Speech: Sarah Atkinson speech at Fundraising Week, 20 April 2016

Sarah Atkinson, speaking at Fundraising Week
20th April 2016

I’m going to deal with three things today –

  • The new charity landscape and how it is shaping up
  • What trustees need to do, focusing on the governance of charities
  • And our new fundraising guidance, and how you can help trustees understand their role

Where we are in the new charity landscape

Let me start with where we are in the new Charity Landscape.

The charity sector is a very strong part of the culture in England and Wales, with almost all UK households both giving to charity and using charity services. The NCVO almanac showed charity giving was up more than 5% and more young people are volunteering (up 2%).

That’s the good news.

Now for the bad. That’s the 2016 almanac so uses data from 2014/15.

Given this year’s public response to charity stories like Go Gen, Kids Company, Age Concern and E.ON, and so on. I think it’s highly likely that trust and confidence in charities will have fallen this year.

We know from surveys such as the Yougov research out in February that confidence in charities has dropped. Yes in that research we saw, charities are still only just below judges and policemen for trust and much higher than business and media and politicians. But this sector has been held in such high esteem – we don’t want to see trust eroded.

We are conducting our two-yearly research which looks at public trust and confidence in charities. We will be publishing this in in late May and that should give us a more comprehensive view on where trust has gone. Though we may not know until next year how that has affected actions – giving and volunteering.

At the Commission we believe that many of the problems we saw emerging in 2015-16 could have been avoided through better governance.

We have an opportunity, now, to fix them. If we address those problems this year, it may be that we’ll see a fall in the data for 2015-16, but we should see those trends reverse for 2016-17. We need to get back on track.

It’s true that the landscape is very different for charities today than it was a year ago.

There’s been intense media scrutiny on all sorts of charity stories that would barely have attracted any interest this time last year.

But there’s also been a shift from the Charity Commission as a regulator.

Because it’s become clear that charities don’t always understand their duties, we’ve been working to be much clearer in our guidance about what charities have to do, and what we expect of them. And you’ll see that in the blunter, clearer language. This is part of our efforts to keep the sector safe.

Being clear should mean we’ll see fewer charities in trouble, less public money put at risk, and it should mean more trust in the charity sector. So this moves me on to my second point, what trustees need to do.

What trustees need to do, focusing on the governance of charities

One of the best ways for trustees to make sure that they are complying with their legal duties is to put processes in place that will encourage good governance. This is about:

  • setting and monitoring the charity’s strategic aims and direction
  • ensuring that there is strong management of its money, reputation and other assets
  • having effective systems, safeguards and controls in place

However it’s not enough to just have these processes, you have to use them.

  • It’s also about trustee boards being committed to improving their own performance.
  • Having the right structure and enough time for effective discussion and decision-making.
  • The right mix of skills and expertise.
  • Making regular opportunities for re-assessing whether that balance is right.
  • Making sure that the board has access to the right information and advice in the best format.
  • And being prepared to ask those probing, challenging, sometimes even awkward questions.

The Essential Trustee

In the past year we have updated our core guidance, The Essential Trustee, to make it clearer and more succinct. It should, in my opinion, be read by each and every one of the million trustees across England and Wales.

I won’t embarrass anyone here by doing a straw poll of everyone who has read the guidance, as I sometimes do at these events, but if you haven’t read it yet I would strongly encourage you to do so and encourage your fellow trustees to do so too. And if you have read it, read it again!

The new version makes it easier for trustees to understand their legal duties and avoid many of the basic errors that often lead to serious problems. The guidance is clearer, shorter, includes links to other guidance, and sets out lessons from our work.

It outlines your 6 main duties.

We know that charities are operating in a tough funding environment and that finances can be a key pressure on charities. We know that many are also reliant on a single source of funding.

Trustees must take ultimate responsibility for charity finances and we recently updated our finance guidance.
It’s worth having a look at these two:

Managing a charity’s finances (CC12)

Charity reserves: building resilience (CC19)

And one of our more practical aids to good governance is 15 questions trustees should ask.

Our new guidance on fundraising

So these are the general duties. But, it’s Fundraising Week and I’m at a fundraising conference.

So, you probably want to hear about our new guidance on fundraising and the role of the Commission.

This comes on the back of the fundraising crisis last summer, which had the potential to seriously damage trust and respect for charities.

