Abstract:The paper investigates the reasons for regulating the accounting, management and performance of charitable organisations. It is argued that there exists apriorireasons to expect the public would demand regulation of this industry. This is primarily so that the transaction costs of bilateral bargaining between the public and charities are minimized, and to improve the security of possible donors against the proclivity of some agents to make false and misleading statements. However, existing regulations may be counterproductive by giving the public the impression that regulation achieves these aims when in fact it has not. Other possible inconsistencies in the way regulations have been applied are identified.