Charity regulation has increased markedly over the past year, with multiple watchdogs keeping a closer eye on the sector than ever before.

This year governance and finance regulator the Charity Commission will be bolstered by greater powers to disqualify trustees and senior managers.

Last July the Fundraising Regulator was added to the mix, with a brief to better protect donors. In addition, the Electoral Commission has already shown its willingness to pounce on charities that fail to comply with 2014 Lobbying Act regulations around campaigning.

Information Commissioner’s Office

As if that wasn’t enough for charities to deal with, late last year the Information Commissioner’s Office (ICO) joined the fray, with a major operation targeting data protection breaches within the sector.

This resulted in fines of £25,000 and £18,000 for the RSPCA and the British Heart Foundation respectively last December.

More action by the ICO was to follow in April when 11 charities, including Oxfam and the NSPCC, were fined a total of £138,000.

To put this heightened focus by the ICO into perspective, prior to last year it had fined just one charity since 2010, the British Pregnancy Advice Service in February 2014 after a hacker threatened to publish thousands of names of people seeking advice on abortion, pregnancy and contraception.

A key driver in the ICO’s recent interest in charities has been a series of high profile media stories around charities’ fundraising practices, according to an ICO spokesperson.

This included a 2015 Daily Mail investigation into allegations charities were exploiting vulnerable donors.

Although the spokesperson confirms there are no other outstanding investigations as part of their operation, Information Commissioner Elizabeth Denham indicated in April that she hoped the recent action had sent a clear message that “what we now want, and expect, is for charities to follow the law”.

GDPR

Another factor in ICO interest is the introduction of the Genral Data Protection Regulation in May 2018, which supercedes current data protection legislation and aims to give the public more control over how organisations, including charities, collect their data.

Guidance issued by the ICO over this EU regulation urges charities to ensure individuals have genuine choice and control over how their data is collected and used.

According to charity sector groups such messages over the importance of protecting and responsibly using data have been received loud and clear.

“It is right and proper that charities comply with data protection law,” says Elizabeth Chamberlain, NCVO head of policy and public services.

“Charities always need to think about what the expectations of the public are and I think when it comes to their data they do have clear expectations around how that is treated.”

ACEVO chief executive Vicky Browning agrees, saying that “the charity sector is not above the law, and people expect us to behave in a legal and ethical manner”.

But while Directory of Social Change (DSC) policy director Jay Kennedy concedes that charities “have to follow the law and should not be treated differently, this is not the same as saying the ICO has got its approach completely right”.

“There is maybe a sense of double standards. Companies are routinely violating these data protection laws. I wonder, are they looking at them and whether their data protection is compliant,” he adds.

Fundraising

Increased scrutiny in data handling has coincided with a shake up of fundraising regulation in England and Wales, with the Fundraising Regulator launched last July to replace the Fundraising Standards Board (FRSB).

As with the FRSB this new watchdog is self-regulatory, but under the Charities (Protection and Social Investment) Act 2016 that created it, the government has reserve powers to make it statutory should practices not improve.

Included in its brief is to set up the Fundraising Preference Service, which is due to launch in July and enable the public to end all direct marketing communications from specific charities.

The regulator also has a brief to investigate complaints from the public and take action if poor practice is found, including publicly naming and shaming charities or referring onto other regulators such as the Charity Commission.

So far it has adjudicated just one case, in which it criticised seven charities that employed third party fundraising company Neet Feet, which was found to have intimidated and targeted vulnerable donors.

Browning is concerned that the Fundraising Regulator has not effectively communicated its role and responsibilities to the sector, saying “the first year has been marked by confusion over the precise extent of its powers and how these will be used”.

Kennedy believes some in the sector are struggling to see its value.

“This may be because the Fundraising Regulator has started from the point of view of saying ‘you better fund us’ rather than saying ‘here’s the value that we bring’,” he adds.

Lawrie Simanowitz, charity partner at legal firm Bates Wells Braithwaite, says another concern is the Fundraising Regulator’s readiness to fully back the ICO’s crackdown on charities. When the RSPCA and British Heart Foundation were fined last December the Fundraising Regulator’s chief executive Stephen Dunmore said it “should be a wake up call for the whole sector”.

But Simanowitz says: “I would have liked to have seen the fundraising regulator come out and say what it thought based on its specialist knowledge of the charity sector, which the ICO did not have. The Fundraising Regulator could have tempered what was said by the ICO but in the end it virtually just parroted it.”

Levy

Such criticism of the Fundraising Regulator could hit its coffers as it looks to raise a levy from 2,000 eligible charities, which have a fundraising spend of more than £100,000 a year.

Just 600 have so far have paid, according to a spokesman for the regulator, who adds, “we are in touch with those who haven’t paid and are confident that more will do so. Should payment still not be received, we may look to name and shame those that don’t pay.”

Chamberlain worries that if charities do not pay the levy it could eventually lead to the government enforcing statutory regulation on the sector.

“Some charities think that payment of the levy is some sort of punishment when actually it is a way they can demonstrate their commitment to good fundraising and self- regulation. The possibility of statutory intervention is there,” says Chamberlain.

