A significant change in fundraising?

Legal News
A significant change in fundraising?


While it is hoped that the new Fundraising Regulator will make a difference for charities and donors, there is still room for improvement, explains Andrew Mackie

During the latter part of 2015, the media was full of reports into alleged malpractice by charities, many – although not all – of which related to fundraising. One vulnerable individual was said to have been tricked into parting with £35,000 after his personal details ended up in the hands of scammers; another was reported to have taken her own life as a result of an overwhelming number of requests for donations. Charities and their fundraising practices were suddenly thrown into a rather unflattering light.

Readers and listeners with concerns regarding charities’ use of their personal data were encouraged to complain and the Fundraising Standards Board (FRSB), then the self-regulatory body for charity fundraising, received 384 complaints in just three weeks. Not long afterwards, the government asked Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, to lead a review into charity fundraising and its model of self-regulation. The review, which took place over the summer of 2015, found that the model was not working and that, although it had ‘striven hard to represent the public interest’ during its ten-year history, the FRSB had ‘ultimately failed’ and did not offer a ‘credible form of regulation’. The review concluded that ‘significant change’ was therefore needed.

‘Significant change’ could have meant replacing self-regulation with statutory regulation – and there were those who called for this – but self-regulation had long been seen as the most appropriate model for charity fundraising (not least because it is more flexible and cost effective) and so the Etherington review recommended it be given one last chance to work. A new fundraising regulator – appropriately named the Fundraising Regulator (FR) – was established and, in July 2016, took over the former responsibilities of the FRSB. It also inherited the Code of Fundraising Practice from the Institute of Fundraising, which, as a trade association previously able to set its own standards, was regarded as having a conflict of interest.

Role of the new regulator

The FR has been tasked with strengthening the system of charity regulation and restoring public trust in fundraising. It regulates all fundraising undertaken by, or on behalf of, charitable, philanthropic, and benevolent organisations in England and Wales, and has had its work cut out in the months since its formation, during which it carried out an investigation into Neet Feet (a fundraising agency) and eight of its charity clients, prompted by allegations published in The Sun. The FR’s first (and so far only) adjudication was published at the end of November.

Funding the regulator

Somewhat ironically, the FR itself is not immune from the need to fundraise: the Etherington review proposed that the new body should be funded by means of an annual levy on organisations that carry out fundraising activity. Around 2,100 fundraising charities have been identified as ‘eligible’ to pay the levy, which ranges from £150 per year for charities with an annual fundraising spend (as at 2014) of between £100,000 and £149,000 (of which there are 383) to £15,000 per year for those spending more than £50m (of which there are just two).

The difficulty for the FR is that the levy is voluntary – although you would be forgiven for thinking otherwise, given that eligible charities have each received a formal letter and ‘invoice’ for payment of a fee for ‘regulatory services’. In April, minister for civil society Rob Wilson said that he was ‘disappointed’ that some charities have refused to sign up to the levy and ‘support’ the new regulator, but, in practice, each charity must consider, bearing in mind its own particular circumstances, whether payment would in fact be appropriate. This may involve considering the consequences of not paying, some of which could be reputational – particularly as the FR is threatening to ‘name and shame’ organisations that do not pay. Wilson also points out that the government has the power to introduce statutory regulation if it deems it necessary and that he ‘won’t be afraid to act’, although his ability to do so will of course depend on his continued appointment following the general election in June.

Charities with lower fundraising spends are now able to register with the FR. By doing so, they will be signing up to its terms and conditions, and agreeing to make sure that their fundraising is ‘legal, open and honest, and respectful’ and complies with the fundraising code. Registration costs £50 for charities; a sliding scale from £100 to £1,200 applies to third-party fundraisers, depending on their income. As with payment of the levy, registration is not compulsory and, again, trustees will want to consider whether registration is appropriate for their charity. Either way, it is now fairly apparent that charities will be expected to carry out their fundraising in accordance with the code, whether or not they sign up formally.

Code consultation

The FR has recently carried out a consultation on proposed changes to the code. The consultation was not intended to be a root-and-branch review; rather, it concentrated on proposing changes in specific areas that the FR felt could be easily improved. Its aims were sound: strengthening protection for the public against undue pressure or unreasonable persistence on the part of fundraisers, for example by making it easier for employees of fundraising bodies to raise concerns about particular practices and ensuring that fundraisers take into account the needs of donors in vulnerable circumstances.

Some of the proposals were more concerning for charity lawyers, however. For example, concerns have been raised over whether the code will give sufficient clarity on how (and to what extent) trustees are expected to oversee the fundraising activities of their charity. Others are worried that, at a time when charities are becoming ever more regulated (most fundraising charities have at least four regulators), the proposals will lead to mission creep, which could leave charity trustees confused as to what precisely is being policed and by whom. The consultation suggested, for instance, that parts of the Charity Commission’s existing fundraising guidance should be inserted into the code, which would risk elevating guidance to the status of the code and blur the lines over which is the responsible regulator. There is already crossover between what the regulators are regulating in this area (see also the fines levied by the Information Commissioner’s Office for fundraising-related data protection breaches by charities), so more clarity would be welcomed.

Enforcing the code

The extent to which there will need to be regulatory cross-over highlights perhaps the biggest potential problem for the FR: it has no real enforcement powers of its own and therefore needs to ‘co-regulate’ with other regulators. It will have to be the statutory regulators – the Charity Commission, the ICO, and HM Revenue & Customs – who step in where sanctions are required.

In many ways, much about the new regime appears a little low key – at least so far. For example, the Fundraising Preference Service (FPS), when it is implemented at end of this year, will be a watered-down version of what was announced initially. The Etherington review recommended that the FR establish a service by which ‘individuals can register if they no longer wish to be contacted for fundraising purposes’, rather as the Telephone Preference Service enables individuals to opt-out from receiving unsolicited sales or marketing calls. Instead, the FPS will require individuals to list by name the charities from which they do not wish to hear (and there are over 167,000 on the register). However, this should not be seen as a failure by the FR; rather it is the result of it listening in response to consultation.

It is early days for the FR and, as the levy and the registration fees are currently its only source of funding, it remains to be seen whether it will survive without statutory backing. However, it is to be hoped that its introduction will help make a real difference, both for charities and the people who donate to them. But, as Rob Wilson remarked recently, while fundraising scandals may not be on the front pages today, they have not necessarily gone away for good. It may be too soon to rule out statutory regulation of charity fundraising just yet. SJ


Andrew Mackie is an associate at Bircham Dyson Bell