If 2014 was a year of ups and downs in the third sector, 2015 looks likely to be at least as turbulent, with an exceptionally unpredictable political and economic outlook and the possibility of more changes in the regulation of the sector. With that in mind, we ask: what are the key issues charity leaders need to keep at the front of their minds during the year ahead?

Funding and fundraising

Money remains the primary preoccupation for many charity leaders. But there are reasons to be optimistic, as NCVO’s director of public policy, Karl Wilding, wrote in the organisation’s annual overview of the operating environment for the sector. Noting that although in real terms the sector’s income is probably still lower than its 2008/09 peak, Wilding said NCVO’s research showed charitable giving to be stable, with income from the public as a whole rising. He acknowledged that income from statutory sources continues to decline, but could see some possible positive consequences here too, for organisations taking new opportunities to deliver public services.

Daniel Fluskey, head of policy and research at the Institute of Fundraising (IoF), is also bullish. He highlights some of the year’s more spectacular online/social media-based fundraising campaigns, such as the remarkable work led by cancer-sufferer Stephen Sutton during the last few months of his life, or the ice bucket challenge, which raised over £7 million for the Motor Neurone Disease Association, as examples of how social media is helping supporter-led fundraising play a more significant role in boosting some charities’ income; a phenomenon other organisations will seek to emulate.

While the chancellor’s Autumn Spending Review announcements could herald further difficulties for charities delivering public services, there were also some welcome measures, including the plan to propose to the EU that the threshold for Social Investment Tax Relief should be increased.

2014 saw some bad publicity in relation to some fundraising methods, including a Channel 4 Dispatches documentary that revealed shocking exploitation of vulnerable and elderly people by telephone fundraising agencies. But Fundraising Standards Board (FRSB) chief executive Alistair McLean points out that while his organisation’s complaints reporting processes grow more robust every year, numbers of complaints remain low overall – 48,432 in 2013, following almost 20 billion fundraising contacts – and rise only in proportion to increased fundraising activity. McLean also believes the sector has responded well to criticism of chuggers, with better training now provided by charities and face to face fundraising agencies.

Another funding method that will be used by a growing number of third sector organisations during 2015 is loan finance. Carolyn Sims, head of banking at Charity Bank, says it has seen a significant increase in enquiries and applications during the past year, from a wide range of organisations. Loans may be used for many purposes, sometimes alongside other sources of funding, including asset purchase, service development, setting up social enterprises, or as a bridging mechanism, if a grant or contract payments will not be paid for some weeks or months.

The value of corporate partnerships to the sector is also likely to increase during 2015. “We’re seeing companies wanting to play a more active role in society, by drawing on their competencies and assets,” says Manny Amadi, CEO at the consultancy C&E Advisory. “I think they are frustrated when they are seen by charities as simply being cash machines.”

Amadi believes the fact that more partnerships are now running for longer – three to five years instead of as part of Charity of the Year arrangements – is a healthy trend, as it allows more strategic planning.

HR, recruitment, and governance

Bad publicity related to executive salaries in the charity sector has been a source of exasperation during 2014. Although an inquiry conducted by NCVO in spring found that senior executives are generally paid much less than their counterparts in the private and public sectors, it also recommended that charities publish the exact salaries of named senior staff members, along with the ratio between the organisation’s highest and median salaries. The NCVO has also updated guidance for trustees on setting salaries.

The Charity Commission broadly supports these recommendations. “It is up to the trustees of the charity to decide levels of remuneration for staff, and to take into account any reputational risks surrounding this,” says a spokesperson. “We have also recently added a question into our Annual Return [submitted by charities to the Commission each year] which asks whether the charity has a policy on paying its staff.”

Another aspect of HR many charities will be considering during 2015 will be the campaign to pay other employees at least a living wage. Gillian Owen, spokesperson for the Living Wage Foundation, says there has been a significant increase in the number of organisations seeking accreditation as Living Wage Employers during 2014, including a notable increase in third sector organisations. She also notes that a growing number of funding organisations now actively encourage organisations to incorporate a commitment to pay a living wage if a funding application entails establishing new posts.

