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The 2015 Charity Fundraising Controversy: Lessons for Trustees, the Charity Commission, and Regulators

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The 2015 Charity Fundraising Controversy: Lessons for Trustees, the Charity Commission, and Regulators House of Commons Public Administration and Constitutional Affairs Committee The 2015 charity fundraising controversy: lessons for trustees, the Charity Commission, and regulators Third Report of Session 2015–16 HC 431 House of Commons Public Administration and Constitutional Affairs Committee The 2015 charity fundraising controversy: lessons for trustees, the Charity Commission, and regulators Third Report of Session 2015–16 Report, together with formal minutes relating to the report Ordered by the House of Commons to be printed 14 January 2016 HC 431 Published on 25 January 2016 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Public Administration and Constitutional Affairs Committee The Public Administration and Constitutional Affairs Committee is appointed by the House of Commons to examine the reports of the Parliamentary Commissioner for Administration and the Health Service Commissioner for England, which are laid before this House, and matters in connection therewith; to consider matters relating to the quality and standards of administration provided by civil service departments, and other matters relating to the civil service; and to consider constitutional affairs. Current membership Mr Bernard Jenkin MP (Conservative, Harwich and North Essex) (Chair) Ronnie Cowan MP (Scottish National Party, Inverclyde) Oliver Dowden MP (Conservative, Hertsmere) Paul Flynn MP (Labour, Newport West) Rt Hon Cheryl Gillan MP (Conservative, Chesham and Amersham) Kate Hoey MP (Labour, Vauxhall) Kelvin Hopkins MP (Labour, Luton North) Rt Hon David Jones MP (Conservative, Clwyd West) Gerald Jones MP (Labour, Merthyr Tydfil and Rhymney) Tom Tugendhat MP (Conservative, Tonbridge and Malling) Mr Andrew Turner MP (Conservative, Isle of Wight) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No. 146. These are available on the internet via www.parliament.uk. Publication Committee reports are published on the Committee’s website at www.parliament.uk/pacac and by The Stationery Office by Order of the House. Evidence relating to this report is published on the relevant inquiry page of the Committee’s website. Committee staff The current staff of the Committee are: Dr Rebecca Davies (Clerk), Ms Rhiannon Hollis (Clerk), Ms Laura Criddle (Second Clerk), Dr Adam Evans (Committee Specialist), Ms Luanne Middleton (Committee Specialist), Dr Henry Midgley, (Committee Specialist), Ms Penny McLean (Committee Specialist), Ms Jane Kirkpatrick (PSA Intern), Ana Ferreira (Senior Committee Assistant), James Camp (Committee Assistant), and Mr Alex Paterson (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Public Administration and Constitutional Affairs Committee, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 2107/2995, the Committee’s email address is [email protected]. The 2015 charity fundraising controversy 1 Contents Summary 3 1 Introduction 4 2 Fundraising and the allegations 6 The Importance of Fundraising 6 Allegations of poor practice made in the press 7 3 The role of trustees: governance 12 The role of trustees in fundraising 12 The trustees’ responses to the allegations 13 Proposed improvements to governance 14 What trustees should do 15 CAGE 16 Donations from overseas 18 4 A new fundraising regulator 19 Fundraising regulation: the current situation 19 The origins of the current system: the Charities Act 2006 19 Lord Hodgson’s Review and subsequent action 20 Criticisms of the current regulatory structure 20 The proposed new fundraising regulator 22 The structure of the new regulator 22 The hybrid model 22 Progress towards creating a new regulator 23 Is Etherington appropriate? 24 5 The role of the Charity Commission 27 The previous role of the Commission 27 The Charity Commission and the hybrid model of regulation 27 Accountability 28 Monitoring Success 30 6 The role of the Information Commissioner 31 The role of the Information Commissioner 31 Allegations made by the media and the data protection laws 32 Future Role of the Information Commissioner 33 2 The 2015 charity fundraising controversy 7 The role of the Cabinet Office 35 Charities (Protection and Social Investment) Bill 2015 35 The reserve powers 36 Conclusions and recommendations 37 Formal Minutes 42 Witnesses 43 Published written evidence 44 List of Reports from the Committee during the current Parliament 45 The 2015 charity fundraising controversy 3 Summary In response to allegations made over the summer by the Daily Mail in relation to the unethical practices employed in fundraising activities, the Government set up the Etherington