New rules and regulations have flooded into the charity sector recently. Since 2016, charities up and down the country have been trying not to get swept away by the barrage of guidelines, standards, principles, behaviours, sections and sub-sections being enforced on them.

Driven in part by the powerful influence of the media, the list has included an updated Charities (Protection and Social Investment) Act; the Governance Code; the introduction of a new fundraising Code of Practice, Fundraising Regulator and Fundraising Preference Service; and, of course, GDPR. Add to this monitoring the potential impact of Brexit, negotiating ways around the Lobbying Act, preparation for the forthcoming safeguarding code (currently being written by Dame Mary Marsh) and getting to know the new leadership at the Charity Commission, and things have been somewhat busy.

And for most charities, ‘busy’ has translated into ‘expensive’. Understanding and implementing all of this has come with substantial administrative and financial burden. “The sheer volume of information and guidance that trustees and staff have had to wade through is a barrier to compliance and unnecessarily bureaucratic”, Simon Francis, chair of the PR and Communication Association’s Charity and Not-for-Profit Group says.

Pauline Broomhead, chief executive at the Foundation for Social Improvement agrees, emphasising the fact that while small charities have responded appropriately and proportionately, they “don’t have access to significant resources with which to manage change, especially as the demand for their services has increased by an astonishing 134 per cent since June 2013.”

Tom Murdoch, a partner in the charity & social enterprise team at Stone King, provides another example, citing one of his clients – an organisation he describes as already very careful with data, fundraising and the safeguarding of its beneficiaries – as being “horrified when they had all of these extra regulations to respond to. They are still quantifying the cost of it all”.

Meanwhile, an anonymous charity explains: “I estimate it has cost us in the region of six figures, in both legal advice and staff time – money that we would rather have spent on our charitable purposes. Multiply that across the sector and that’s a whole lot of resource that has been spent by already very-stretched organisations. Let’s hope it’s all worth it.”

The government believes it is. At the heart of the decisions to tighten up the rules, they say, is trust. Without trust, the charity sector cannot operate. And the best way to protect trust is through regulation.

Indeed, it was trust that was the focus of the first speech made by Baroness Stowell to the sector after her appointment as the new chair of the Charity Commission. Referencing the “sobering” findings of new research that, at the time of writing had not yet been published, she said people’s experiences mean they “trust charities no more than they trust the average stranger they meet on the street.”

“Whatever the failing, it adds up to people seeing and believing that those in charge of important institutions are running them in their own interests, for their own benefit,” she said.
While Baroness Stowell was clearly – and rightly – referencing poor behaviour and decision-making within the charity sector, such as that displayed by Oxfam’s leadership regarding the safeguarding cover-up or one of the 13 charities fined by the ICO for mis-use of supporter data, it’s important to also view this within the context of wider society.

Over recent years, the general public has been repeatedly let down by large, powerful organisations and institutions – many of which never seem to be “punished” for their actions. The long list of examples includes, but is not limited to, MP’s expenses, media phone-hacking, the banking crisis, the Libor scandal, Facebook’s dalliances with Cambridge Analytica – the list goes on. But with so many examples of mis-use and abuse of power by supposedly “trusted” people and organisations, is it any wonder that the public is so suspicious of everyone and everything?

The impact of all of this on the sector is still not entirely clear. As the CFG/University of Kent report, What Regulation, Who Pays? Public Attitudes to Charity Regulation in England and Wales, outlined, people only give when they feel confident their donations or time will be
used wisely – confidence which the report says is maintained by effective regulation.
However, giving levels remain strong – CAF’s UK Giving Report 2018 shows no major fluctuations in giving, for example.

And when it comes to trust, while Baroness Stowell hinted that the Charity Commission’s research identified some disturbing trends in the wrong direction, nfpSynergy, which has been tracking trust for more than 15 years, thinks charities are the third most trusted public institution after the NHS and Armed Forces. Additionally, it revealed trust in charities rose by nearly four percentage points between Autumn 2016 and May 2017.

History repeats itself

Increased regulation due to concerns about charity operations is nothing new. Since charitable status was first introduced back in medieval times, activities have been mismanaged, donations mis-used and new laws developed in response.

The Statue of Elizabeth, for example, established a commission in 1601 to hear complaints about charities, and “during and following the civil war, the commission became less effective and was eventually replaced by a system whereby a complainant could seek redress through the Attorney General”, according to a paper penned by Anne-Marie Piper and her colleagues at Farrer & Co for Thomson Reuters Practical Law.

However, where living memory is concerned, not since the 1990s have so many changes been seen in charity law as they have of late. In 1992 when the Charities Act strengthened the power of the Charity Commission and introduced a new fundraising regime, it was both growth in the sector and concerns of malpractice that were the key drivers – a situation that was not too dissimilar to what happened in 2016 when the Charities Act was updated again (now called the Charities Protection and Social investment Act).

