Regulating Charities: The Inside Story is a fascinating amalgam, especially for a book about recent changes in how five historically connected common law jurisdictions approach regulating their charitable sectors. While the title of the book and the preceding synopsis suggest potential for a dry text with discrete appeal only to a select group of academics, lawyers and perhaps regulators, the book’s reality is far more appealing and thought provoking.
In large part, the amalgam itself helps make the book more than meets the eye. It is part history, part chronology, and part storytelling. Running throughout are recitations of political intrigue, maneuvering and collaboration along with power transitions and their attendant consequences, especially when idealism meets application and execution. Sprinkled throughout are informed and insightful expert assessments that provide meaningful context for understanding the past and present and for contemplating possible futures for regulating charitable sectors.
Adding to the mix is that the book adopts this combination among unique chapter authors with at least two chapters or perspectives across each of five jurisdictions: England and Wales, United States, Canada, New Zealand, and Australia. Each has roots in British common law and the Statute of Charitable Uses of 1601 (aka Statute of Elizabeth) and its progeny, including how to define “charitability” through evolving social, political, and other landscapes. Complicating this further are the overlays of federal or national systems by which a federal government has certain responsibilities and authorities while states/provinces and local communities often have overlapping or distinctive – sometimes even competing – roles. Except for one of the U.S. chapters, the book focuses on evolving regulation at federal or national levels.
The book and its chapters successfully resist devolving into comparative analyses of neatly packaged similarities and differences, although a common theme tends towards reverencing former iterations of the independent Charities Commission approach of England and Wales. Even the overarching introductory and conclusory chapters from the editors are richly reflective in connecting the various points of interest among the chapters. These opening and closing chapters also ensure that readers understand the unique perspectives and deep personal engagement of the chapter authors in the evolution of charity regulation in their respective jurisdictions, thus allowing the chapter authors to focus on substance rather than establishing their credibility.
Chapter authors include those who have served as principle executives of their country’s primary regulatory body, members and chairs of government oversight commissions, a legislator, and leaders and practitioners from within the respective charitable sectors, including one with a decidedly state-level orientation. Many authors cross several categories, and some cut across multiple jurisdictions having served as advisors to others or substantive participants in international gatherings of charitable sector regulators.
Even though explicitly eschewing a coordinated effort or command, several key themes emerge: the influence of political power, challenges balancing regulator independence vis a vis government and the sector, views of permissible proactive engagement by charitable sector entities in policy activity, and the effects in some countries of increasingly blurring lines with other sectors – government and business.
For those and other themes and for the book overall, regulatory context and intended purposes matter a great deal.
For England and Wales there seems to have been a long time during which the regulator served dual roles: increasing effectiveness with advice, guidance and intervention balanced with ensuring that charities are properly and publicly accountable (17, 37, 53). As Commissioner Fries states in his chapter, regulation in these jurisdictions originated as being charity led not tax led (18). But the balance shifted in recent years with substantially increased emphasis on compliance and de-emphasis of support functions (37, 53, 135), which has raised cautions about the broader appeal of and eagerness to adopt the Charity Commission approach.
For the U.S., regulatory oversight at the federal level is tax-based and, thus, focuses on compliance with no role for the regulator (IRS) to advocate within government for the sector and only limited ability to provide advice to the sector (81), although there are tools for requesting and providing compliance guidance. For Canada, regulatory emphasis is on “prevention of harm” to charities, donors and the public (119–20). In New Zealand, the long-time approach was to let organizations decide for themselves (159) with only recent attention paid to tracking charitable organizations through registration and reporting (187). Australia’s efforts are on protecting and increasing public trust and confidence in the sector (215).
While the above insights to the roles of regulators and their evolution certainly are essential context, beginning there misses an even more critical step. That is delineating the purposes and roles of the charitable sectors themselves in and for these societies, which roles and purposes seem to differ – quite dramatically in some cases. The sector’s roles and purposes appear subtly throughout the book but largely enter from the periphery, such as in discussions about whether sector entities should be allowed to engage in policy debates and, if so, to what extent. Sector purposes and roles also are inferred in discussions of sector independence from the regulator and thus from government.
