Public Accounts Committee
Oral evidence: Charity Commission: Follow-up, HC 926
Wednesday 28 January 2015
Ordered by the House of Commons to be published on 28 January 2015
Watch the meeting: http://www.parliamentlive.tv/Main/Player.aspx?meetingId=17101
Members present: Margaret Hodge (Chair); Meg Hillier; Dame Anne McGuire; Austin Mitchell; Stephen Phillips; John Pugh
Amyas Morse, Comptroller and Auditor General, National Audit Office, Gabrielle Cohen, Assistant Auditor General, National Audit Office, Vikki Keilthy, Director, National Audit Office, and Marius Gallaher, Alternate Treasury Officer of Accounts, were in attendance.
Witnesses: Paula Sussex, Chief Executive, Charity Commission
Chair: Welcome.
Paula Sussex: Good afternoon.
Q1 Chair: We are going to start, really, just taking forward something. I don’t know if you know, but we had a hearing on Monday on Durand academy.
Paula Sussex: Yes, I do.
Q2 Chair: You do know about that. I just want to ask you a few questions about that, because I think there is a lot of concern among members of the Committee. Have you started a statutory inquiry on that?
Paula Sussex: We are currently assessing an inquiry. We have had a case open on Durand since October.
Q3 Chair: I will tell you what concerns us. If you look at what we were told, there is a trust—Durand Education Trust—that is taking out and putting into the hands of an individual a considerable sum of money. I think it was £161,000. It seemed to us that there was a personal benefit to the trustees of money that should have been used for the charitable purposes. I know it is a very serious accusation, but I think that those who watched or took part in the hearing on Monday felt really disturbed that there was an abuse of charitable trust status. That should require really prompt action. Ironically, I am not sure why you are not in there, rather than just opening a file.
Paula Sussex: Yes, but it has been a compliance case since October. We agree that there are potentially very serious issues of private benefit and conflicts. I have been talking to Peter Lauener about this. He and I agree that this should be a joint team, because, as you know, there are two vehicles: the academy trust and the charity. Having read the transcript from Monday, we are very pleased to confirm that we can move at the same speed as EFA. Particularly if we can put it into inquiry, we can open up our information powers, and we will be able to move at the speed that Peter indicated on Monday—within two months.
Q4 Chair: Are you putting in an interim manager? Have you considered that?
Paula Sussex: We would have to get to the inquiry first for the interim manager. As you know, the easier powers that we come to in inquiry will include freezing the bank accounts.
Q5 Chair: So you have the powers and you would intend to do that.
Paula Sussex: We have those powers. I should also say that I have been talking to the caseworker on this case, and the technical position is that the public moneys are protected, as I understand it, by the Secretary of State for Education, in that he has to give consent on any disposal of the assets in the charitable trust.
Q6 Chair: That is the view of Peter Lauener, but that was not the view of Sir Greg Martin.
Paula Sussex: But that is also the Charity Commission’s view.
Q7 Chair: But what is not protected is that he has taken out—I forget the sums—
Dame Anne McGuire: He had a management fee paid.
Chair: Here it is. Sir Greg Martin took out in 2011-12 £172,000, in ’12-’13 £161,000 and in ’13-’14, £175,000. We are talking about half a million pounds that he has taken out of a charity, which is not being used for charitable purposes. That is of great concern.
Paula Sussex: Yes, it is. It is of serious concern to us as well, which is precisely why we are looking at the private benefit angle now.
Q8 Dame Anne McGuire: Could I ask what a case open means? You said that you opened the case in October. I get the impression, just from the last few sentences, that the hearing on Monday has encouraged you to do other things. What were you doing between October and Monday 26 January? If you do not want to go into the specifics, I quite understand that, but perhaps you could give us a general flavour of what case open means. Does it just mean that there is a file open, but it is left to one side? Perhaps you could just take us through your process, because it is key to your regulatory powers and responsibilities.
Paula Sussex: Absolutely. I can talk in general terms, because this is a live case. In general terms, the analysis, the research and, if you like, the “investigation” that we do in an operational compliance case can be exactly the same as the work that we do in inquiry. Putting it into inquiry, which is, as you know, challengeable, requires a certain threshold of severity. Putting it into inquiry unlocks our statutory powers, both the enforcement powers and the information-gathering powers. Information-gathering powers often mean that we can go faster. But the research that we have been doing—I should stress that we have been working jointly with EFA on this particular trust—has been very similar to the work we would do under inquiry, but without the exercise of the powers. On Monday, the discussion was such that it has caused us to consider opening an inquiry into this case.
Q9 Chair: Why did it take until Monday? That is what surprises me. This stuff has been in the public domain. It has not suddenly leapt into the public domain courtesy of our hearing on Monday.
Paula Sussex: No, it has been in the public domain, and we have been “investigating” it, but the nature of the conversation—it was a very thorough hearing—on Monday has given us reason to look at moving into inquiry.
Q10 Chair: I know some members of the Committee thought it was an aside, but I was quite taken aback by this: do you think it is appropriate to run a dating agency from the same premises as you run a charity from? Is that appropriate?
Paula Sussex: It is more than enough to make one’s eyebrows rise.
Chair: Good. Do you want to ask anything else on this, Anne?
