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Charity Commission chair reappointment causes concern
Thursday 5th February 2015

William Shawcross, the chair of the Charity Commission since October 2012 has been reappointed for a further term of three years by the Minister for the Cabinet Office Francis Maude. The announcement was made on 29 January 2015 and was accompanied by a statement on the Charity Commission’s website.

The statement said that the reappointment “will ensure the continuity of the Commission’s 3 year transformation programme designed to ensure that the Commission can address its longstanding weaknesses and serve as an effective and proportionate regulator of the sector”.

The statement continued: “Since his appointment Mr Shawcross has led the Charity Commission in recruiting an experienced board and new Chief Executive and developing a transformation programme to make the Commission a more robust and proactive regulator”.

Mr Shawcross will now work three days a week instead of the previous two and it is reported that he will receive no increase in remuneration for this increased commitment. It was reported on his appointment back in October 2012 that he was to receive an annual salary of £50,000 for the two days so it is assumed that this will remain the case despite the additional commitment.

However, the news has not been met with universal approval. Whilst there is no doubt that Mr Shawcross has overseen a very challenging period for the Commission, he has taken significant criticism, particularly in relation to his comments on Islamic extremism.

More immediately however, concern has been raised as to the manner by which the reappointment has been made, in particular on the part of the Association of Chief Executives of Voluntary Organisations (ACEVO).

In an open letter addressed to the Cabinet Secretary, ACEVO’s chief executive Sir Stephen Bubb pointed out that Mr Shawcross’ original appointment followed “a period of advertisement, shortlisting and a pre-appointment hearing from May 2012”.

He added that he “and many of [his] colleagues in the charity sector, our supporters, donors and beneficiaries are therefore surprised to learn that the appointment has been made already”.

The fact that this appointment has taken place less than three months before a general election will serve only to raise those concerns in the mind of the public. They deserve and require assurance as to the absolute propriety of the processes that have been followed to make this appointment”.


It will be interesting to see how or even if this story develops. Many in the sector have commented upon the timing of the appointment – nine months before the termination of the original three year term and three months before the general election – and Bubb has asked whether the recruitment process was conducted in accordance with the Code of Practice for Ministerial Appointments to Public Bodies.

In addition to these political concerns, many have expressed concern at Mr Shawcross’ comments on issues such as the threat of Islamic extremism to charities and the reactions of certain sections of the sector could be interesting.


Charity audit thresholds to be increased?
Friday 12th December 2014

The Charities Act 2006 (now consolidated in the Charities Act 2011)  contained the unusual requirement for it to be reviewed after five years of its implementation. Back in July 2012, the review, Trusted and Independent – Giving Back to Charities, was published. The review was led by the Conservative peer, Lord Hodgson who had been closely involved in the passage of the 2006 Act through Parliament and contained in excess of 100 recommendations over 159 pages.

One of the recommendations was that there be an increase in the financial thresholds that determine whether or not charities must have their accounts audited rather than independently examined. In the government’s response to Lord Hodgson’s review, the then Minister for Civil Society Nick Hurd MP adopted a traffic light system, marking each recommendation red (recommendation not accepted), amber (to be explored further), or green (recommendation accepted). The recommendation in relation to auditing thresholds was marked amber.

As things stand, all charities regardless of their income or their registration status, are required to keep accounts and these must be made available to the public upon request. Charities with an income in excess of £25,000 must have their accounts externally examined by an independent examiner.

Part 8, Chapter 3 of the Charities Act 2011 requires charities which fall into either of the following categories to have their annual accounts audited:

• where they have an annual income of more than £500,000; or
• where they have assets worth more than £3.26 million and an annual income of more than £250,000.

The Cabinet Office has this week published a consultation seeking views on the increase of the financial thresholds. The proposed new audit thresholds are: where a charity has an income of more than £1 million; and one of the following:

• where a charity has assets worth more than £3.26 million and an income of more than £500,000; or
• where a charity has assets worth more than £5 million and an income of above £500,000.

The consultation also includes a proposal to increase the threshold above which charities must prepare group accounts from a total income of £500,000 to £1 million.

The full consultation document can be found via the following link:


The Cabinet Office has estimated that these changes, if brought into effect, would make approximately 4,000 charities exempt from the requirement for a full audit of their accounts and the Charity Commission estimates it would save the sector around £8.7 million a year.

