• Recently it was revealed that money from UK charities may have been filtered to the Islamist terror group al-Shabaab.

  • At the root of its problem is a question of identity and purpose. Is the Charity Commission -- recently dismissed by the Chair of the Public Accounts Committee as "not fit for purpose" -- an advocacy group or a policeman? The new head of the Commission…said such practices risked bringing the whole sector "into disrepute."

December is traditionally a time when people dig deep in support of good causes. But even if it is putting money in some carol singers' bucket, we must have the confidence that the money we are giving is actually getting to good causes -- and certainly not going towards activities which run completely against the spirit of charity.

Last week the BBC's Panorama delivered a damning exposé on some of Britain's most popular charitable organisations. For almost thirty years, Comic Relief has done a huge amount, at home and abroad, to help people in the most unimaginable situations, helping children in war zones and families through famines. But, as so often happens, Comic Relief appears to be a victim of its own success.

The Panorama investigation showed how, after raising almost £1 billion in recent years, Comic Relief often retains tens of millions of pounds in its bank accounts. The way in which they and other charities invest this money will shock many of its donors. For instance, it invested thousands of pounds in arms and tobacco companies. The program raised questions about practices at other charities. Save the Children, for example, was alleged to have changed its campaigning priorities in order to improve corporate relations with certain energy companies. All of which opens up a very difficult subject:

Because charities rely on people's good will, and because most do good work, the whole sector can develop a "halo effect." People assume that if something says it is a charity, and has charitable status, its activities are necessarily charitable and good. Sadly, this is not always true. Just as there are good teachers and bad teachers, good nurses and bad nurses, so you can have good charities and bad charities. And while the good can be very good, the bad can be appalling.

Bad charities use the "halo effect" as a kind of smokescreen. Sometimes -- as in questions of ethical investment -- there are questions about the input of the charity's trustees. On other occasions the abuses are so serious that they should really be a matter for the police.

To take just the most serious example, there are organizations that still enjoy all the tax and other advantages of charitable status in this country, but that are actually banned as terrorist entities in some of our nation's closet allies. Sometimes this is deliberate, sometimes accidental. Just recently it was revealed that money from UK charities may have been filtered to the Islamist terrorist group al-Shabaab. Such activities – covering a range of communities – are a national disgrace. Yet they continue.

Another area of concern are organizations set up as charities, but which, in fact, act as the most lavish tax-avoidance schemes. For instance, the Cup Trust -- on which Labour MP and Chair of the Public Accounts Committee, Margaret Hodge has been fixing her sights -- is a registered charity. In one year, it attempted to claim back £46m from the tax authorities in Gift Aid on £177m income. Yet in that same year it had given only £152,292 to good causes. This raises questions of oversight beyond the activities of any one charity.

Of course the body meant to oversee all charities in the UK is the Charity Commission. But it is a body rife with problems. It was recently dismissed by Hodge as "not fit for purpose." Whether that is a fair description or not is debatable. But it is certainly an organization with a fearsome task before it.

At the root of its problem is a question of identity and purpose. Is the Charity Commission an advocacy group or a policeman? Charity Commission chairman William Shawcross has recognized that the Commission must properly and fully carry out the diligent policing role which will stop wrong-doers damaging the reputation of charities as a whole. It is not an easy task. There are currently just 41 people available in the Commission's Investigations and Enforcement unit to deal with the most serious cases of abuse among those 160,000 charities.

To help him, however, Shawcross has overseen a transformation in the Commission's board. Only one member from the previous regime remains. New members include Peter Clarke, the former head of the anti-terrorist branch at the Metropolitan Police. His experience will make him invaluable in dealing with the intersection between charities and those who break the terrorism laws. Another new face, Nazo Moosa -- a highly respected figure from the world of finance -- will help the Commission come to grips with the forensic accounting needed to deal with the abuses which existed during the previous board's tenure.

And as we get to that time of year when charity should be on everybody's minds, there can be few more important tasks than cleaning up this issue. Giving generously to worthy causes is an important mark of a civilized and compassionate society. But for people to give generously, they must give with confidence. And if that confidence has been shaken by recent revelations, it must now be mended with great speed.

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