Q11 Dame Anne McGuire: No, I am just surprised, given that—perhaps the NAO can confirm when the Report came out that we considered on Monday. Does anyone remember?
Gabrielle Cohen: It was before Christmas.
Q12 Dame Anne McGuire: I go back to my earlier question. In the absence of our hearing on Monday, even though all of our questioning related to the evidence presented to us by the NAO, would you have taken any action? I just get a sense that we are almost talking about two very slow tankers: you and the EFA. Had there not been this exposition on Monday, it might still have been lying as an open file.
Paula Sussex: No, it is not an open file.
Q13 Dame Anne McGuire: But that evidence from the NAO was there in December.
Paula Sussex: I have been talking with the EFA about it. We had got to the point where we believed that it would be simpler to move forward in effect as a joint team. You will know that the academy trust and the charitable trust are very interconnected. We were working at a fair old clip on this one, but we observed that the Committee was keen to get this wrapped up broadly within two months. We are now very happy to align with the EFA on that.
Q14 Stephen Phillips: That is the speed question, but what it does not answer is that you have now said that you are minded to open an investigation, correct?
Paula Sussex: An inquiry, yes.
Q15 Stephen Phillips: An inquiry that brings into play your statutory powers. Why are we doing your job for you? What is it that we did, based on the NAO Report on Monday, that you could not have done for yourselves before Christmas?
Paula Sussex: The conversations I have been having with the EFA led us to this point, but without going into the details of the case, some of the thorough discussion with Greg Martin has given us enough evidence to put this into inquiry assessment.
Q16 Stephen Phillips: But it is no more thorough and is probably in fact considerably less thorough, with the greatest of respect to us, than the work that the NAO had done. I do not understand why it took that hearing on Monday and us to shine a spotlight on this, which I suspect is the real truth as to why you are now opening an inquiry, for you to take that course.
Paula Sussex: Mr Phillips, it is also the speed point, I think.
Q17 Stephen Phillips: I am not asking about speed; I am asking why you are now opening an inquiry.
Paula Sussex: We are currently assessing whether we will open an inquiry that will enable us to move at the speed that the EFA undertook to move with you.
Q18 Stephen Phillips: That just indicates to me that we have essentially done a job that you should have been doing before Christmas, Ms Sussex. What do you have to say to that?
Paula Sussex: Perhaps I can understand that you believe that we have not been moving fast enough on this, but I can absolutely assure you—
Q19 Stephen Phillips: I am on a separate point from whether you are moving fast enough. You are now proposing to do something different, which is to go down a route that engages your statutory powers—the inquiry route. You are going to consider that, but why were you not considering that before Monday?
Paula Sussex: We have had this case under close review.
Q20 Stephen Phillips: You have not got an answer for me. Why do you not just accept that?
Paula Sussex: Principally the speed point and going into inquiry on this.
Dame Anne McGuire: The only element of speed, with the greatest of respect, that we have seen is between Monday’s hearing and you appearing as a witness today, which we did not see between the publication of the NAO Report and Monday.
Sir Amyas Morse: If I may—I do not know whether this is helpful—what was different and what may have indicated to you the need for speed, apart from the requirements that the Committee articulated, may be some of the evidence that you heard from the principal parties and some of the things that they said, which might have come as quite a surprise.
Paula Sussex: Yes, absolutely.
Q21 Chair: Can I just, for clarity for the Committee, confirm that you will be looking at whether the payments of more than £500,000 that Sir Greg Martin received from the charity were lawful and whether you could demand that they be returned?
Paula Sussex: Yes, absolutely, we will be looking at that.
Meg Hillier: Chair, I am not sure about raising this now—I will take your advice about the general oversight of charities.
Q22 Chair: I am going to go now to the general, then we will start on that. I wanted to start with the general to say that this is actually a good report—early days, but it was very welcome to see that some of the things that we had been asking for are starting to happen. It is very early days, and we have to see whether your good intentions translate into actions, but I really wanted to say that. So we welcome your arrival and we welcome the progress that you are making.
Paula Sussex: Thank you.
Chair: We will be watching and coming back to it to see whether you can translate that into action. So good luck on that. Now I am going to bring Meg in. What did you want to say generally?
Q23 Meg Hillier: It is about what triggers your interest—what level of expenditure. When we had your report, just over a year ago back on 16 December 2013 I asked Sam Younger what would trigger your interest in terms of expenditure. He said some very interesting things, including that trustees of a charity who are expending a large amount of money on something should really notify the Charity Commission. Is that right?
Let me find the exact quote. I said to him: “If I was running a charity and I took a costly court action, for whatever reason, I should report that to you?” He said: “There is no absolute definition of a serious incident but I think we would say that anything that had put significant charity funds at risk would come under that rubric. Of course, we found historically that a lot of trustees have been reluctant to make that report. Those reports are on the rise but there are still not as many as should be coming in. But if they come in they are also recorded.” Then we had a bit of dialogue about this.
I should declare that I am a trustee of a charity, although it is not my charity I am talking about. My husband runs a charity—sorry, I forgot to declare my interests.
Q24 Chair: Oh, golly, we should all declare an interest. We are all trustees of charities—for the record.
Dame Anne McGuire: I am not a trustee of any charity.
Stephen Phillips: The Dame Anne McGuire charity.
Dame Anne McGuire: The Dame Anne McGuire charity, yes.