In a sector comprising approximately 165,000 registered charities with a combined income of circa £65 billion many might consider these proposals to represent a small drop in large ocean. However according to the Commission’s latest sector figures there are almost 21,000 registered charities whose income falls between £100,001 and £500,000 and a further 8,400 (approx.) whose income falls between £500,001 and £5,000,000. This represents around 17% of registered charities who will either be immediately affected or may one day find themselves affected by these thresholds, not to mention the significant number of much smaller registered charities (approximately 124,000) who might aspire to achieve increased income levels.

The consultation is open until 27 January 2015.


New Minister for Civil Society reinforces charities’ right to campaign
Wednesday 10th December 2014

As most will be aware, the position Minister for Civil Society has changed hands twice this year and the current role holder is Rob Wilson, Conservative MP for Reading East.

Mr Wilson has very recently given an interesting interview to Civil Society News in which he discussed plans to boost the capacity of charities and social enterprises to provide public services. It is anticipated that a significant portion of public services may be outsourced as government spending cuts continue, as announced in the Autumn Statement.

Whilst the main focus of his interview was on service provision, Mr Wilson also touched on other topical issues in the sector, including charity campaigning and the current and future role of the Charity Commission.

In respect of charity campaigning, it was noted that prior to his appointment as Minister for Civil Society, he had made a complaint to the Commission about posts made on Twitter by the Family and Childcare Trust that carried the hashtag #childcarecrisis. Around the time, the Labour Party was also using that hashtag and it was suggested that the Trust’s activity could be construed as being party political, aligning itself to the Labour Party. It is well established law that charities cannot give support to a political party.

Mr Wilson’s acknowledges in his interview that charities have “every right to campaign and speak freely about any issue that is in line with their core work”, even suggesting that the “government should listen to many of the things they have to say”. Many charities whose confidence in their campaigning activity has been shaken by the controversy surrounding the Lobbying Act may be reassured by this.

In relation to the Charity Commission, Mr Wilson seems to recognise the difficulties the Commission has had over the past two years or so but now considers it to be a “proper regulator of the sector” with a strong leadership “making a real impact”. Mr Wilson supports the Commission’s focus on terrorist abuse of charities and his overall remarks are in line with the Commission’s positioning of itself as the sector’s “policeman” rather than its friend.


Mr Wilson’s comments concerning charity campaigning will be welcome in the sector following some of the more hard line statements made by others in government over the past six months. Many organisations may have been concerned given Mr Wilson’s track record but there is certainly a lesson for charities arising out of the complaint made about Family and Childcare Trust.

Many charities do use Twitter and other forms of social media to deliver their messages but charity trustees and staff do need to be careful that their charity is not seen as being a vehicle for the expression of the political views. A charity can support specific policies advocated by political parties if it would help achieve its charitable purposes but the use of hashtags and retweets should be very carefully considered and advice should be taken.

As for the Commission’s ongoing role, this has been discussed in previous blogs and as the Commission’s figures on its regulatory powers and functions attest, we can expect its more robust approach to continue.

Finally, Mr Wilson’s comments concerning the outsourcing of public services are encouraging. He states that “Over the next five years we need to see a massive transfer of funds from the centre of government out to localities, communities and regions and that means we need to do a lot to make government departments understand better how they can commission out more services”. Hopefully charities can benefit from this.


The 2014 Fred Freeman Lecture - A hundred years on: The Ragged Trousered Philanthropists revisited
Wednesday 19th November 2014

On 18 November 2014, I attended the University of Liverpool’s annual lecture in honour of Fred Freeman.

Fred Freeman was born into a family of Liverpool shopkeepers in 1921 and devoted much of his life to charitable work and founded the concept of Payroll Giving, enabling millions of pounds to be distributed annually to those in need.

The Fred Freeman lecture was established by a gift awarded by his family to the University through his charitable foundation, and is intended to honour his lifetime of achievements by recognising, celebrating and encouraging philanthropy and the benefit it brings to society as a whole.

The 2014 Fred Freeman Lecture was delivered by Sir Bert Massie in the Leggate Theatre at the Victoria Gallery and Museum on Ashton Street, University of Liverpool and its billing focused upon the hundredth anniversary of the publication of The Ragged Trousered Philanthropists by Robert Tressell.