For fundraising though, the government went a step further in 2016 than it did in 1992. The media furore over direct mail and telephone fundraising led to Sir Stuart Etherington’s review, which in turn resulted in a new Fundraising Regulator, and much to the horror of many, the introduction of the Fundraising Preference Service. The FPS would kill fundraising, destroy giving levels and generally be a disaster for the sector, shouted many, while the Fundraising Regulator was a politically-motivated initiative that could not be trusted to do what was right for the sector and would cost charities a fortune in fees.

What has actually happened is far less dramatic than that. The Fundraising Regulator has implemented what it has been required to and has focused on doing so in a way that maintains “a proportionate balance between the duty of charities to raise funds and the needs of the public not to be put under undue pressure to give”.

As a result, some 28 per cent of people would now opt out of receiving communications from a charity using the FPS. However, so far just 16,500 people have actually done so – which equates to a tiny percentage of all those who give, much to the relief of fundraisers.
Despite this, the regulator is happy. “We hear regular feedback that we are helping charities create longer term, more sustainable relationships with donors,” a spokesperson says.

GDPR

What has the potential to be more impactful on the way in which charities fundraise is GDPR.
Unless you have been living under a rock for the last few months, you won’t have escaped the changes to data protection rules, which have strengthened the data rights of EU residents, increased the potential fines organisations face for misusing data, and made it easier for people to discover what information is held about them.

The sector has been preparing for GDPR for some time, indeed long before lots of other industries cottoned on to what was about to hit them. In part this is because the media coverage into data practices and subsequent fines from the ICO has spurred them on, but it is also because – despite the impression that can be given at times – most charities understand how important good data management is.

“The vast majority of organisations were already in a good place,” Francis says. “It is testament to how seriously charities treat data that they were well ahead of the game in contacting supporters with any changes to privacy policies that they were making.”

Take Demelza Children’s Hospice, for example, which has been preparing for these changes for some time: “We set up a project group to go through each stage of the GDPR, updating consent and permissions, training staff and volunteers, and updating all of our processes and policies,” Claire Ellis-Waghorn, its deputy director of fundraising explains.

“We’ve always endeavoured to put our supporters first when it comes to fundraising and have always taken data protection seriously. While it has been a lot of work to make sure that we are compliant with new standards, we are yet to fully understand or appreciate the full implications, something I believe will come as case law comes into place,” she adds.

Likewise, at Twining Enterprise where Joanna Lucille Phaure has been busy cleaning the database. “We’ve always tried to maintain the absolute highest standards in how we manage and store data. I don’t want to mail people who do not have an interest in our work and hopefully with our smaller list we will have greater engagement,” she says.

Another impact of both the previous fines and the prominence of GDPR is that of changing the culture of data management, with one charity saying: “People still make mistakes with data, but they now own up to them which they wouldn’t have done before. We have seen a lot more internal notifications of data breaches be sent to the ICO. It’s not because we are doing more things wrong, but because we are more aware of the rules now.”

Forewarned is forearmed

Contacting the ICO to let them know about data breaches, both large and small, before complaints are made, is the right thing to do. So too is letting the Charity Commission know if incidents – data-related or otherwise – have occurred that are likely to be picked up more widely, says Murdoch.

“If a journalist phones the Charity Commission asking for a response to an issue that it doesn’t know about, it can put them in a difficult spot. People often take liberties with the truth, which can then become the narrative. Whereas if both the commission and the charity in question are on the front foot and informed, they can respond differently, which can help reduce the chance of a crisis developing,” he says.

The Charity Commission does need all the help it can get, given the state of its finances. In a story that might be familiar, its budget has been cut by 50 per cent in real terms over the past
eight years. At the same time, the volume of its case work has grown – thus putting Baroness Stowell and her chief executive Helen Stephenson in a somewhat unstable and unenviable position.

Not only is this of detriment to the Commission’s staff and their ability to do their jobs well, but it is questionable for the sector as a whole. As CFG pointed out in its recent contribution to the government’s civil society strategy consultation, “the risk is that regulation is not invested in and the charity sector is not supported to govern itself effectively. This will undermine its ability to grow and to leverage resources from the public, government and private sector.”

CFG highlights the considerable bang for its buck that the government receives in exchange
for its investment in the commission and suggests that “even a slight increase” in its budget would result in significant returns – £1,900 for every £1. It’s a strong argument indeed, but perhaps a little much to ask of a government that has the tendency to prioritise short-term gain for the few over long-term benefits for wider society (the impact of cuts to policing and youth services being just one example).

Assuming no more money

will come, how else can the commission and its charities respond to this? Enhanced communication between the commission and the other sector bodies – including CVS’s and local authorities – would be a big help, believes the FSI’s Broomhead. Referencing the safeguarding issue as a prime example, she explains how many small charities expressed concern that their voices would not be heard. “The time has come were we need to get together to find a way to communicate with civil society more consistently and effectively.”

In short, better partnerships. This is something Baroness Stowell was also keen to encourage in her speech when she referred to “a shared vital mission”. The Commission, she said, does not want to be the sector’s adversary nor cosy friend, but “a partner”.

Coming from a regulator that swung from being critical friend to public enemy number one, these are important words that perhaps indicate a thawing of the chilly relationship between it and the sector. But as Baroness Stowell knows well, to build trust, it’s not what you say that counts. It’s what you do. ■

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