Chair: The rest of us are.
John Pugh: I’m not.
Meg Hillier: Okay, a number of us are. I have declared and so have others—
Chair: So have I.
Q25 Meg Hillier: So I am a charity trustee, but it is not about my charity. If I were a charity trustee and we were taking costly court action against someone, would you expect us to tell you about that?
Paula Sussex: We always say to trustees, “When in doubt, we ask you to report”, but my predecessor was quite right that there is discretion to be taken into account on what is costly or appropriate use of funds.
Q26 Meg Hillier: So if a court action was costing between £100,000 and £300,000 and was unlikely to be successful, or had doubtful benefit to the charity’s aims, where would you come in on that? We had a long discussion last time about the regulatory role and how you couldn’t look at everything, but sometimes in a David and Goliath situation, you have the small—it might be a contractor, an employee or some other charity that they were doing work with who had an issue—against a bigger charity, because some in the market now are very large and wealthy and can take disproportionate action, but there is no real regulatory control over that.
Paula Sussex: There is regulatory control in that if we consider that to be inappropriate management of charity funds, that would be grounds for opening a case and issuing an assessment. The proportionality point is difficult, as you say. We have some very large charities on the register and, as you know, 40% are under £10,000 turnover.
Meg Hillier: We should probably put on the record that a lot of very good charities are doing a lot of very good work quite properly.
Q27 Chair: May I ask something wide about this? How many live investigations do you have at the moment?
Paula Sussex: At any one time we are running about 100 inquiries—so we have about 100 or 120 inquiry investigations at the moment.
Q28 Meg Hillier: May I ask if that is inquiries that are actually under way? For example, with other warning systems in other areas, you might have people notifying a concern and if you get a certain number of concerns you then investigate. How many are live investigations and how many are notifications?
Paula Sussex: So what we call operational compliance cases, we have a couple of thousand.
Q29 Meg Hillier: That is when someone says, “I’m a bit worried about this”, and you have logged the worry, but you have not done anything further.
Paula Sussex: Correct. Or we are responding to a complaint, or done some proactive monitoring and opened up a compliance case.
Q30 Chair: On the investigations, how many do you have that are looking at charities that claim to be helping victims of the crisis in Syria? I have seen a figure in the press—it was 37. I don’t always believe what I see in the press, so I am giving you the opportunity to correct or confirm it.
Paula Sussex: That is a very good thing. We do not tag charities. We have no tagging of charities against religious orientation. The statistics that are quoted in the press are quite misleading. I will happily come back to you or send you a copy of our report, “Tackling Abuse and Mismanagement”. The figure of 37 was an inaccurate number. My colleague has just said that in the public domain we have four inquiries that are related to activity in Syria or for Syria.
Q31 Chair: Okay. I saw another thing in the press—you will see where I am taking you in a minute—saying that 20 of the investigations were focused on Muslim charities. Is that true?
Paula Sussex: That is not true. We don’t actually tag against religion. We are deliberately blind on that. We assess each instance blind against our risk framework.
Chair: I understand that. I am not sure that it is right not to tag. What is slightly worrying about both of those stories is that obviously you need to ensure that charitable status isn’t being abused for any terrorist or terrorist-related activity—I take that as read.
Q32 Dame Anne McGuire: Can I just ask how you assess blind? Do you hand it over to an independent person to assess the charity without the name being identified? To me, that is what assessing blind would be. It is the same as, for example, some professional exams where you have a number not a name, or some assessments for lottery funding. What exactly do you mean?
Paula Sussex: We absolutely have the name. I apologise. It wasn’t very helpful language. What we do is that we don’t tag against religion.
Q33 Dame Anne McGuire: I understand that bit. Perhaps you could clarify what your assessment process is. It isn’t that you do not know an organisation’s name—and the name may give an indication.
Paula Sussex: Correct. We do know the organisation’s name, but we won’t say, “We have 20 Muslim charities that we are going to look at,” for example.
Q34 Chair: But in a way, you need to monitor that, don’t you, to ensure that there isn’t any bias entering into your judgment as to which ones you investigate? That is really where I was going to take you. When I saw those two press reports, I thought, “Oh my goodness! I don’t know how many Muslim charities there are.” Maybe you don’t tag that, but in a monitoring system you need to assure yourself that there isn’t any bias in your judgment.
Paula Sussex: Yes. That is tremendously important. As public servants it is hugely important that we have no institutional bias in any respect. For the seven months I have been with the commission I have not seen that.
Q35 Chair: But you don’t know if you don’t monitor, I am afraid. I say that from long-standing experience. I came into this at time when people weren’t monitoring the allocation of housing, and we brought that in. It was controversial, but it was the only way to ensure that BME communities were actually getting fair access to housing. You have to monitor to know. There are a couple of stories we have seen in the press—they may be justified, and it will be really interesting if they are—that suggest that there may be a bias. You need to satisfy us that there isn’t.
Paula Sussex: We are very conscious of the media interest and the media inference that there is bias. To reiterate, I am very comfortable that there is not, but none the less we know that we need to do a better job of communicating that. One report we put out before Christmas shows the spread of our work on tackling abuse and mismanagement. We will be sending out another one about quality of work, in which we seek to set that to rest. You may well be right, Chair, that we need to set up a system whereby we code against particular segments of the register.