Whilst recognising the importance of the often well-publicised financial contributions of the wealthy, Sir Bert’s lecture focused upon those who give generously in other ways, whether that be by way of smaller financial contributions (albeit ones that might represent a greater proportion of a person’s wealth), the giving of time through voluntary work and those who go beyond what is required of them in order to assist others (“there is more to philanthropy than money”).

In addition to this, Sir Bert’s lecture also touched on some very relevant legal issues affecting the voluntary sector.

Firstly, the issue of charity campaigning was discussed. Much of Sir Bert Massie’s career was spent campaigning for equal rights for people with disabilities and this resulted in many positive changes, such as disabled access to public transport.

Charities can become involved in campaigning and political activity which furthers or supports their charitable purposes but recent developments have caused real concern that the right of charities to campaign is being threatened. The Lobbying Act, the reaction of some Conservatives to a tweet by Oxfam and the unfortunate comments of Brooks Newmark that charities should “stick to their knitting” and stay out of the realm of politics were all referred to by Sir Bert and the extent to which this has influenced the Commission’s proposed changes to its annual return was considered.

This was also linked to a second issue of contracting with government and the inclusion of clauses in contracts designed to prevent charities from speaking out on particular issues. Sir Bert noted that reductions in funding have left many charities in a position where they are effectively forced to cede to the inclusion of such clauses or turn down a contract altogether.

Finally, there was also a mention of the topic of chief executive pay in charities which many will recall regularly making the news over the past twelve months. The effects of this can be seen in the publication this year of two new Charities SORPs (Statement of Recommended Practice) that affect the way that charities explain executive pay.

Sir Bert Massie’s lecture was very interesting and from a legal perspective in particular, demonstrated the importance of effective and lawful charity campaigning in achieving positive change for beneficiaries.


Charities to pay for the Charity Commission’s services?
Monday 10th November 2014

As most readers will be aware, the Charity Commission has been subjected to substantial funding cuts in recent times.

Whilst the Commission has taken every available opportunity to point out the difficulties caused by this (for long periods it was not possible to speak to or correspond with a Charity Commission employee without being reminded of its funding woes) the Coalition Government’s Spending Review in 2010 has resulted in a cut of between forty and fifty per cent in real terms.

This has led to regular suggestions that the Charity Commission might introduce charges for its services. Most recently, the chief executive the Commission, Paula Sussex, has revealed that the Commission is to discuss this very matter with sector representatives this month.

Lord Hodgson’s review of charity law published in 2012 brought the issue of regulatory fees and penalties to the fore. The review recommended that further consideration was given to the introduction of charges for registration and penalty fines for the late filing of accounts and it was even suggested that the Commission should be permitted to offer bespoke legal advice on a cost recovery basis.

Former Minister for Civil Society Nick Hurd MP in his response to Lord Hodgson’s review accepted that this issue merited further consideration and the Commission is clearly keen to encourage debate.

In addition to Paula Sussex’s recent comments concerning the meeting taking place this month, the Commission’s chairman, William Shawcross, speaking in Manchester earlier this year at a  public meeting, suggested that the imposition of charges could be linked to a charity’s size, with larger charities being required to pay charges and small charities being exempt.

Back in 2010, when the funding cuts were first announced, the Directory for Social Change ran on opinion poll on this issue, asking “should the Charity Commission charge fees to charities?

90% of almost 800 respondents were against the idea. A selection of the comments received appear below:

Absolutely not…The Charity Commission is a statutory regulatory body and as such must be funded from taxation. Most, if not all, charities have little choice as to registration. Charities are not businesses that generate profits for their beneficial owners so the argument that there is similarity when compared to fees levied by, say, Companies House is spurious

It would mean that only larger charities with sufficient funds would be able to access the Commission. This is directly against the ethos of the charitable sector which [is] all about creating equality of access and opportunity

Funding for charities and social enterprise is severely squeezed at the moment. Every pound handed over to the Commission would be one pound less spent directly on service delivery

More recently, the chief executive of the Directory of Social Change, Debra Allcock Tyler noted that this would result in the taxpayer paying twice for the Commission, “once through taxes and then supplemented through donations, which would be used to pay this fee”.