Low wages may be part of the reason that the biggest skills shortage in the sector is in fundraising, as revealed by figures from CharityJob. But there is also a shortage of talented managers, or of adequate investment in training for managers, says Denise Fellows, director and CEO of consultancy and talent development at the Cass Centre for Charity Effectiveness (CCE), at City University in London. She points out that employment dispute resolution specialist ACAS deals with more grievances reported against managers in the third sector than in the private sector – a problem that may be exacerbated by the fact that those managers are sometimes clashing with individuals who are likely to be highly motivated and committed.

Better training of managers within the sector could also help to alter another superficially damning statistic: 50 per cent of charity chief executive posts are recruited from outside the sector. Yet Fellows also believes more must be done to make the most of the group of individuals now in their 40s and 50s who are seeking to work for charities after spending the first part of their career in the private sector.

Iona Joy, head of the charities team, research and consulting, at NPC (New Philanthropy Capital), agrees. “There is a need for people who are financially literate and open to new ways of running organisations,” she says. “It’s about striking a balance between being risk averse and being entrepreneurial, willing to explore new ways of working.”

Administration, accounting, and reporting

In the back office during 2015 the sector will need to work diligently to adapt to changes made to the Statement of Recommended Practice (SORP) and to the development work of the new Charities SORP Committee, which consists of representatives from the accountancy sector, funders and academia, as well as umbrella third sector bodies and organisations.

The Charity Commission is also continuing its work to improve submission of annual returns and accounts. A spokesperson reiterates that it sends numerous reminders and regulatory advice warnings to charities in default: “We will not tolerate charities that demonstrate contempt for the public by failing to meet reporting requirements.”

Charities will also need to continue working on developing the best ways to demonstrate the impact they have. “We now have three out of four charities saying they measure impact in some form,” says Joy. “We’re also facing increasing amounts of competition, which also suggests activity in this space is growing.

“But even if three out of four charities are measuring their impact, to what extent are they changing their services as a result? We’re concerned that organisations may not actually be acting on what the evidence tells them.” She also bemoans the fact that while many funders want to see measurement of impact, they are not prepared to contribute resources towards this process.

Jenny North, director of policy and strategy at Impetus-PEF, advocates an impact measurement and reporting strategy rooted in pragmatism and a commitment to the organisation’s core purposes.

“The most important thing is to have a really good understanding of what you are doing,” she says, “Until you really understand your programme it’s really hard to run an evaluation that gives you meaningful data.”

Organisations able to implement an effective impact reporting strategy do stand to enjoy significant gains as a result, says Joy: “Reporting can be really hard to do sometimes, because sometimes the data isn’t what you want to hear. You do have to be prepared to understand that looking at data and processing data might mean that you’ve got to change.”

PR and reputation management

Despite the fact that some media outlets seem all too eager to publicise problems in the sector, it appears that charities are still trusted more readily by the public than almost any other institution – only the police and doctors are trusted more, according to research from Ipsos MORI conducted in early 2014.

The most important principle for any organisation seeking to participate in a major public debate is to stick to the facts, says Beatrice Karol-Burks, head of advice, information and news at Citizens Advice.

“We take our positions based on what’s coming through the doors and down the phone lines and what people are searching for on our website,” she says. “If you can justify what you’re doing it’s quite hard to go wrong.”

When it comes to using the media – and social media – to promote a particular cause, many charities could learn a thing or two from change.org, which has achieved great success in publicising causes dear to the hearts of its end users.

Change.org is not a charity, but it does provide a platform for activism. Katherine Sladden, change.org campaign director, thinks more charities should view themselves primarily as platforms for the people they represent, giving beneficiaries the opportunity to act as advocates for the cause, rather than passive case studies. She points to a number of major charities already doing this effectively, including many in the medical research field.

The Stroke Association is among them. Its broader media and communications strategies will continue to be based on a proactive approach in 2015, says Anil Ranchod, assistant director of external affairs. “The days of putting out a press release and sitting back and waiting for coverage are gone,” he says. “It’s about knowing who your audiences are and adapting your messages so that they resonate with them.”

The coming year will also see more charities refine the way they use social media to further their cause and communicate with end users, supporters and the wider public. Supporters will have a crucial role to play, says Ranchod. “It’s not just about growing the number of followers you have on Twitter or friends on Facebook, but about keeping them up to date and engaged.” For example, the charity runs Q&A sessions on Facebook every month, in which stroke survivors, their families and carers all participate.