Charity Commission

While getting to grips with heightened ICO and Fundraising Regulator interest are relatively new developments for charities, they should be well versed in scrutiny from the Charity Commission.

But charities still need to be ensure they are up to date with developments at the commission, which in July sees senior Department for Education civil servant Helen Stephenson, who has also held roles at the Office for Civil Society and Big Lottery Fund, succeed Paula Sussex as chief executive.

Her experience in the sector will be needed to tackle a bulging in-tray that includes handling new powers around the disqualification of trustees.

Due to come into force in April these new 2016 Charities Act powers were postponed until later this year due to the general election.

Once enacted they will see unspent convictions for terrorism, money laundering and sexual offences added to existing provisions for disqualification, that include bankruptcy and offences related to dishonesty or deception. In addition, these new provisions will cover senior managers, including chief executives.

Priorities for Stephenson should be to ensure these new powers are implemented as smoothly as possible, including having a clear idea of numbers affected and a robust waiver system in place, says Chamberlain.

Between 2008 and 2014 all six applications for a waiver were granted.

Another priority for Stephenson should be to ensure the commission’s communication and advice to trustees around their role is clear, says Chamberlain, who acknowledges that the regulator has already sought to do this by revising existing guidance.

This included a revamp in March this year of the commission’s Charity finances: trustee essentials document, to make it more accessible and readable.

But she wants the regulator to go further, with a new trustees induction pack from the commission, with information about their responsibilities in the role, on her wish list.

Independence

Another challenge for Stephenson will be to ensure the commission maintains its independence from government, says Kennedy.

“It has such a difficult job, facing pressures from government, the media and the charity sector pulling them in different directions,” he says.

In particular he hopes the commission has learned from its bungled advice on campaigning and lobbying ahead of last year’s EU referendum. This guidance was widely criticised by the sector, which felt it discouraged legitimate activities, and had to be rewritten with a far softer stance.

Another item teetering at the top of Stephenson’s to-do list is settling a debate over whether the commission should charge charities a fee.

Exploring the possibility of becoming part funded by the sector was a condition of government funding in 2014 and in March the Treasury green lit a consultation over the move.

Among those to object has been the House of Lords Select Committee on Charities. Its March report, Stronger Charities for a Stronger Society, said charging could undermine the regulator’s role as an independent overseer of the sector.

The DSC agrees, with Kennedy fearing charging would create “a conflict of interest between those who are being regulated and those who are regulating”.

But Simanowitz disputes this, saying that Companies House charges fees to firms but is still able to regulate effectively.

“I don’t think the Charity Commission is going to turn around and say ‘this charity paid us a few hundred pounds for its registration now we are not going to take enforcement action against it’,” he says.

Chamberlain is open minded about charging and wants to see a more “nuanced” debate that recognises “pros and cons” as well as issues such as “what it would charge for, how much would be charged and what would the additional resources go towards”.

Lobbying

Charities’ ability to lobby and campaign, particularly around election times, is also under increased scrutiny.

Under 2014’s Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Act, more commonly known simply as the Lobbying Act, charities that spend more than £20,000 in England, or £10,000 in the rest of the UK, need to register with the Electoral Commission as non party campaigners.

As Friends of the Earth and, in particular, Greenpeace found out in April, failure to do this can be costly.

Greenpeace was fined £30,000, while Friends of the Earth was fined £1,000 over an anti-fracking campaign they carried out in the run up to the 2015 general election.

In a statement Greenpeace said it had failed to register as a point of principle against a piece of legislation, which its executive director John Sauven described at the time as a “democratic car crash” that “curtails free speech”.

Many others in the sector agree, with more than 50 charities, including Age UK and Christian Aid, launching a campaign in June calling for urgent reform of the legislation, which they say is having a “chilling effect” on campaigning.

Lord Hodgson’s review of the act last year also called for reform, to ensure it only covered activities intended to influence voting during an election, rather than general campaigning.

Browning backs reform along the lines of Hodgson’s review and would also like to see the period of regulation, of a year before an election, reduced to four months.

“At the moment, it doesn’t stop charities from campaigning but it does impose a regulatory and administrative burden on them. Charities need to consider their expenditure on potential regulated activity, and if in doubt they should register to avoid any potential charges – registering does not mean that they have to stop,” she adds.

More regulation?

Charities’ clearly have a lot of watchdog interest to contend with in 2017 and Kennedy warns that even more regulation could be on the way following the Conservative Party’s decision to lead a minority government after the general election.

While Labour and Liberal Democrats favoured a scaling back of charity regulation in their manifestos, through overhauling the Lobbying Act, the Conservatives were the only party to hint that even greater scrutiny of the sector is on the way.

Its manifesto pledged to “establish a new framework” around digital activity to better protect the public, specifically mentioning both the charity and business sectors.

“It is too early to say but it is interesting that this is one of the few places where charities are mentioned in the Conservative manifesto,” Kennedy adds.

Joe Lepper is a freelance journalist

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