Whilst further debate is being encouraged, the Commission itself has conceded that it will only progress “at the speed of glacier”. Some have questioned whether the appropriate systems could be put in place in a sufficiently cost effective way so as to justify the introduction of charges and many have also raised concern as to extent to which the Treasury might simply reduce the Commission’s budget further by the amount raised by way of charges, thus defeating the object of the whole process.

However, given that the Commission’s chair and chief executive have recently been commenting publicly on the proposal it seems that there exists a determination to at the very least fully explore the idea.

It does appear that this question is going to continue to run but charges for Charity Commission services and fines for non-compliance are probably a long way off.


New powers and extra funding for the Charity Commision announced
Thursday 6th November 2014

It has recently been announced by the Prime Minister that the Charity Commission will receive extra funding of £9 million over the next three years, and new regulatory powers to ban trustees and shut down charities.

The extra funding is comprised as follows:

  • £8 million to improve regulatory functions, with a focus on tackling tax abuse and terrorism;
  • £1 million in general funds in its settlement for the year 2015 / 16.

The Commission’s new regulatory powers have been published in a draft Protection of Charities Bill and the measures in the draft Bill include:

  • A ban on people with convictions for criminal offences including terrorism and money laundering from acting as a charity trustee;
  • A power to disqualify a charity trustee where the Charity Commission considers them unfit to act;
  • A power for the Commission to require a charity to shut down where there has been misconduct or mismanagement and allowing the charity to continue would risk undermining public trust and confidence in charities;
  • A power for the Commission to issue an official warning which it could use in less serious cases and to record such a warning against the charity’s records;
  • Tackling loopholes that have previously prevented the Charity Commission from taking enforcement action, including where trustees have resigned in order to avoid removal and consequent disqualification.

The announcement was accompanied by a statement from the Prime Minister in which he said “I want to build a country which everyone is proud to call home” and “that’s why I want us to confront the menace of extremism and those who want to tear us apart”.

The Charity Commission has welcomed the announcement but has stated that further regulatory powers will be sought during the passage of the Bill through Parliament. The Commission’s chairman, William Shawcross has said:

I welcome the draft bill. It will give us new powers which will help us to be a more effective regulator. The new power to issue an official warning, for example, will allow us to warn trustees that we are monitoring their compliance with the law in situations where more forceful intervention would not be appropriate. We will play our full part in the pre-legislative scrutiny and will continue to push for more measures included in the consultation to be included in the bill”.

However, others in the sector have raised some concern. As many will be aware, the Commission’s chairman was criticised earlier this year when describing Islamic extremism as the “most deadly” threat to charities in England and Wales and whilst many accept that the Commission’s regulatory and enforcement work requires reinforcement, the continuing focus on terrorism has caused some consternation.

Lisa Nandy, the shadow charities minister, questioned whether there was too much focus on terrorism commenting that “Ministers need to explain how they will ensure the Charity Commission can hold charities to account across the board, not just respond to one type of abuse that is attracting headlines”.

The chief executive of ACEVO, Sir Stephen Bubb, highlighted continuing doubt from with the sector over the Commission’s ability to effectively regulate stating that the sector deserves “a properly equipped regulator, but packaging these measures as counter-terrorism is counter-productive”.


These proposed new measures set out in the draft Protection of Charities Bill should in theory strengthen the Charity Commission’s regulatory and enforcement role and the new power to issue official warnings and record those against a charity’s records is interesting as it goes beyond the Commission’s previous practice in less serious cases of issuing advice and guidance to trustees.

As noted above, the Commission is pressing for more measures to be included in the Bill, including a power to ban people who are disqualified from trusteeship from taking up other key roles in charities, such as treasurer or finance director. Depending upon the circumstances of a person’s disqualification form acting as a trustee, one might take the view that charity trustees would not be acting prudently in appointing such a person to a key role within a charity and as a result such a power might be unnecessary. However, it seems clear that the Commission, echoing the comments of its chairman and new chief executive, is determined to use this Bill as an opportunity to significantly strengthen its role as the sector’s “policeman”.

Whilst increased regulatory powers would certainly assist the Charity Commission, one might query the extent to which they will make a real difference given the effects of the Coalition Government’s budget cuts upon the Commission’s resources. The extra funding announced will of course improve the position but as noted above, if the focus of the Commission’s efforts is to be on tackling tax abuse and terrorism the impact felt by the majority of small and medium sized charities might be minimal.


