The UK Charities sector suffered from bad press during 2015 amidst widespread allegations of inappropriate fundraising methods and accusations of data protection breaches. The shortcomings of the charities sector were trumped by an even bigger blow when children’s charity ‘Kids Company’ was closed due to allegations of financial mismanagement following reports that public funding was being spent on accommodation for its clients when the charity was in fact getting the accommodation for free; as well as an ongoing investigation by the Metropolitan Police.
Review Of The Charities Sector
Despite the high-level enquiry into Kids Company it was the public perception of poor fundraising behaviour among many charities which drew the most discontent and prompted a review of fundraising self-regulation by a cross-party panel of peers. The review was conducted by chief executive of the National Council for Voluntary Organisations NCVO, Sir Stuart Etherington, and looked at several aspects of the conduct and management of UK charities. The Review concluded that the current system of self-regulation was inadequate and that the fundraising operation of charities would have to be more robustly regulated if it was to regain the public’s trust.
Governance & The Role Of Trustees
The role played by trustees and senior managers in the oversight of fundraising activities were also examined in the Etherington Report. While many of the recent issues which gave rise to the Etherington report were due to a lack of compliance with existing rules, it is the trustees who are legally bound to act in the interest of a charity ensuring any funds raised on its behalf are disbursed in accordance with the organisations charitable objectives. The Report suggests that trustees and senior managers must take primary responsibility and regularly review the organisation’s compliance with the code of fundraising practice. Interestingly, the methods used to raise money for a charity do not presently come under the remit of trustees but they should ensure the charity is behaving ethically and complying with the Code of Practice.
The proposal that trustees should be more engaged with fundraising activities is an acknowledgement of the importance of fundraising in the relationship between a charity and its supporters.
The Charities (Protection & Social Investment) Bill
To remedy the perceived disconnect between some trustees and fundraising behaviour, the Charities (Protection and Social Investment) Bill currently going through Parliament, contains a requirement for all trustees of charities with an income exceeding £1 million to report annually on:
- The charity’s approach to fundraising;
- The use of third party fundraisers;
- The steps taken to protect vulnerable persons and other from undue pressure in their fundraising.
The Bill essentially strengthens the onus for responsible fundraising activity to the trustees which will enhance the self-regulatory regime.
Fundraising Using Third Parties
Many charities opt to use third party professional agencies to collect funds on their behalf and this can create a disconnect with the charity’s ethical code and that of the third party. The Report advises that where a charity is working with an agency to fundraise, the charity’s trustees should play a more active role in managing the relationship between the two parties. Further to this, the Report suggests that it is also the responsibility of the trustees to ensure that:
- Agencies adhere to the charity’s value and ethos;
- Agencies have no negative impact on the charity’s reputation;
- Agencies do not cause donors to feel unduly pressured into donating.
The Bill has passed through the House of Lords and is currently approaching its final stage in the House of Commons. Given the haste with which the legislation is being implemented to rectify the public perception of UK charities, trustee responsibility is set to increase with trustees soon finding themselves with increasingly onerous duties in relation to the conduct of their charities.