REGULATING FUNDRAISING for the FUTURE Trust in Charities, Confidence in Fundraising Regulation September 2015

REGULATING FUNDRAISING FOR THE FUTURE Trust in charities, confidence in fundraising regulation September 2015 Sir Stuart Etherington Lord Leigh of Hurley Baroness Pitkeathley Lord Wallace of Saltaire Contents Review of fundraising self-regulation CONTENTS Foreword 4 5.5 Powers and functions 53 Acknowledgements 5 5.6 Sanctions 54 Glossary 6 5.7 Responsibility for the Code 55 5.8 The Complaints Committee 55 Executive Summary 7 5.9 Funding 56 1. Introduction 13 5.10 Governance structure 57 1.1. Context 14 5.11 Accountability 57 1.2. Purpose of the Review 16 5.12 A new Fundraising Practice Committee 58 1.3. Terms of reference and scope of the Review 16 5.13 The Code of Fundraising Practice 58 1.4. Other relevant issues 17 5.14 A registration badge 59 2. Current system 20 5.15 The creation of a ‘Fundraising Preference Service’ 59 2.1. Overview of current landscape 21 5.16 A new single professional Institute of Fundraising 60 2.2 The main self-regulatory bodies 22 5.17 Recommendations on responsibilities of trustees and CEOs 61 2.3 Charities and the role and responsibilities of trustees 25 5.18 Further recommendations 63 2.4 How self-regulation currently works 26 6. Next steps 64 2.5 Analysis of submissions to the written consultation 28 Annex I: Terms of Reference of the Review into 3. Types of regulatory models 30 the Self-Regulation of Fundraising 66 3.1. Self-regulation 31 Annex II: List of bodies and individuals consulted 68 3.2. Statutory regulation 33 Annex III: Consultation Analysis 74 3.3. Co-regulation 34 Annex IV: Analysis of Successful Regulators 86 3.4. Examples of successful regulatory systems 35 References 92 4. Options analysis 36 4.1 Mode of regulation 38 4.2 Functions 40 4.3 Strengthening existing bodies or reshaping the system 42 4.4 Jurisdiction 43 4.5 Funding 44 4.6 Sanctions 47 5. A regulatory model for the future: the Review’s recommendations 48 5.1 Criteria for a new regulatory solution 49 5.2 Three lines of defence model 50 5.3 A new Fundraising Regulator 51 5.4 A co-regulatory model 51 02 03 Foreword Review of fundraising self-regulation FOREWORD Britain is a generous society with a strong tradition of philanthropic action. In turn, there is tremendous, though not inexhaustible, public goodwill towards Britain’s charities. As such, they have a privileged status in society. With this comes a responsibility to live up to the very highest standards. Most charities are conscious of this and strive to work to high standards in everything that they do. Where this falls short – as has recently happened The recommendations in this report aim to in the case of some fundraising practice – it is achieve a better balance between the public’s important to ensure that charities and the bodies right to be left alone and charities’ right to ask. Sir Stuart Etherington Lord Leigh of Hurley Baroness Pitkeathley Lord Wallace of Saltaire charged with regulation act swiftly and effectively We have sought to resolve many competing (chair) to restore public trust. As Lord Hodgson, a arguments, not least of which has been the previous reviewer of fundraising regulation, call for direct government intervention. has noted, the charity sector is only as strong But we remain of the view that in order to as its weakest link. maintain public trust it is up to charities to take responsibility for a better relationship with their Britain is a better place because of our collective donors and the wider public. This begins with generosity, which enables the work of thousands charity trustees, who we believe need to take a of charities and voluntary organisations. The two more active role in the oversight of fundraising. are inextricably linked: and we are clear that charities and voluntary organisations must be We now have the opportunity, indeed the duty, allowed to raise funds from the public. to bring about change. We believe our proposals will create a simple and clear system, We are equally clear that this right to ask is not comprehensible to the public and charities, and unbounded. For the public, the right to be left proportionate to the issues at hand. The clear alone, or approached with respect and humility, majority of those we have spoken with as part of is equally strong. This is not simply a matter of this Review have expressed their full appreciation ACKNOWLEDGEMENTS public interest, but is also key to the long-term of the seriousness of the problems and a clear sustainability of charities. desire to find a solution. We hope to have This has been an ambitious review that has drawn considerable As a response to the greater demands placed provided a constructive way forward, including attention from the media, charity sector and public alike. upon them, we have seen an increase in plans for implementation. charities’ fundraising activities. However this Ultimately our ambition is that charities view It has taken great effort to create such a We would not have been able to achieve this