Liverpool City Council launches consultation on adult social care services
Friday 12th September 2014

As many of our local clients will be aware, Liverpool City Council has very recently launched a formal consultation into a wide ranging review of adult social care services. The review comes as a result of the Council’s 2014 budget decision which seeks to accommodate £156 million worth of Central Government funding cuts. The proposals relevant to this particular consultation are hoped to result in savings of £3 million a year.

The proposals affect:

  • Day services for people who have learning and physical disabilities, people with mental ill health, and older people;
  • Supported accommodation for people who have learning disabilities and people with mental ill health; and
  • Temporary accommodation for people who are homeless.

As part of the consultation, it is proposed that the operation of four day centres will be transferred to external organisations. The centres that are proposed to be transferred out are:

  • Lancaster and Alderwood

These sites will be aimed at people with learning disabilities. The centres will be expected to provide a range of services including longer term support; peer support; information, advice and drop in sessions for people with learning disabilities and carers.

  • Parthenon House

This site will be aimed at those with mental health issues and carers. The centre will be expected to provide a range of services including longer term support; peer support; information advice and drop in sessions.

  • Geneva Road

The current centre provides temporary accommodation for single women who are homeless. However, it is proposed that this centre will provide a male service only. It will be tendered alongside the two further services currently provided by external organisations at other locations.

The transfer of services that have historically been provided by the Council to external organisations is increasingly common. For example, we have established and advised many charities that have taken over the ownership and operation of youth and community centres throughout Merseyside. In our experience, such charities have not only been able to safeguard the delivery of a service (or the provision of a facility) but have been able to improve its delivery.

The Council’s consultation will run until 12 October 2014, ahead of the final decision. Assuming that the proposals are approved, the Council will then move to select external providers of these services as part of a procurement process. Many local charities might see this as an opportunity to expand their operations so as to reach a greater number of beneficiaries.


Whose role is it to regulate the charitable sector?
Thursday 31st July 2014

On the 25th July 2014 the Charity Commission published an inquiry report into the Amy Marian Dwyer will trust.

The charity has existed since the 9th March 1949 and is a will trust. Basically the testatrix gave the money on trust to the Trustees for the People’s Dispensary for Sick Animals (PDSA). The second purpose within the trust was a request to keep the grave of the testatrix’s mother in good repair and in the event that the PDSA did not comply with the request then there was a gift over to the Royal Society for the Prevention of Cruelty to Animals.

The PDSA raised concerns with the Charity Commission as this charitable fund had not been registered and it had an income in excess of £5,000 per annum and therefore was compulsorily registerable.  The PDSA had alternative concerns which can be summarised as follows:

  • Unauthorised fees were paid amounting to £31,641.24 between the 6th April 1994 and the 5th April 2010
  • Insurance premiums had not been recovered from tenants of properties owned by the Charity to the 5th April 2010 amounting to £724.85
  • There were losses in relation to mortgages (unauthorised investments) amounting to £8,872.75
  • Failing to carry out rent reviews in leases amounting to a loss of £25,150.00
  • Interest payable

PDSA also drew to the Charity Commission’s attention the legal costs it had expended to date in trying to pursue these losses against the Trustees.

The Trustees apparently referred these complaints to their professional indemnity insurers. The Trustees seemed to have some difficulty in co-operating with the Charity Commission, based upon their understanding that they were not in fact a charity. The Commission advised the Trustees that they did not see how they could be discharging their duties responsibly if they ignored the Charity Commission’s advice, which appears to be a suggestion.

The Commission indicates that the Trustees had failed to co-operate with them over their regulatory concerns and that is what had led to the formal opening of an enquiry.

As a result of the enquiry the charity was actually registered. The Commission also found that the Trustees had not notified their professional indemnity insurers of all aspects of the PDSA’s concerns.

It appears that these issues had been drawn to the attention of the Trustees in 1999 but the issues had not been properly addressed. The enquiry report is critical of the Trustees and we are advised in the report that the focus of the investigation was to see whether or not the Trustees were taking reasonable steps to address the concerns raised by the PDSA. It concluded that the PDSA and the charity were effectively in dispute. The Charity Commission now appears to have taken a position where it will oversee the Trustees’ actions in resolving claims made by the PDSA and has made an order requiring the Trustees to report back to the Commission on these matters.