Q36 Chair: I would be grateful if you would take that idea away and consider it. When I looked at those two press reports, I thought that when we had the previous couple of hearings with the Charity Commission our concerns were that you were not focused enough on tax avoidance—whether any charities were established for tax avoidance, like the famous Cup Trust—and on abuse of gift aid relief. I don’t know from your investigations—and I would like to know—whether those two issues, which we have identified in Committee, have impacted on your investigative work in the Commission.
Paula Sussex: The approach we have to risk assessment and management absolutely takes categories of abuse into account. The board gives a weighting to certain types of abuse, as you mentioned: tax avoidance or certain other types of financial crime. The programme we have with risk is to get more aware of risk and more granular risk, so we are alert and alive to it. That also enables us to be proactive, to go looking for instances, flags, indicators and warnings of a certain type of abuse. That is being built into the system.
Q37 Chair: Could you let us have a note, with numbers attached, that sets out what proportion of your investigations currently deals with concerns around tax avoidance or abuse of gift aid tax relief?
Paula Sussex: Yes.
Q38 John Pugh: Would it be helpful, too, if you differentiated between those cases where your own risk analysis has shown up markers that led you to look further, and those cases where you received an anonymous call or tip-off and risk analysis was not the source? That would be helpful.
Paula Sussex: Yes, the proactive and the reactive, absolutely.
Q39 Chair: Okay. That is very helpful. Take us on to something else. One of your Charity Commission board members, Gwythian Prins, said in Third Sector, “The public expects charities to stick to their knitting.” That was reiterated by the Minister who said that the important thing charities should be doing is “sticking to their knitting”. What does that mean? How does that change what you do?
Paula Sussex: I think that predated me. I can only speculate on what message he was trying to convey.
Q40 Chair: When did you arrive?
Paula Sussex: July last year.
Q41 Chair: The Minister Brooks Newmark’s quote is from September 2014.
Paula Sussex: I can only speculate on the intent behind that comment. I would like to say that your interpretation is as good as mine, but at this point I would say that I do not account for every single board statement made to the press.
Q42 Chair: What is worrying is that it interferes with the freedom of the charities to go about their legitimate business. It feels like a judgment on their activity.
Paula Sussex: One could take that inference, but I have no doubt that that was not the board member’s intention.
Meg Hillier: I think, Chair, that Ms Sussex cannot be held to account for the comments of a Government Minister in that respect.
Q43 John Pugh: I have two questions. There are some charities that you might say are compliant with all the regulations but do not serve much of a charitable purpose, in so far as vast amounts of the money that they collect is back-resourced in just keeping the charity going rather than delivering the charitable purpose. That would presumably not be a case for investigation. Are you capable of bringing any pressure to bear on such charities—presumably smaller rather than bigger ones—threatening them with reclassification or whatever, if it seems to you that the charity is almost self-defeating, in that money is raised only for the purpose of running the charity?
Paula Sussex: That is a very good question. The Charities Act gives us relatively limited powers to act in what one might look at, if you like, not the best management in the world. If it is so inactive as to be effectively dormant, we can deregister the charity. If it is not well managed—
Q44 John Pugh: Approximately how many per year do you deregister?
Paula Sussex: Probably about 100 or so, no more. Let me come back to you on that. If it is not well managed, sometimes there is little we can do. You will know that we are very keen to support our statutory objective of effective use of resource. We often have to do that in what I would call a soft power way. We send out regulatory advice, guidance on good use of funds and so on.
Q45 John Pugh: I have a second area of concern. I just suddenly realised, when responding to the declaration of interest, that I may in fact be a trustee of a charity, because I am part of a small group trying to make good use of a public library that has closed.
There must be in the natural history of your work at the moment a plethora of such cases, given that local authority services—particularly libraries and such—are being closed. Those organisations exist almost as temporary vehicles to accommodate a purpose. Do they create any special difficulties for you? Are these highly specific small charities set up to preserve a community institution threatened by cuts increasing in number?
Paula Sussex: No, they don’t create any particular difficulties for us. We are able to provide some advice and guidance to them. Some of the small ones, if they are in the growing area of community interest companies—I don’t know if your charity is—are serving invaluable causes and doing a very good job.
Q46 John Pugh: Am I right to suppose that they have been multiplying a lot recently?
Paula Sussex: Certainly community interest companies are, yes. It is not a rapid growth or distinct trend, I would say.
Q47 John Pugh: I have one last short question. Your volume of telephone calls, e-mails and letters seems to be going down on a regular basis. Can you explain that?
Paula Sussex: When you look at the calls it is because they are coming through different routes, so it is coming through the web. Our web activity is increasing.
Q48 John Pugh: No. The monthly total of everything has gone down by about 4,000 over two years, hasn’t it?
Paula Sussex: Yes. As a general proposition, demand is holding fairly steady. It is going up in other areas, for example in registration. Over a year ago the Commission took to head off demand, in effect, or to work more closely with what we call the partnership bodies.
You will have observed that we operate within very constrained resources and we have very minimal contingency around calls coming in, so we have to reserve our resources for the more serious cases. As a general proposition we try to divert to the web and partnership bodies, which has kept demand suppressed. Although I would say that across all of our avenues it is holding pretty steady.