Owens in his chapter on U.S. regulation implicitly acknowledges sector roles and purposes when pointing to the inadequacies of a tax-based regulatory system and encouraging an alternative structure and approach (82, 90–92). Boris and Lott do likewise in describing changes to the U.S. charitable sector itself, including increased entity reliance on government funding and earned revenues and the attendant consequences of too frequent underpayment, late payments, and otherwise (99, 103); mission drift and cross sector blurring are among other potential outcomes of these changes.
But it seems to me that the sectors’ affirmative purposes and roles in and contributions to their respective societies should precede regulation thereof, especially in common law jurisdictions. Ms. Baker from New Zealand provides the clearest statement of pre-conditional grounding by quoting from her nation’s High Court that regulation “’must follow the application of the common law principles which govern charitable status’” (198).
Stated differently: why should regulation prevent harm? Why increase trust and confidence? Why pursue effectiveness and accountability? Even in a tax- and compliance- based system such as in the U.S., a prerequisite should be ensuring that respect for boundaries protects against harmful regulation and regulators infringing on or interfering with the fundamental roles and purposes of the charitable sector and its members.
Foundational principles seem especially important for jurisdictions in which the charitable sector is an organic outgrowth of freedoms of speech, assembly, religion, and petitioning the government and, by extension, especially of any societal culture that encourages and protects individual and community initiative, self-reliance, and the right to try to mobilize others towards charitable purposes. Those principles shape even the definition of that which is or should be deemed “charitable,” about which several chapters relay intriguing stories and recent evolutions.
Without that grounding at the forefront, there are non-tenuous risks that the charitable sector gets perceived and regulated as if a “loophole” or as a means for government abdicating its responsibilities and/or using the sector to address fiscal deficits (198). It may be that, as Etherington relates in discussing a particular case in England (65), regulatory purposes of ensuring effectiveness and accountability threaten to morph into over-reaching exercises of governmental power in the name of enhancing trust and confidence. “At what cost,” however, may be important to have as an ever-present policy and regulatory question about the sector, especially with regard to intangible, non-financial costs to common law, rule of law rather than rule of power, and other contributions of the sector and its member organizations to individuals and society.
This is not to suggest that the above concepts are totally absent from the book. To the contrary, they seem presumed in the discussions about New Zealand’s evolution from essentially having no regulator to having a Charity Commission to its dissolution and shift of responsibilities to elsewhere within government. They also are inferred in how recent regulatory evolutions in Australia and Canada, in particular, included active participation and even initiative from within their charitable sectors. They are implicit in the chapters about how England and Wales approach defining what is “charitable” as it relates to expected public benefit, who in the first instance must decide, and the deference due such decisions. And they are present in the U.S. chapters and their discussions of potential for abuse and a weakened sector overall given current crises in confidence in the primary federal regulator (the IRS) and inconsistent attention and inadequate resourcing of state level oversight.
It may be that actual comprehensive, neat statements of purposes and roles for their respective charitable sectors do not exist. While that might explain so much reliance throughout the book on presumptions and inferences of meaning, such flexibility or ambiguity may itself constitute purpose and meaning, but even the absence of clear delineation still can frame approaches to regulating. Two polar possibilities could be either as something to be valued and preserved a la Tocqueville’s frequently quoted observations of nineteenth century America or as unbridled permission by which those in power in government are free to impose their will on the sector and its members subject to tolerances of the majority of the electorate.
Discussions of regulation can have an innate tendency to focus on trees or even their leaves rather than their interconnected forest and broader ecosystem. That being said, sometimes the more detailed focus is appropriate for identifying and addressing particular challenges or predicting future possibilities. Regulating Charities’ combination of storytelling and historical reflections strike a reasonable and useful balance in this regard. As such, it satisfies certain curiosities, stokes others, and ignites new ones, perhaps especially in allowing the reader to decipher for him or herself just how much of the approaches taken by any given jurisdiction may or may not be readily transferrable to others – despite shared origination in and operation under common law.
The book succeeds in demonstrating that appropriately regulating the charitable sector is challenging and that merely adapting from another jurisdiction(s) – even from ones with shared origins and histories – is not as easy nor as obvious as it might seem on the surface.
© 2018 Walter de Gruyter GmbH, Berlin/Boston
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