Moving on from scandal

Following widespread press coverage about the way in which some charities fundraise, Sir Stuart Etherington was tasked with conducting a fundraising regulation review and ?in September published his report, ‘Regulating fundraising for the future: Trust in charities, confidence in fundraising regulation’. The minister for civil society, Rob Wilson, accepted the review’s recommendations.

There was a welcome emphasis on the need ?for a shift in focus away from charities viewing fundraising simply as a way to raise money towards charities and their trustees taking responsibility for a better relationship with their donors and the wider public. Sir Stuart stressed that this was not simply ?a fundraising issue but also a governance issue. 

The key recommendations of the report are ?as follows:

A single new regulator: The report concludes that a new regulator with stronger powers to sanction, universal coverage, and better resources is a necessity and recommends the abolition of the Fundraising Standards Board (FRSB) and ?the creation of a fundraising regulator, which would be responsible for regulating all types ?of fundraising by UK-based organisations. ?This new regulator would be a public-facing body responsible for all complaints about fundraising, enforcing a single code of fundraising practice. 

A co-regulatory approach: There needs ?to be a co-ordinated effort between the new regulator and the Charity Commission – particularly in creating a strong relationship between the code of fundraising practice ?and the commission’s guidance for trustees (e.g. CC20). The commission would act as ?a ‘backstop’ in cases that raise regulatory concerns, for example, where the fundraising regulator has evidence of fundraising practices that, in addition to being in breach of the rules, raise concerns about a breach of trustee duties;

More effective sanctions: There should be ?more effective sanctions, including naming and shaming, cease and desist orders, compulsory training, and clearance of future campaigns. ?The report stops short of recommending fines and explains that this is primarily due to the negative impact that they have on donors and beneficiaries;

Responsibility for the code of fundraising practice: The code should be overseen by ?the new regulator, with its structure comprising a fundraising practice committee and a complaints committee, with an independent reviewer of the complaints committee to address complaints regarding process. ?With the Institute of Fundraising (IoF) freed ?of responsibility for the code, the report recommends that it should focus on encouraging good practice and supporting fundraisers beyond the compliance mindset. The report also says that the Public Fundraising Association (PFRA) and IoF should merge, but with complaints, adjudications, and sanctions transferring to the new regulator;

A single code: The PFRA handbook should be merged with the code of fundraising practice;

A badge of membership: The report recommends the replication of the FRSB’s ?tick logo, which was recognised as one of the successful elements of the existing system during the consultation; and

A new fundraising preference service: Individuals could register with this new service if they no longer wished to be contacted for fundraising purposes. Charities engaging ?in high-volume fundraising would have a responsibility to check this list before the ?start of a campaign. Sir Stuart has established ?a working group of fundraising practitioners and other relevant experts to determine how the service will work operationally and further details about this group are expected to be published shortly.

Kids Company

Following the closure of Kids Company in August 2015, various investigations have taken place. ?The commission opened a formal statutory inquiry on 20 August to continue to investigate and put on the public record whether concerns about the administration, governance, and financial management of the charity were true in light of the then increasing number of allegations made in the media, and to identify wider lessons for other charities and trustees.

This is in line with the commission’s duty to promote public trust and confidence in charities.  >>?>> The commission says it cannot comment further while the investigation is underway, but will publish a report once it has concluded, to set out its findings and conclusions. Meanwhile, the Public Accounts Committee has issued its report into the actions of the government in continuing to fund Kids Company and, unsurprisingly, has criticised the actions of those involved. 

Some £42m of public money was given ?to the charity throughout its existence, and the committee had a number of concerns over the decision-making processes involved.

The full report, including a summary of findings and recommendations, is available online, but the main conclusions are:

• Public funding ought generally to be focused on national projects rather than smaller regional projects that only benefit those in ?a certain geographical area. For a long time, ?Kids Company operated only in certain London boroughs, and only fairly recently did it branch out to Bristol. Despite promises that the model would be used to set up in other areas, this never happened, and the report is critical of the fact that this was never explored or raised with the charity;

• While it should be the case that the government can fund organisations that do not meet the traditional grant-giving framework, all funding should be transparent, with clear reasons ?given for departing from any stated policy or procedure. Kids Company failed to meet the criteria for competitive grants in 2013, and from that date received funding that was otherwise reserved for national organisations, without ?any clear basis for the decisions made; and

• The level of funding and processes by which decisions were made were fundamentally flawed. There appeared to be no real oversight as to the viability of the charity, or the use to which funds were being put. Nor were any of the conditions of the grant apparently ever checked, or the charity called to account. 

The recommendations are around how the government funds organisations like this in the future, with the aim of continuing to give some level of flexibility, but including far more due process and transparency. 

CAGE funding

The advocacy group CAGE has withdrawn its application for judicial review of the Charity Commission’s action in requiring two charities to not make any further grants to it. Both charities had given assurances to the commission that ?they would cease, and would not resume, funding CAGE following controversial statements made ?by the group in support of the Islamic State killer known as ‘Jihadi John’ (Mohammed Emwazi). CAGE claimed that the commission had exceeded its role by unlawfully requiring charities to stop giving grants to it.

A statement agreed between the two parties was published, explaining that the commission’s actions had been motivated by its duty to ?protect public trust and confidence in charities. The statement also confirms that charity trustees have the right to exercise their discretion when acting in the best interests of their charity and within their powers.

Charities Bill

 The Charities (Protection and Social Investment) Bill had its second reading in the House of Commons on 3 December and has now been committed to a Public Bill Committee. The dates for the meetings of the committee have not yet been announced, but the programme motion ?on the Bill schedules the committee to report to the House by 7 January 2016. Possible areas of concern for the Bill going forward are the power of the Charity Commission to issue statutory warnings to charities and the need for further safeguards.

Gift Aid

There is a new model declaration that must be used on any new declarations made after 6 April 2016. Existing declarations for future donations remain valid, but charities will need to make sure that they start planning for the new declarations. The new declarations are shorter, but still make it clear that if the donor does not pay enough tax ?to cover the gift aid reclaimed on their donations, they will be liable. Use of the model declaration is not mandatory, but all relevant element must be in place for it to be valid, and the easiest way to ensure this is to use the HMRC model.

Sarah Clune is an associate and professional support lawyer at Stone King @StoneKingLLP www.stoneking.co.uk