has meant that the balance between giving and conduct fundraising not simply as a way detailed analysis over a relatively short period without their help. and asking has sometimes gone awry. Some to raise money, but most importantly as a of time. We would like to express our thanks to of the techniques used, or the manner in which We would also like to thank everyone who conduit between their donors and the cause all those who have made this possible, they have been used, present a clear risk of has contributed to the consultation either in they wish to support. particularly Karl Wilding, Elizabeth damaging charities in the public eye. Despite person, via the phone, online or by post. Chamberlain, Helen Raftery, Aidan Warner, A detailed list can be found in Annex II. this, we are clear that charities and those Teresa Scott and Chloe Stables of the National working within them have the best intentions. Council for Voluntary Organisations (NCVO) Unfortunately, good intentions are not always and Susann Hering of the Cabinet Office. enough to avoid bad outcomes. 04 05 Glossary Review of fundraising self-regulation GLOSSARY ASA Advertising Standards Authority PACAC Public Administration and Constitutional Affairs Committee CC20 Charity Commission guidance ‘Charities and Fundraising’ PECR Privacy and Electronic EXECUTIVE Communication Regulations CCNI The Charity Commission for Northern Ireland PFRA Public Fundraising Association DMA Direct Marketing Association MPS Mail Preference Service SUMMARY FRSB Fundraising Standards Board NCVO National Council for Voluntary Organisations HEFCE The Higher Education Funding Council for England NEO National Exemption Order ICO Information Commissioner’s Office SCVO Scottish Council for Voluntary Organisations IoF Institute of Fundraising SMAs Site Management Agreements OSCR Office of the Scottish Charity Regulator TPS Telephone Preference Service 06 07 Executive Summary Review of fundraising self-regulation PART 1: ISSUES AND PROBLEMS THE CURRENT APPROACH TO THE as many problems as it would address , fundraising booking system. Nevertheless, a SELF-REGULATION OF FUNDRAISING particularly high costs and lack of speed wider, more effective set of sanctions is required IS NOT WORKING in responding to change. by the fundraising regulator. The Review received sufficient verbal and written evidence to show that the current approach to …BUT A RECOGNITION THAT JURISDICTION NEEDS TO COVER self-regulation is no longer fit for purpose. A STATUTORY INVOLVEMENT IS HELPFUL ALL FUNDRAISING ORGANISATIONS number of systemic weaknesses were identified Hybrid models of regulation that involve statutory Any self-regulatory system based on the notion in both the design and implementation of the bodies either directly or implicitly were of membership is likely to suffer from a lack of current system. Self-regulation has lost the recognised as useful, potentially offering the public confidence. The Review has heard that confidence of both fundraising organisations benefits of both state regulation (such as charities in particular are concerned about the and the public. compulsion, threat of enforcement) and self- problem of ‘free riders’ and concluded that any regulation (speed, professional involvement), new fundraising regulator should have the power THE CURRENT APPROACH IS albeit with the disadvantages of such to adjudicate over all UK-based fundraising UNNECESSARILY COMPLEX AND approaches. In order to work, future fundraising organisations, regardless of whether they have BADLY RESOURCED regulation needs the clear and visible co- registered with the regulator or publicly shown The chief concern reported to the Review is the operation of statutory regulators. their support for the system. unnecessary complexity of the current system. Specific problems include a wasteful duplication ALTERNATIVE FUNDING MODELS COMPLIANCE AND GOOD of resources as well as confusing and frustratingly EXIST FOR THE FUNDRAISING PRACTICE MATTERS…AND slow decision-making processes. These have REGULATOR STARTS WITH TRUSTEES partly been attributed to the involvement of too The Review has explored alternative models for Many of the recent problems have occurred many bodies whose roles and functions lack funding a new fundraising regulator, including due to a lack of compliance with the existing clarity and often overlap. There is a need for the current membership subscription model. rules, or disregard of the available guidance. clear separation of powers and responsibilities Alternatives proposed to the Review include a Charity trustees and managers have too often in the future. levy on Gift Aid or fundraising income, the latter been absent from discussions on fundraising operating above a de minimis level. A levy on Many respondents – including the Fundraising practice or values. We share the desire, Gift Aid would however turn fundraising Standards Board (FRSB) – argued that self- expressed by many to the Review panel, to regulation into a statutory system.

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