Q49 Dame Anne McGuire: Do you not find it surprising that in a charitable sector of around 164,000 charities, as I understand, that the pressure on you of telephone calls and communication is actually decreasing? [Interruption.] You will have 10 minutes to think of an answer to that.
Sitting suspended for a Division in the House.
On resuming—
Q50 Dame Anne McGuire: Can I go back to the 164,000 registered charities? Harking back to John Pugh’s question about communication between you and the sector, why is that falling? I find there to be a disconnect. Do charities think, “The charity commissioners are there for registration, but, after that, why should we bother with them?”
Paula Sussex: I am with you. No, absolutely not. The commission—predating me—had a strategy to manage demand. The demand is still there, but as I was trying to explain to your colleague—
Q51 Dame Anne McGuire: Tell me what managing demand means. Does that mean that your line is always engaged so that people cannot get through to you?
Paula Sussex: That means that the charity sector still has a whole raft of questions that they want to ask about operating as a charity that they would normally ask of the Charity Commission. We do not have capacity to deal with all of those in terms of help and guidance—like you would expect Citizens Advice to do, for example. We do not have the resources.
About 18 months ago we started working with what we call partnership organisations. For example, there is something called the Ethical Property Foundation. About a third of our requests relate to land and land-related assets, so we are now able to divert a charity on to the Ethical Property Foundation for a certain type of help and guidance.
We have been, as they say, managing demand, but we have probably got to the end of that road. Like many other public bodies, we now need to do more of this through digital tools: more webchat, more online help and so on.
Q52 Chair: Did you consult with anyone in the charities themselves or their organisations when you put forward your new plan and changed your way of working, including cutting access through the telephone?
Paula Sussex: We do not technically consult on an operations matter such as that.
Q53 Chair: No, it’s a service matter.
Paula Sussex: Yes, it is. We have user groups with charities. We discuss changes with user groups before we implement them, and we also make very good use of our website to inform of what we can or cannot do. A classic example is when we had to inform charities that we were no longer going to be able to hand-hold them through registration. There had previously been a practice where we would have one-on-one advice for registrations. We do not have the capacity for that now, so we have set out as much guidance as possible on the website. We direct charities to the website.
Q54 Chair: But you consulted before you changed that.
Paula Sussex: Absolutely; we spoke to charities before we did that.
Q55 Chair: I ask because there are comments coming from around the sector. ACEVO says: “The commission aren’t cherishing the sector and the sector’s independence, they are fettering it.” A CVS chief executive says: “I’m very concerned as are many, many, many of my peers across the country right now that the Charity Commission is simply becoming punitive…It doesn’t seem like the Charity Commission supports the sector.” It goes on. Someone at the Directory of Social Change says: “We’re also deeply concerned that politicians seem to be pushing the Commission to focus purely towards a ‘bad-cop’ enforcement role above all else. Charities, their trustees and the wider public still need the Commission to enable a simple registration process, maintain the public register” and so on. That criticism of you is coming out.
Paula Sussex: Yes, and we are very sensitive to that and very keen to talk to the sector about what we are doing and what we are able to do, as well as about what we intend to be able to do with the investment that we have taken from the Treasury.
Q56 Chair: But they are right: you are prioritising the regulatory. This is not a criticism, but you are changing from what you were. When the previous incumbents came before us, they were very clear that they had a strong role in supporting the charity sector; you are now telling us that that has changed and you see yourself much more as the regulator and enforcer.
Paula Sussex: The focus is absolutely on compliance and enforcement. We believe that the best way for us to regulate effectively is through that, but at the same time we need to do more with the charity sector to say how we can help them and how that effective regulation helps them. We probably have not been clear enough in our press and dealings with the charities about how that is going to look over the next two years.
Q57 Dame Anne McGuire: How do you consult the sector?
Paula Sussex: We consult formally on certain formal matters. We often go through the umbrella bodies, such as the NCVO and ACEVO—we issue a formal consultation notice.
Q58 Dame Anne McGuire: But, although they are good organisations, the NCVO and ACEVO do not actually cover the whole charitable sector. I should perhaps declare that I used to work for the Scottish Council for Voluntary Organisations, which is obviously under a separate jurisdiction, but some of the issues are the same. As I said, the NCVO and ACEVO do not cover the whole sector, so how do you consult the sector?
Paula Sussex: We go out publicly to consultation. Anyone—any charity or any member of the public—can come back and comment on our recommendations.
Q59 Dame Anne McGuire: How do you get that information across that, “Hey, this week the Charity Commission is consulting on x, y and z”? How do you deal with it? Do you have database of your 164,000 registered charities? Do they all get an e-mail that week?
Paula Sussex: Most typically, we will go out with that through our website. That is supported by going out quarterly to public meetings and a series of round-tables up and down the country. We also issue quarterly something called CC News—from memory, we send out about a quarter of a million of them.
Q60 Austin Mitchell: Our last report on the Charity Commission in February 2014 seemed to find a certain lethargy in its proceedings. Your predecessors told us that they were being asked to do too much with too little—in other words, they were not getting enough brass to do the job. On the other hand, you think that you can manage with the £21 million budget. Who is wrong—you or them?
Paula Sussex: I think, Mr Mitchell, that that was before we benefited from an £8 million investment from the Treasury. Perhaps I can take you through the pitch we made to the Treasury. With that £8 million, we believe we can get the productivity increases to give us the contingency, but also the ability to redeploy something like 30 posts out of 300. If our baseline budget is not touched, and if we have no increase in scope, we can cope.
