which calls for more volunteers to get involved.

All these changes mean new challenges for charities and it is important that the law evolves so it remains relevant and current. The review was originally planned to address some specific concerns, but now it will be useful in a much broader sense. Potentially, it could produce a strong and effective framework within which charities can work, and which will encourage the public to be more confident in their support for charities.

The legal review will have two main purposes: whether changes can be made to improve the legal and regulatory framework in which charities operate, and whether or not the Act is effective. Under his terms of reference, Lord Hodgson has to account for economic, political, social and technological changes in the voluntary sector since the Act was introduced.

The review has to adopt a 'broad approach' and, within the two main purposes, it has to answer the following questions:

• What is a charity and what are the roles of charities?
• What do charities need to do in order to deliver those roles?
• What should the legal framework for charities look like in order to meet those needs?

Under the terms of the review, formal recommendations will only be made on the third question.

The review should also consider charity registration thresholds; the operation of the charity merger provisions; the licensing regime for public charitable collections; measures to reduce red tape and bureaucracy on smaller charities; and how effective the organisational forms available to charities are (which is slightly ironic as the long-awaited introduction of charitable incorporated organisations is still pending!).

Lord Hodgson, who is president of the National Council for Voluntary Organisations and led the Big Society deregulation taskforce, must also investigate the success of the tribunal and the number of decisions made by the Charity Commission which can be appealed against or reviewed by the charity tribunal.

A lighter touch

As part of Trustee Week, I presented to some 90 trustees from charities throughout Buckinghamshire, focusing upon trusteeship in the future. A key theme was the need to be 'commercial' in outlook and how to achieve that goal within the framework and ethos of being a charity. As the world within which charities operate has changed dramatically and charity giving can no longer be taken for granted, it is time charities realised the need to operate as businesses. Although some do so already, many more still do not see themselves as commercial organisations and have yet to embrace this mindset.

With the Charity Commission recently undergoing a strategic review of its own, as a result of a cut in its budget of a third over four years, it is imperative charities begin to realise they will no longer be able to rely on the commission's provision of free support and advice to the same extent they have done previously. In any case, there is so much information available online and from other organisations, there is really no need for this comfortable arrangement to continue.

Some charities have reacted badly to this, seeing it as a key function of the commission, but why should the Charity Commission continue to give its advice and expertise for free? Charities will have to stand on their own two feet and even seek professional advice instead of relying on the support of the Charity Commission. Part of the challenge for the legal profession (and other professionals) is to demonstrate that engaging advisers needn't be a traumatic experience and needn't be expensive or difficult either.

It is good that the Charities Act review will be able to consider the objectives, functions and structure of the commission in light of the commission's own stated priorities. The focus on developing compliance and accountability should be welcomed if it results in an effective regulator, as this will in turn generate more public confidence in the sector.

The hope is that by reducing red tape the review will help charities, but this may be quite difficult to achieve. My main concern is to see how a lighter touch can be achieved, while still retaining core protections. If it is done well, it could be brilliant news for smaller charities, although there is a possibility that the changes will be relatively conservative.

That said, the review already has the benefit of the recommendations in the red tape taskforce report, which covers a wide range of issues and picks up on certain flaws in the Act, such as the unworkable rules for licensing and regulating public charitable collections or the need for more flexibility in how charities can engage in investment.

Charity fundraising has a huge impact on public confidence and this is an issue the review will be considering. It is crucial that a charity can access the public face to face to seek donations, but there is a real concern among the public about how this is done, with those involved being described as 'chuggers' (charity muggers). The Act was supposed to implement a modern licensing regime, but in reality this has not happened. If the review can address this issue and put in place a framework that will help to reaffirm public confidence, that would be a good step.

Public benefit

The public benefit requirement has been the subject of much debate. Charity trustees have been made more aware of their responsibility to take account of the public benefit requirement, but the detailed guidance is not straightforward and has faced legal scrutiny over the last few years. People don't necessarily understand the issue of public benefit and the detailed guidance is not written in such a way that it is accessible to everyone, nor does it sit comfortably with the purposes and activities of some registered charities.

I welcome the chance the review will have to clarify the situation around public benefit, which has been clouded by debate and criticism, culminating in the recent legal case brought by the Independent Schools Council concerning the Charity Commission's public benefit guidance as it applies to fee-charging charitable schools.

Encouraging involvement

Another area the review will look at is how charity trustees operate, asking questions about their independence; addressing concerns about trustee and volunteer liability; and looking at how to encourage more individuals to volunteer as trustees. These are indeed important areas to consider, as volunteers are the lifeblood of the sector.

Every charity needs to be aware of the Charities Act and the obligations it puts on its trustees. While many people are generally happy to volunteer, I come across a number of common misconceptions and concerns in the smaller charity environment. These are mainly focused around personal liability and the need to recognise that what is in the best interests of the organisation must take account of commercial, as well as ethical, considerations.

The review needs to consider these common concerns and clearly address them to reassure those involved and avoid generating unnecessary fears. After that, the challenge will be how to communicate and implement the changes.

With the review due to be completed before the summer, my one final wish is that change really does happen. It is an ideal opportunity to move with the times, and not one that should be wasted by simply making cosmetic changes.