One cannot help but wonder whether the PDSA would consider the Charity Commission had been an effective regulator in this matter or not. They have drawn what appeared to be in part of not in total justified concerns to the attention of the regulator, yet the regulator’s position appears to be now to simply oversee how the PDSA resolves the issues with the Trustees.

One is left wondering why the Charity Commission were conferred with a power (subject to the positive consent of the Attorney General) to bring proceedings against errant charity Trustees, if it is not prepared to actually engage with Trustees who it has clearly found wanting in some regards through a formal enquiry process. Apart from the registration of the charity and what appears to be a continuing oversight of the Trustees’ actions, the PDSA appear to be the body that has to regulate this matter.

We therefore pose the question, who is to regulate the charitable sector?

Would it not be more satisfactory to simply properly fund the Commission to undertake proper regulations rather than leave this burden to volunteer Trustees such as those representing the PDSA?


Charity – are you a fit and proper person?
Monday 3rd February 2014

HM Revenue & Customs introduced a test known as the “Fit and Proper Person” test to measure and prevent perceived tax avoidance.

Originally, the test suggested that “managers” of a charity, community amateur sports clubs or other organisations that might be entitled to UK charity tax reliefs should declare that they had not been involved in tax avoidance schemes.

The term “managers” applies to the trustees of charities, directors of corporate charities, directors of corporate trustees, community amateur sports club officials and charity trustees generally, including those that have the general control and management over the running of a charity or the application of its assets.  In large charities without a doubt this is likely to include members of senior management teams.

Charity clients should consider whether or not a written declaration to this effect should now be put into place within their organisation as a means of defending themselves against any challenge by HMRC as any person associated with the charity in this capacity identified above, may not be a “fit and proper person”.

Note that the declaration does not contain a definition of what “avoidance” actually means.  Equally, HMRC has not prescribed any time limit, so for example unlike a spent conviction for fraud, there would appear to be no safe period following behaviour in the categories identified as problematic after which you could take up a position in a charity or related organisation.

Furthermore, the model declaration and its guidance do not stipulate what the individual’s involvement has to have been in such behaviour.  Some people have suggested that it may be difficult for accountants, tax advisers and/or lawyers to sign up to an amended declaration of this nature.  HMRC guidance further indicates when considering the application of this test, they will take into account the likely impact on the charity’s tax position.  If an individual has no dealings with HMRC or no control over the spending of the charity’s funds, even if they are not a fit and proper person, it is unlikely this will affect the charity’s eligibility to tax relief.

Charity tax reliefs are, of course, extremely valuable and sometimes are the sole reason charities choose to be registered as charities.  Loss of the relief could be devastating for many organisations and those involved with charities, CASCs and others claiming reliefs of this nature, should be aware of the required amended declaration to preserve their tax concessionary status.  


Charity commission acts in respect of fundraising costs
Wednesday 29th January 2014

The Charity Commission has now completed its operational compliance report on Wildlife Rescue Sanctuaries – a registered charity number 1118457.

The Charity Commission became involved in this matter because the charity (which looks after sick and injured wildlife, runs an animal hospital and generally educates the public about wildlife) had engaged a fundraising company and independent third party fundraisers.  The original allegation was that only 10% of the funds donated actually arrived at the charity and that the charity had poor financial controls. 

The Charity Commission’s investigation revealed however that 16p in the £ in 2012 had actually gone to the charity.

It was a concern that this level of expense, i.e. 84% in the relevant year, could be damaging to the reputation of the charity.  The Charity Commission also found that the trustees had failed to take proper steps to ensure that an appropriate solicitation statement had been made by the fundraisers.

The solicitation statement requirement would have resulted in the fundraiser having to explain to a member of the public making a donation that only 16p in every £ (in the case of 2012) would, in fact, be donated to the charity.

The relevant contracts have now been terminated and the charity only raises funds now through volunteers.

It is always difficult for trustees to calculate what an appropriate level of donation coming to a charity through an external fundraiser should be.  However, it is pretty clear that if a donating member of the public understand that 84% of their contribution will go to the administrative overheads and the fundraiser’s expenses, they are most unlikely to make a donation by that route.

We are pleased to see the Charity Commission take steps to preserve the reputation of charity in such matters and to ensure that charity is not abused to the detriment of their reputation and to the cost of the public.