Politics and regulation

It is impossible, at this stage, to predict what the government will look like after the General Election in May 2015, but sector bodies such as the IoF already know what they would the next government to do. It launched a ‘manifesto’ in July, calling for measures including more flexible regulation of society lotteries and further reform of Gift Aid.

The Association of Chief Executives of Voluntary Organisations (ACEVO) has made the protection of free speech and the avoidance of interference with that principle by legislation such as the Lobbying Act a key focus in its own manifesto, published in November. It has called for explicit protection of free speech for third sector organisations in law. Other measures on its wish-list include protection of charities’ access to judicial review, an extension of the right to legal aid to charities representing at-risk or under-represented groups, unification of all legislation applying to charity campaigning; and use of the £470 million levied in bank fines to support charities and community groups.

Director of public policy, Asheem Singh, slams the Lobbying Act as “a legislative aberration and a national outrage”.

“It places us with some pretty shady regimes in seeking to restrict the third sector’s democratic voice,” he says. “This retro-regressive ‘stick to the knitting’ nonsense has gone on long enough. It has no place in a 21st century debate about a modern, enterprising sector that is geared up to help as many people as possible. All parties should commit to repealing the Lobbying Act in the first year of the next parliament.”
In theory an incoming Conservative-led administration will review the legislation after the election. Labour has said it would repeal it – although this might not be straightforward, says Jay Kennedy, director of policy and research at the Directory for Social Change (DSC), because of overlaps with existing electoral law and party political funding rules.

The practical impact of the Act remains unclear at the time of writing. “The technical impact is less than we initially feared, but it’s almost the philosophical impact that is a problem,” says Kennedy. He points out that, in theory, the Act does not actually prevent charities campaigning or influencing politicians, or speaking out on public issues. But they do need to understand where they stand in relation to the Act and to existing Charity Commission guidelines.

“We decided not to register, although we do a lot of campaigning and a lot of it is aimed at government,” says Kennedy. “We hope that’s a signal to similar organisations that they don’t need to worry.”

One issue that illustrates the problems that may lie ahead for charities and the Charity Commission in relation to the Lobbying Act is how it might be applied to use of Twitter. This was the subject of a blog by NCVO policy team member Elizabeth Chamberlain in October. She noted the importance of asking whether tweeting by employees in relation to a specific issue could be seen as regulated activity. Chamberlain urged charities to adhere to the Charity Commission’s own guidance on campaigning during elections, which she suggested would be more relevant in most cases than the Lobbying Act.

The DSC also has some concerns about some of the clauses in the Protection of Charities Bill, which is at the parliamentary committee stage at the time of writing.

“Various aspects of the Bill are trying to extend the Commission’s power to remove trustees and disqualify people from being involved in charities, which seems to us to be a significant alteration in the regulatory relationship,” says Kennedy.

“We’re quite impressed so far with the new chief executive [Paula Sussex], but a lot remains to be seen about the direction the Commission is going in. The big worry remains that it’s going to be all about enforcement. The vast majority of charities are not engaged in criminal activity. They need a regulator that is an enabler.”

ACEVO’s Asheem Singh is scathing about the Commission’s performance in recent years and urges reform. “Trust is a fragile thing and if trust in the regulator is compromised, that affects perceptions of the wider charity sector,” he says.

“The Commission’s bungling on a range of issues from its fudged intervention in the Lobbying Act, to its tendency to chase the media agenda rather than show leadership, to injudicious comments by its trustees, has compromised it. It must not only reform itself, but must also look outwards and recognise that it should play a vital, active role in our civil fabric.”

ACEVO has also established the Low Commission, which will review and report on regulation of the sector during 2015. NCVO is also currently conducting a review of the Charity Commission’s governance structure.

If the only thing of which we can be certain in the year ahead is continued uncertainty, then perhaps one principle all charity leaders should have in mind during 2015 is the need to try to expect the unexpected.

“I think the economic downturn took a lot of charities by surprise, because many were working on projects planned for five or 10 years,” says the Stroke Association’s Anil Ranchod. “It’s all about being able to adapt to change. 2015 is going to be an interesting year.”

David Adams is a freelance journalist

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