Q61 Austin Mitchell: So anorexia works.
Paula Sussex: I perhaps would not put it quite in those terms, but investment in more productive working will certainly help us.
Chair: Are you considering—
Austin Mitchell: They—
Chair: Go on. I was going to ask whether they were considering charging.
Q62 Austin Mitchell: Let’s come to that later. The Committee’s report from February 2014 says: “The Commission’s approach to charities is too trusting”—too nice. Paragraph 20 of the NAO’s Report, which is from this week, says the Commission has “improved its follow-up checks but it does not follow-up all issues we might expect it to.” There have been some good removals, and 17 suspicious registration applications have been prevented from being progressed, but the Report says: “in our review of a small sample of cases we found some where we might have expected the Commission to follow-up to check that trustees had acted on its instructions, but where instead the Commission closed the cases,” so you have not actually been that thorough.
Paula Sussex: The first thing I would say about the case you are referring to is that it was not a high-risk case. All of our high-risk cases have 100% follow-up. This was a low or medium-risk case. The monitoring team, who have made great progress—that was remarked on by the NAO—still have a way to go to systematise their processes to make sure that we follow up. They have been going for a year. They have made great progress. There is still further work to do.
Austin Mitchell: I hope that’s true.
Vikki Keilthy: There were actually two cases. One was a medium-risk case. In the other case—I am at paragraph 3.8—we could not tell what the risk assigned to the case was, because it was not recorded on the case management system.
Q63 Austin Mitchell: Can you risk a generalisation? What assurances can you give us that this risk assessment approach will prevent another Cup Trust?
Paula Sussex: In accounting to the Public Accounts Committee, I would never say never, but the risk assessment system is absolutely going to give us the risk awareness and the alerts to stop a Cup Trust.
Q64 Austin Mitchell: You didn’t have that risk awareness before?
Paula Sussex: Correct.
Q65 Chair: Can I come back to the charging point? William Shawcross said: “One of the things that we are considering, given the fall in funding from the Treasury, is whether or not we should ask charities—big charities, not small charities, starting with charities over £100,000—to contribute towards the financing of their regulator.” Is that true?
Paula Sussex: Certainly, the board, and indeed the sector, are exploring the feasibility of—
Q66 Chair: What does “the sector” mean?
Paula Sussex: Certainly, NCVO is looking at this, and, quite possibly, other parts of the sector are as well—looking at the feasibility of taking the Charity Commission off the Government’s books, if you like. Although we haven’t talked much in public about this, we are exploring—
Q67 Chair: Off the Government’s books? That is a different point almost. So it would become a regulator funded by the sector?
Paula Sussex: Potentially, yes. Or, in some part funded by the sector.
Chair: That is quite dramatic.
Q68 Austin Mitchell: So charitable donors will have to pay bureaucrats to do their work?
Paula Sussex: It’s a very common model for other regulators, and it is one we are exploring with interest.
Q69 Chair: Could I ask the NAO which sectors fund their regulator?
Gabrielle Cohen: Financial services—those sorts of sectors.
Q70 Chair: My goodness—what is the timeline for this one?
Paula Sussex: Oh, goodness; that’s a very good question, Chair. It’s likely to require legislation, so you would probably be the expert on this. We are certainly looking at one to two years, I expect, before we would have the green light if it were found to be feasible. This is absolutely something that we would consult very widely on, as you can imagine, with the full sector, both large and small.
Q71 Stephen Phillips: I want to come back to the budgetary question of £21 million a year. How much of that budget annually is spent on outside consultants?
Paula Sussex: On steady-state, very little. I would have to come back to you in a note, but off the top of my head, I would say probably a maximum of £100,000.
Q72 Stephen Phillips: If you look at the programme that was put to the Treasury—invest £8 million, and we will be able to increase our productivity and potentially reduce our running costs on an already decreased budget—who drew up that business case? Did you bring in consultants from outside?
Paula Sussex: We had support, but we drew up that business case.
Q73 Stephen Phillips: So you didn’t require any outside consultancy at all to draw it up? That is the benefit, no doubt, of employing a former director of KPMG.
Vikki Keilthy: Well, there was the PA Consulting report.
Paula Sussex: Yes. PA Consulting did a strategic review of the commission just as I was coming into post. We wrote the investment case, and PA Consulting assured the numbers.
Q74 Stephen Phillips: On a related topic, as Mr Mitchell said, your predecessors used to come before this Committee and tell us—they certainly did on their last outing—that they didn’t have enough money. How much money was wasted on the Preston Down debacle?
Paula Sussex: Could I possibly get a note back to you on that one?
Q75 Stephen Phillips: What I am interested in is this. It was such an appalling debacle on the part of the Charity Commission that there must have been some internal inquiry afterwards, so that it could never happen again. Yes? You wasted thousands, if not tens or hundreds of thousands, on lawyers and then basically had to change direction completely with egg all over your face. There must have been some form of internal inquiry. Correct?
Paula Sussex: If I could come back to you in a note; I am aware that Preston Down was a very difficult registration case, as a number of ours are. I am not aware of—
Stephen Phillips: I don’t want to get into the merits. It was actually one where you were ignoring the settled will of Parliament as expressed in the Act, but let’s ignore that. All I am interested in is the answer to the question. Was there an investigation?