We have contributed to the changes to fundraising practices and to help reform the self-regulatory scheme and get self-regulation back on track.

Currently we are working with the new fundraising regulator closely, and indeed we have seconded a senior member of staff to work with them.

But the crisis, and the high profile commentary surrounding it, also raised questions about whether trustees had fulfilled their responsibility to exercise effective oversight of fundraising.

The PACAC report emphasised the role of trustees and governance in driving forward changes to fundraising within their organisations.

Our consultation on fundraising is not publishing until late May, but I want to share the direction of travel it’s going in.

Thank you to everyone who took part in our consultation. We had some really useful responses and many of those are reflected in the final report. It’s really helpful to get a clear understanding of what works and what’s difficult for charities. Most of that feedback was positive: the feeling was that our consultation was going in the right direction for many charities. But we also had useful feedback on setting the right tone and how to calibrate the role of trustees. In fact it’s one of our most-used pieces of guidance with 80% of our consultees telling us they use that guidance.

And in fact, before the recent spotlight on fundraising practice and regulation, we had already had plans to upgrade it – we just brought that work forward. Trustees need to feel confident and reassured about taking on the role of fundraising. They need to know what they need to do.

We believe trustees are central to fundraising. They set the strategy after all.

And the strategy is not just a piece of paper. Trustees need to understand your fundraising appeal or plan and spend time on it. It cannot be too complicated for them to understand it (if it is you either need a new plan or new trustees).

And of course we’ve had some pretty interesting, responses to our consultation from different parts of the charity sector, from small to umbrella bodies, which reflects what a diverse sector the Charity sector is. Just over half of the responses included trustees.

Our messages in this guidance are principally for trustees so we were pleased to have that kind of engagement. And trustee engagement with the consultation was much higher for the largest charities where 85% took part in the consultation response.

We were pleased that 2/3 of those that responded to our consultation found the revised version more helpful than what we currently have. Of the very large fundraising charities who responded, 80% favoured the new version.

There were some concerns about the tone of the guidance. The style and tone of our guidance has undoubtedly changed over the last two or three years, as you would expect in line with the changes to our regulatory approach. The revision to cc20 reflects this, in its sharper focus on our regulatory expectations.

We won’t be changing that approach, but we do want to make clear that our intention is to help trustees to understand what they need to know and do, not to scare them!

There was lots of support for including a checklist, with some refinements, and people are keen to have more examples of how fundraising should work in practice.

So what does the guidance do?

Our revised fundraising guidance concentrates on the trustee role and on promoting trustee compliance with their legal obligations in the fundraising context. We are focusing on what we regulate.

The guidance sets out 6 principles for trustees to help them achieve that. There was very strong support for those principles from those who responded to our consultation. So the new version of the guidance will keep that approach.

The new guidance is clear that trustees have, and must take responsibility for, their charity’s fundraising. They must comply with their legal trustee duties when overseeing it.

And if I were to have a top line for you to take away today, it would be that you and your trustees all need to get across these 6 key duties:

1) Plan effectively

This says that the trustees are responsible for agreeing their charity’s fundraising strategy. Others might be responsible for developing the strategic options, but the trustees must have final ownership. The strategy should reflect the charity’s values and the trustees must be satisfied that it will be implemented.

2) Supervise your fundraisers

This is about trustees having oversight of the fundraising which others, whether in-house or 3rd party, carry out for their charity.

Some of the feedback we have received in the consultation expresses a concern that the new guidance imposes an expectation that trustees have a more ‘hands-on’ role than is feasible in charities of some sizes and undesirable for good governance.

Our expectation isn’t that trustees should get over-involved in the day to day management of their fundraising. We recognise that many charities, like other organisations, rely on effective delegation.

But trustees must have systems in place for strong management of the people and organisations that the charity works with so that they can be satisfied that its fundraising is managed in its best interests. They are accountable if something goes wrong.

Following the comments we’ve had on delegation, we are working to make our expectations about delegation really clear for the published version.

3) Protecting your charity’s reputation, money and other assets

This is about getting all the money in and having controls which reduce the risk of fraud. But it’s also about reducing reputational risk by considering the impact of your charity’s fundraising on its donors, supporters and the public.

You may have read about Our Local Heroes recently in the press after we published our case report.

