Regulatory responses to build charity financial resilience: ‘Tow Truck’ or ‘Guardian Angel’?

Abstract

Charity regulation is increasing internationally, leading to divergent views on what might constitute ‘better regulation’. The purpose of a charity regulator and appropriate regulation may also be contested. Many modern charity regulators are required to maintain public trust and confidence in charities in order to bolster ongoing charity support from funders and the donating public. Nevertheless, public trust and confidence is precarious. At its nadir, in England and Wales ‘the person in the street’ was deemed more trustworthy than charities, with donations diminishing in the current environment and the charity sector close to crisis. Further, charities contribute to crises when they incite negative media interest in their operations, fail to comply with regulatory filing deadlines, and/or manipulate their accounts.

Charity regulators must maintain legitimacy within a changing regulatory space, despite often being resource-constrained themselves. Yet, some suggest regulators could ‘do more’ to increase sector-wide resilience and to increase public trust and confidence. Hence, this raises the question of how charities should be regulated and whether (and how) a regulator could build resilience. We depict charity-sector crises as a vehicular incident and ponder: should the regulator act as a ‘Guardian Angel’ to prevent crises through interventions to build and maintain sectoral resilience, or should it appear post-incident as a ‘Tow Truck’ to clear the road for other traffic through closely bounded regulatory action focused on sanctions and de-registration. We address this question by analysing publicly available regulatory data from the Charity Commission of England and Wales and semi-structured interviews which provide additional ‘behind the scenes’ depth to our analysis and findings. We contribute to literature on charity regulation and expected regulatory responsibilities within a confined but permeable regulatory space.

Keywords: charity regulation, charity scandals, charity resilience, regulatory space, charity crisis

JEL Classification: M4