Paula Sussex: There would have been an internal lessons-learned, but I am not aware of any external costs that went on the Preston Down registration.
Q76 Stephen Phillips: I imagine the internal lessons-learned document would have contained, “This is how much we wasted on this ridiculous fiasco”, and I would like you to write to the Committee and tell us how much was wasted.
Paula Sussex: Of course.
Q77 Dame Anne McGuire: Do you see it as part of the commission’s role to have a conversation regarding remuneration within the sector? It has been an issue of some controversy, given some of the high salaries there. I am not taking a particular position for or against some of those large salaries—certainly not at the moment—but as a commission, do you see it as part of your new developing regulatory role to offer guidelines?
Paula Sussex: Remuneration is not an area that we are currently planning to offer guidelines on, but I am aware that about a year or 18 months ago, there was commentary and opinion offered on the topic of remuneration. We have a separate regulatory stream which relates to whether it is appropriate to remunerate trustees, as I am sure you are aware, because that is an exceptional case, but I think you are probably referring to the remuneration of charity officers.
Dame Anne McGuire: Chief executives.
Paula Sussex: Yes. We don’t have specific regulation on that, but I am aware that we have passed comment on it before.
Q78 Dame Anne McGuire: We have spoken so far about the risks from the charities that you register. The NAO Report identifies six risks concerning the commission itself. Can you take us through the progress you have made in addressing some of the risks identified by the NAO, which include skilled staff, final organisational design and IT requirements, which, given your evidence so far, seem pretty crucial? There is also finalising the accommodation strategy; I take it that means where you will actually be based permanently. It mentions “engaging with staff and maintaining morale”. I am interested in staff morale within an organisation undergoing transition, having suffered some significant difficulties. It also mentions “engaging with the sector”. You have covered some of that to a certain extent, but I am not entirely sure that we have a clear picture yet about how you engage with the sector. Perhaps you could address some of those issues.
Paula Sussex: I am happy to. If it helps, I will take them in order.
Dame Anne McGuire: It is on page 20 of the Report.
Paula Sussex: Yes, I have it. The first comment about the skills to run selected projects was a very good spot by the NAO, because skills in these types of transformation programmes are not two a penny. But I am delighted to say that we have only two outstanding projects that are not currently in the hands of project managers. They do not come on stream until the high summer, so we probably would not be taking them on now. They are a casework and charity database.
On the second point, the organisation design is being finalised at good speed within each of the five directorates. We are also doing further recruitment, internal and external, for the key posts within each of those areas. We are going at a pretty good speed, and I would expect to have that all in play by the start of the new financial year.
Q79 Dame Anne McGuire: What does your final staffing complement look like at the moment?
Paula Sussex: It is 310.
Dame Anne McGuire: Right. Thank you.
Paula Sussex: On the IT requirements, we have specialist staff. As you can imagine from my background, I am quite closely involved in that. It is going well. On digital, you will know that there are two streams of the IT programme. One is around the digital—more use of tools, the website and so on. They are much easier than the risk and data programme, which we are progressing very carefully, and we are running a pilot at the moment to understand what comes out of the risk rules engine so that we do not blindly follow data sources. That is proceeding well.
Q80 Dame Anne McGuire: And you are managing the costs of your IT development?
Paula Sussex: Yes, we are. The budget for the costs against the £8 million investment for this year was £1.2 million, and we are coming in at £1.1 million at the moment, so we are well within budget.
The accommodation strategy is also going well. You will know that we have taken down the costs of two of our offices, Liverpool and Taunton. We are moving into lower-cost accommodation on the Government estate in Liverpool in two weeks’ time, so please cross your fingers for the Liverpool team when that goes through. We are also finalising the accommodation choices in our Taunton office. That is on schedule.
On staff morale, I will come absolutely clean with the Committee: we need to do better. We were disappointed with our staff survey. We know that we need to do better in communicating to staff what the change means for them, what it looks like in practice, and, if you like, what the deal is for them.
Q81 Chair: I think we should put it on the record, because it is worrying. I have the figures. Only a third of staff feel that it is well managed, down from nearly half.
Paula Sussex: Yes.
Q82 Chair: And only a quarter think that the board has a clear vision for the future. That is in the wrong direction as well.
Paula Sussex: It was a disappointing score, perhaps to be expected, given that the commission has had a pretty difficult couple of years. Change is enormously unsettling. The survey was done in September, and we have worked very hard since to understand what the concerns are and to bring forward some of the evidence of the benefits of this transformation programme, both personally for their careers as well as for how we can improve their day-to-day work. A number of the team, particularly in the Liverpool team, are under a lot of work pressure at the moment, so we need to, in a sense, contract better with the staff.
Q83 Dame Anne McGuire: It is interesting that you talk about communicating with the sector, when one of the big gaps inside the commission itself, as you have already said, is in communicating with your own staff. You cannot have quality communications with the sector unless you get the communications with your own staff right.
Paula Sussex: No, absolutely. We have put way more effort and time into the smaller groups, and we are keen to get the board going round what will become the new offices, being more visible and sharing their views about what the commission should look like in two years’ time. So it is a tremendous focus for us. Having been through this process twice before, albeit in the private sector, I know that this is the point at which organisations tend to be the most unsettled. Change is very unsettling. It is in the early days where we cannot make it as clear as it should be to them.
