A recent report carried out by the National Audit Office (NAO) has suggested that the Charity Commission was failing to investigate abuses of the charitable status and therefore putting the good name of the charity sector as a whole at risk.
The NAO carried out their report after the PAC investigated into a charity called ‘The Cup Trust’ which lead to concerns over the Charity Commission. Public Accounts Committee (PAC) chairman Margaret Hodge said that the commission had some “tough questions to answer”
Ms Hodge said: "The Public Accounts Committee asked the NAO to carry out this work earlier this year after our inquiry into the Cup Trust raised serious questions about whether or not the Charity Commission is fit for purpose. This report suggests it is not.
"People in this country are hugely generous in giving to charities but the failure of the Charity Commission to detect and tackle abuse effectively risks undermining public trust in the whole sector.
"The Charity Commission... have some tough questions to answer."
The commission overseas more than 160,000 charities in England and Wales. Over the past seven years its annual budget has been cut by 40% which is around £22.7m.
The NAO report said: "It does important and necessary work and its independent status is highly valued, but it does not do enough to identify and tackle abuse of charitable status.
"It uses its information poorly to assess risk and often relies solely on trustees' assurances. Where it does identify concerns in charities, it makes little use of its powers and fails to take tough action in some of the most serious cases."
The report into the commission was prompted by revelations that The Cup Trust was operating a complex tax avoidance scheme on behalf of its wealthy donors. Out of every £100 donated, just three pence went to good causes.
In a separate report the NAO concluded the Charity Commission should never have allowed The Cup Trust to register as a charity in the first place and was too slow to act when problems emerged.
Earlier this year the PAC heard of evidence from the Cup Trust and commission chief executive Sam Younger will appear before the committee on MPs this month.
Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, said the commission had taken a "soft-touch approach" in even the most serious cases.
He said: "This report reflects what we have said for years. In order to maintain public trust, charities want a vigilant and effective regulator which takes prompt action in the rare instances of abuse."
A Cabinet Office spokesman said: "As the NAO notes, the Commission should exercise the power it has more often."
But he also said the Cabinet Office would launch a consultation "to address any gaps" in the Commission's legal authority.