DÃ©jÃ vu for the charity sector
Charities are once again revisiting the issues of fundraising regulation, payment of trustees and the Charity Commission, and the public benefit requirement, writes Vicki Bowles
Three years ago, I sat down to write the Solicitors Journal charity update, and was listening to my daughter singing 'Are We Nearly There Yet' in preparation for her nativity play, and thinking about the Hodgson review (SJ 157/48). Back then, fundraising was on the agenda, as was payment for the Charity Commission's services, and public benefit.
Now, my daughter is too old for nativity plays, and we're still thinking about fundraising, payments, and public benefit, but in a slightly different way. But last year, there was also the excitement of Brexit, and some data protection news, so there is a lot to think about now that the mince pies have all been eaten and the decorations put away again for another year.
Fundraising continues to be big news in the sector, and we now know that the Fundraising Regulator will be consulting on the code of fundraising practice in the new year. This is a really important step in the new regime, as the regulator will be able to police adherence to the codes whether or not an organisation is a member, so for charities that fundraise, it is important to get their views across to make sure that the codes are as practical and universally applicable as possible.
The Fundraising Preference Service is also on the horizon, and although all the details are yet to be confirmed as I write this, it does look like there will be a choice for individuals of either hitting a 'total reset' button '“ meaning that no charities can contact them about any fundraising '“ or a softer option whereby individuals can name specific charities that they do not want to hear from. It will be the responsibility of the charity to check the lists, which will be updated daily, so it will be really important to make sure that there are systems in place to do this effectively.
For regular supporters who hit the total reset button, there will be an opportunity for the charity to get permission to continue to contact the individual. This permission will override the total reset for that charity only, and is a means of being able to keep in touch with individuals who perhaps want to stop unsolicited requests, but still maintain a relationship with one or two charities.
The real issue for the sector here is that there will have to be changes made to the way in which charities deal with donors '“ from checking the register when sending out mass literature, through to making sure that there are mechanisms in place to maintain contact with those that have pressed the total reset button to get that all-important override consent. Fundamentally, though, charities need to understand how the system works so that they can comply, which is where lawyers may have to assist.
As Sarah Clune mentioned in her update in June 2016 (SJ 160/25), the Charities (Protection and Social Investment) Act 2016 brought in additional requirements for charities in relation to fundraising agreements and what has to be reported in the annual return. These are now in force, and importantly, although the Act is silent on whether the amendments to fundraising agreements apply only to those entered into after 1 November 2016, the Fundraising Regulator takes the view that because the changes are aimed at protecting vulnerable donors, and all charities should be taking steps to make sure this happens, the requirements will apply to all agreements, regardless of when they were entered into. This means that all existing agreements need to be amended to contain this provision. The regulator has given charities until 1 April 2017 to implement the changes, but clients need to start thinking about doing so sooner rather than later to ensure there is time to get all agreements up to speed. Payments to trustees and the regulator
The question of whether trustees should be paid, and whether there should be a fee payable to the Charity Commission, is not new, and yet we are talking about it again in 2017.
The sector has raised the issue of paid trustees as it becomes increasingly difficult to find people willing to give up their time and volunteer in what is becoming a progressively more regulated environment. The Charity Commission, on the other hand, is suffering the effects of the austerity measures as much as any other government department, so is looking at ways of supplementing its income.
The former tends not to be popular with the public, and the latter not popular with charities, and we will have to wait and see whether the arguments being put forward this time are any more persuasive than the previous ones, but it is worth reminding charity clients who are struggling that it is possible to pay trustees where you have a good reason, and applications to authorise this can be made to the commission.
The commission was given a number of additional powers in the 2016 Act, and that Act also included an extended list of convictions which automatically disqualify an individual from holding senior positions in a charity. This is important, as it will cover a number of individuals already in post, and charities are likely to need advice on how to proceed once the relevant provisions become binding. The commencement date has been delayed, which is good news for those who need time to prepare, and we expect the law to come into force in September 2017.
Data protection changes
One of the most significant changes over the next 12 to18 months which affects all organisations, not just the charity sector, is the coming into force of the EU General Data Protection Regulation (GDPR). This is a directly effective regulation and is already in force, but organisations have until 25 May 2018 to be fully compliant. With Brexit looking likely to happen after this date, and the UK government having confirmed that it will enact very similar legislation when we exit the EU, it is important that charities start looking now at the new obligations to make sure that they are compliant by May 2018.
The more significant changes relate to additional requirements in relation to processing agreements, and increased information that has to be made available to individuals when their information is first collected. One of the key changes, however, impacts on fundraising practices too, and that is the requirement that consent be explicit, specific, informed, freely given, and unambiguous. This is going to mean that charities will have to look at how they obtain consent to use an individual's personal data, and work out whether they think that they can demonstrate that it meets the new definition.
What is evident is that the old 'opt-out' system is unlikely to be sufficient '“ the Fundraising Regulator has already made it clear that this is not considered good practice, and when the GDPR is fully operational, this effectively becomes law. But, as with all areas of law, there will be exceptions, and it is not necessarily the case that all charities will have to switch to an opt-out system in relation to fundraising. The reality is more subtle, and charities are likely to need assistance in looking at their individual positions, and how they demonstrate compliance with the new regulation, while also maximising income. Public benefit
I honestly did not expect to be revisiting this in 2017, but it looks as if the debate around public benefit, and particularly independent schools, is to become a talking point again. The government has announced proposals in a recent green paper which would effectively force schools with charitable status to increase bursaries, sponsor academies, and share facilities.
This is not new, and the sector has been here many, many times, but it is an indication that perhaps independent schools are still not shouting about all they do for their local community. Public benefit shouldn't be prescriptive, and certainly shouldn't be a pure numbers game. It should be about governors looking at what they have, and what they can offer, and making decisions in the knowledge that they have to demonstrate that they operate for the public benefit in line with their charitable status.
Clients in this sector may well be nervous about the potential for change, but at the moment these plans are still very much in their infancy. And let's not forget, we have been here more than once. Key takeaways for the sector at the moment are that there is some antagonism building towards independent schools, and to bear this in mind when reporting.
I'm not sure that we will ever get 'there' for charity regulation '“ wherever 'there' may be '“ but we will have fun along the way. I'm hoping that 2017 will see an end to the hounding of charities over fundraising issues, and an increase in positive stories about the benefits that the sector provides. And I wonder whether I will still be talking about public benefit and paying trustees in another three years'¦
Vicki Bowles is a senior associate in the charity and social enterprise team at Stone King