Finally, on your point about consulting and engaging, we are looking at all aspects of the programme and seeing where we need to have what I would call, from my background, user groups—user engagement or focus groups. If there are any areas of the programme where we think we need to have more formal consultation with the sector of the nature that I discussed before with you—at the moment we think no to the latter, but we are looking at it very carefully.
Dame Anne McGuire: Thanks very much.
Q84 Chair: I want to ask about your building of relationships with everybody. This goes back to the investigations, where you clearly have stronger and better relationships with the police on information. It looks to me from the Report that you have not built a very good relationship with HMRC. You are giving them lots of stuff and they are not reciprocating.
Paula Sussex: As you know, when I arrived in July, I was delighted that Lin Homer quickly asked to have an early meeting. I have had a couple of meetings with Lin and her direct reports—particularly Mary Aiston. I am very confident that, between us, we will be able to get a better collaborative model between the organisations. One of the things that my team are looking at is getting secondees either way. Secondees in practice are one of the most effective ways of getting really good joint working.
Q85 Chair: Okay—as long as you recognise that. That takes me to another point, which is that you have refused registration for 17 applications by organisations for charitable status out of 6,661. It just feels to me, instinctively, that you are not doing the due diligence well enough yet. Declining to register 17 out of 6,661 organisations just feels too low. I do not have any evidence for that, so it is entirely instinctive. But neither you nor the Report gives me the comfort that you have got that registration process right. That is one reason to focus on the relationship with HMRC; they will know who some of the most likely abusers of the system are.
Paula Sussex: Although there are only 17 that we have formally and officially rejected, some 1,000 or possibly even 1,500 drop away after we ask more penetrating questions. In last year’s numbers, from memory, 6,000 applied and only 1,500 were registered.
Q86 Chair: Only 1,500 were registered?
Paula Sussex: I’m so sorry; only 4,500 were registered and 1,500 fell away for whatever reason. Sometimes that is because of the quality of the application. Sometimes it is because a particular organisation is not comfortable with our line of questioning, which may mean that they do not have charitable status after all.
Q87 Chair: Okay. My final question is about the relationship between you, the executive and the board. Again, the last part of the Report focuses on that and there has been quite a lot of stuff said about it. I can understand that before you arrived, there was a sort of interim period where the board had to be active. But it feels to me that the board is being far too executive. If I take you to figure 4 on page 19—once you have decided your strategy, it is down to you as chief exec to implement it. I see absolutely no reason for the transformation to have board members on there; it is not their job. That gives me a slight concern that the chairman, in particular, is spending too much time thinking that he is an executive rather than a non-executive chair.
There have been comments from the previous chief executive about a “continual stream of maverick interventions”. That might be a bit sour grapes, I don’t know—“maverick interventions from the chair”; but there are other ones. Stephen Bubb, whom I think we all have a high regard for in the sector, said that the intervention was too great and there was a political agenda being fed there. Stuart Etherington also has called—I think they are doing some work around governance because of their concerns. So I know it is a slightly difficult question for you to answer, but there are these concerns around whether we have got the right separation between non-exec and exec, and whether in fact your non-execs are playing too much of an executive role.
Paula Sussex: You are right, Mrs Hodge. It is a difficult one for me to answer on my own, but I can say for my own part that I am very comfortable that I know what my job is and that I have the room and the support to do it; so I know what success looks like as an accounting officer of the Charity Commission.
Q88 Chair: But would you agree with me that it is a bit odd, figure 4? I would not expect to see that in an organisation with a non-executive board, and an executive.
Paula Sussex: I would expect to see non-executive oversight of such a critical programme of transform.
Q89 Chair: Management?
Paula Sussex: It is oversight, not management, so I think if you are talking about the same figure—
Q90 Chair: How often does it meet?
Paula Sussex: Currently monthly.
Q91 Dame Anne McGuire: And that is part of the transition?
Paula Sussex: It is the transformation, yes. It is oversight of, also, the spend of £8 million.
Q92 Stephen Phillips: In a sense this is not really a question for you. Am I right in thinking there is only one woman on the board?
Paula Sussex: Yes. No—correction; there are two.
Stephen Phillips: Your website needs to be updated, then. You are not one of them, are you?
Vikki Keilthy: There is Claire Dove and Eryl Besse.
Paula Sussex: Yes, correct, so there are two non-executive female members.
Q93 Stephen Phillips: Out of how many members?
Paula Sussex: Out of, if I remember correctly, eight.
Q94 Stephen Phillips: So nowhere near 50%, but better, probably, than it was 10 years ago.
Vikki Keilthy: But the board members are appointed by the Cabinet Office.
Stephen Phillips: Right, well we will take it up with the Cabinet Office, because it should be 50:50.
Dame Anne McGuire: Particularly in a sector where women play such a prominent role.
Stephen Phillips: That is just the reverse—
Dame Anne McGuire: I am just saying it does not reflect the sector.
Chair: There are plenty of fantastic women around.
Good. Thank you very much indeed. Early days, as I said; and a real improvement on where we were last time, but clearly we will have to come back and see how you get on with implementation. We wish you well.
Oral evidence: Charity Commission: Follow-up, HC 926 2