Review into the regulation of Charity Fundraising. PACAC also launched an inquiry, to examine both the regulation of charity fundraising and the way in which trustees of large charities govern fundraising. Witnesses to our inquiry, including employees and trustees of some of the charities whose outsourced fundraising activities have been criticised, expressed shock at the Daily Mail’s discoveries. There was consensus amongst witnesses both that trustees had failed in their duty to extend their governance to fundraising, particularly in the management of sub-contractors, and in support of Etherington’s proposals. The Government is right to welcome Etherington’s recommendations. This is the last chance for self-regulation. It is essential that the Etherington system is made to work effectively, though it can only work by supporting effective governance by trustees. Trustees are ultimately responsible for every aspect of their charity’s activity, including fundraising. No system of regulation can be a substitute for effective governance by trustees. Good governance in general is about sustainability of reputation in the long- term, as well as the sustainability of finances. Each of the charities that gave evidence to us should re-examine their governance of fundraising and other charities should learn lessons from this episode. Trustees must have the right skills, information and attitude to prevent poor practice in the future. They are responsible not merely for fundraising within the charity but for fundraising by sub-contractors as well. We welcome the Charity Commission’s new guidance on the duties of trustees over fundraising, in particular their emphasis that trustees need to ensure that charities (and their sub- contractors) always act in accordance with their values. Our forthcoming report on Kids Company will also draw out lessons from that case study for trustees. The Government is correct to accept the findings of the Etherington review. The Etherington proposals should however be further enhanced. The Charity Commission should gain a higher profile and be more proactive to ensure the new system works, holding public hearings rather than solely the private inquiries it holds now. The Commission should act as guarantor of the system, ensuring that regulators cooperate with one another and that trustees understand their duties. Trustees, the Commission and regulators should assist the sector in developing a more ethical fundraising culture, and to make sure that bad practices are not tolerated. The Government should monitor the sector to ensure that it is able to use its reserve powers under the Charities Act should self-regulation fail. It would be a sad and inexcusable failure of charities to govern their own behaviour, should statutory regulation became necessary. 4 The 2015 charity fundraising controversy 1 Introduction 1. In the summer of 2015, the Mail on Sunday and Daily Mail carried a series of reports which alleged that many of the best known charities in the UK (including Oxfam, the NSPCC, Save the Children and the RSPCA) had used, often through sub-contractors, exploitative and unethical fundraising methods. These methods included buying and selling personal data, ignoring the Telephone Preference Service (TPS) and putting pressure on vulnerable people to donate.1 In doing this, they failed to uphold the values of their organisations within their fundraising functions. The media also brought to light a number of specific cases, including that of Olive Cooke - who received hundreds of fundraising communications a month, and Samuel Rae - whose personal data was repeatedly bought and sold by charities and commercial companies. 2. Until now, the charity fundraising sector has been regulated by three bodies (all membership organisations). The Institute of Fundraising set a code of fundraising practice. The Fundraising Standards Board receives complaints and adjudicates on whether any of its member charities have, or have not, broken the code. The Public Fundraising Regulatory Association regulates street and doorstep direct debit fundraising. 3. The Government reacted to the Mail on Sunday and Daily Mail’s allegations by announcing a review of fundraising regulation. It asked Sir Stuart Etherington, the Chief Executive of the sector representative body, the National Council for Voluntary Organisations (NCVO) to chair the review. Sir Stuart invited Lord Leigh of Hurley, Baroness Pitkeathley and Lord Wallace of Saltaire to support him in this work. The review reported on 21 September 2015. 4. The main recommendation of the Etherington review was that a new single regulator should be established to replace the Fundraising Standards Board and to take over the role of setting the code from the Institute of Fundraising. It also recommended
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