Charities are not about private control or personal gain

The Charity Commission’s Sector Risk Assessment 2026 report makes for worrying reading. The regulator reports a 29% increase in concerns raised about charitable status being abused for personal benefit (on top of a 38% increase in the previous year).

Alongside this, the proportion of new charity registration applications has fallen dramatically (45% in the last year compared to 72% in the year before that), which the Commission puts down in large part to new technologies, including the use of AI in charity registration applications, increasing the risk of bad actors “exploiting the system and seeking to use charities as a vehicle for private benefit”.

Worse still, the report highlights “potentially organised misuse of charities” through financial transaction methods such as voucher schemes, which it said can involve weaknesses including reduced transparency and an increase in “particularly complex case work”, often involving charities that are subject to multiple regulators, or where the boundaries of regulatory remits are not clearly drawn. As a result, the Commission made almost 500 disclosures of information to agencies such as the police, local authorities and HMRC, an 8% increase on the previous year.

This matches our experience: we have written before about our concerns arising enquirers seeking our help to register a charity who seem not to be interested when we explain our ethical approach to ensuring charities are established for the right reasons.

Our fear is that this will lead to further challenges in dealing with the Charity Commission as it attempts to clamp down on fraud and other forms of abuse. Such a move by the regulator would inevitably make it harder for small charities, the life blood of many communities, to navigate the system and make the decisions they need to make in the best interests of the current and future beneficiaries.

It is likely, given the complexity of charity law and regulation is it likely, that some of the cases highlighted by the Commission will be small charities led by good people making honest mistakes because they don’t understand the fundamentals of charity law, namely that:

• Charities must be established for exclusively charitable purposes: they can’t have a mix of purposes that are charitable and non-charitable. Of course, it’s not always obvious what is and is not legally charitable because there are 100s of pages of regulatory guidance that set out criteria for assessing this in each area of allowable charitable activity (education, arts, relief of need, etc .)

• Charities must be established for public benefit: which means that what they do must be beneficial and benefit ‘a sufficient section of the public’ and any personal benefits must be no more than ‘incidental’ to the public benefit. These are complex concepts that require much more than a dictionary to unravel.

What is clear, is that charities cannot be established for personal gain.

In our view, backed up by the Charity Governance Code and the Charity Commission, is that the best safeguard against abuse of charities for personal gain is to have effective governance: a strong board that is not dominated by any person or sub-group (including a founder), with effective management of conflicts of interest or loyalty, good systems for ensuring effective behaviours in the boardroom (e.g. a Code of Conduct) and an effective culture of collective accountability.

While effective governance won’t stop ‘bad actors’ trying to set up charities for nefarious purposes, it is the best way for existing charities to prevent their charity being hijacked by people who want to use it for personal gain.

It is also the best way to avoid another risk highlighted by the Commission’s report, damaging disputes between trustees. The Commission reports a 57% increase in case work triggered by disputes between trustees, something mirrored in the enquiries we receive from charities.

The regulator says this “may be partly due to difficult decisions that charities are having to take in response to financial pressures, as well as wider societal tensions resulting in challenging circumstances facing charities”. In our experience it almost always arises from poor behaviour by a single trustee or small group of trustees and poor collective governance by the Board.

If you think our practical, values-led approach to charity governance can help your organisation please drop us a line.

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Want to find out more? Contact us at julian@almondtreeconsulting.co.uk to discuss your organisation’s needs.