We got involved after complaints that the public was being misled and were not being properly informed that only 20% of the funds raised went to the charity. Our role was to ensure that trustees were complying with their legal duties, as we do not directly regulate fundraising.

We met the trustees and visited the charity to conduct an inspection of the charity’s books and records. This allowed us to properly understand the way the charity was being run.

We identified serious regulatory concerns including a very low level of charitable expenditure, substantial spending outside the charity’s objects, poor governance, conflicts of interest and an insufficient focus on providing grants to beneficiaries. The charity had entered into contracts and agreements without due diligence or proper records and there were poor financial controls.

The charity’s income in 2015 was £500,000, but only £10,000 had been used in to further the charity’s objects by providing grants. The rest went on administration.

The charity had signed a fundraising agreement with Targeted Management Ltd (TML) 5 years and the charity only got 20% of all the funds they raised.

We said that this was not acceptable and that there was likely to be justifiable public concern and damage to the charity’s reputation if the ratio of income to charitable expenditure remained so low. And we issued an action plan:

  1. to ensure that fundraising is conducted in an open and transparent way, and the public are informed how much of their donation would go to the charity
  2. to maximise the proportion of income given as grants and minimise administration costs
  3. to ensure money is not spent outside the objects of the charity

The result was that the costs were substantially reduced by over £100,000 a year. The trustees also stopped all projects that did not directly further the charity’s objects.

The charity is now aiming to provide a minimum of £140,000 worth of grants a year. New trustees have been recruited, and governance and financial controls have been put in place by the charity.

The fundraising costs of 80% remain high and we got asked a lot by the press when we published the case report about Our Local Heroes, isn’t that too high?

I think the lesson for charities is that they need to live their values and think about their reputation.

You might think that £2,000 from a professional fundraiser is OK but how will the public think about £8,000 going into the pocket of a fundraiser? You have to be confident about explaining this.

Legally, there is no set amount that a charity should spend on fundraising costs and no minimum proportion of a donation that must go to a charity. But if the public doesn’t know when they are donating, and comes to know later, how will they feel. What impact will that have on your charity?

4) Finding out about, and fully complying with, any laws or regulations that apply to your charity’s fundraising

The legal rules that apply to various types of fundraising can be detailed and complex. They cover compliance in important areas such as with data protection law, licensing, and working with commercial partners. These rules must be followed.

With the new version of our guidance we’ve moved away from providing a handbook approach which tries to cover the whole of the legal framework for fundraising, so that we can focus on compliance with trustee duties which we regulate.

Our guidance will cover the Charities Acts’ rules and regulations on fundraising, including the new act, and we will make sure that there are the best possible links to sources of other information about the wider framework.

And let’s talk briefly about the new Act.

The Charities (Protection and Social Investment) Act 2016

How you treat your donors and particularly vulnerable ones is really important and this is recognised in this new Act which requires charities and commercial fundraisers charities use to be much more transparent and accountable about the standards they follow. An outsider might be somewhat surprised that charities have to be told to do that and it is reflective of the government’s concerns in this area.

5) Finding out about, and following, any recognised standards that apply to your charity’s fundraising

These standards are in the Code of Fundraising Practice. The commission expects all fundraising charities to fully comply with the code.

6) Being open and accountable

This includes complying with any relevant statutory accounting and reporting requirements on fundraising and using reporting to demonstrate that your charity is well run and effective. In your fundraising communications it is about being able to effectively explain your fundraising work to members of the public and your charity’s supporters.

Ok, that’s the 6 key principles.

People have told us they like the new guidance but miss the ‘how to’ factor.

NCVO, ACEVO, The Institute of Fundraising and the Charity Finance Group announced last year they will be working together on some ‘how to’ guidance on fundraising for trustees and senior staff, and I really welcome this. Because although we set the rules, the sector has the practical expertise on making the rules work. Many of you will have good practice to share and I hope this sector guidance will give you the opportunity to do so.

I hope that all of you will read our new fundraising guidance, and welcome your engagement with the fundraising self-regulator.

It may seem a tough mountain to climb, but we are certain that if we work together, – with better governance, with better decision making, and better fundraising practices, the charity sector can regain the public trust.

I’d like to look ahead 5 years from now and see a charity Renaissance – with the UK charity sector flourishing and known for its probity, its excellent governance, and for the way that it touches peoples’ lives.

Now, can I take questions?

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