Last night PLMR’s Xanthe Couture attended Westminster Social Policy Forum’s seminar on ‘Regulation, trust and the future of fundraising’.
The event provided an opportunity to discuss the Review conducted by Lord Hodgson of Astley Abbotts, who was appointed by the Minister for the Cabinet Office to undertake the statutory review of the Charities Act 2006. Lord Hodgson’s report, Trusted and Independent: Giving charity back to charities was released in July of this year and is currently awaiting a full response from the government.
Lord Hodgson’s report set out to review the aims and understand how the 2006 Charities Act is operating in practice, how effective it is, and whether the legal framework for charities in England and Wales is fit for purpose now and in the future. The report took a broad approach and sought to address what the role of charities is and what charities need to deliver on these roles.
The event was chaired by Baroness Barker, the Vice-Chair of the All-Party Parliamentary Group on Complex Needs and Dual Diagnosis. Baroness Barker stated that traditional charities are facing a perfect storm including changes to funding through social enterprise initiatives and deep funding cuts.
Lord Hodgson explained the report gathered information via two online questionnaires (one for the public and one for the sector, published on the Cabinet office website) as well as through 13 specific calls for evidence, six public meetings across England and Wales and a survey of 1,004 members of the general public commissioned from Ipsos Mori. This additional Ipsos Mori survey led to a report entitled, Public perceptions of charities, published in May of this year.
Lord Hodgson’s report produced 110 recommendations, each setting out which organisation could achieve the objective set forward. Vaguely, Lord Hodgson stated the Review found people support charities because they believe in them as charities help themselves, help other people, and help people who may also be far away.
As part of the recommendations, Lord Hodgson has called for greater freedom for charities to decide how they are run. In return, charities would be asked to be more transparent and accountable to the public by focusing information requirements on what the public need and want, and agreeing stronger rules on the regulation of fundraising.
Key areas for reform are:
- hand back power and control to trustees by reducing red tape;
- help charities demonstrate their success by making information requirements simpler and more transparent;
- revolutionise investment rules to open up the social investment market for charities.
Lord Hodgson stated there are seven principles that should guide the operation of charities in the UK, which are:
- Judgement not process – if we are going to reduce red tape for charities we have to be prepared to use our judgement, provide information and let charities and the people who run them use their judgement. For example, while there are numerous regulations around charities disposing of land, there have never been any laws around acquisition of land. In addition, disposal of land could cost just as much in professional fees as the sale raises.
- Charitable status is a privilege not a right, and charities should be prepared to merge to achieve best outcomes.
- The charity sector needs independence as well independence of the regulator.
- Regulation needs to be proportionate, transparent and comprehensible.
- Regulatory structure needs to be focused, practical and affordable. We have to be realistic on what we can effectively and efficiently monitor as there are thousands of sets of accounts.
- The regulatory attitude needs to be flexible and needs to maintain awareness that a range of charities are necessary to capture peoples’ needs.
- The voluntary principle is at the heart of the charity sector. Lord Hodgson added that this statement is something that requires debating separately.
Lord Hodgson Trusted and Independent Report Q&A
In regards to the idea and practice of trustees accepting payment, Lord Hodgson stated for larger charities, trustees should be able to judge for themselves if payment of trustees is appropriate. The Ipsos Mori research showed younger trustees are more likely to accept an honorarium. So, it could be said the shortage of young trustees can be connected to this finding.
The report recommended lengthy time consuming pre-qualification questionnaires for public sector commissioning contracts should be abandoned. In addition, the Charity Commissioner should always think about how many tenders are submitting for a project and tender and monitoring should be in relation to the size of the contract.
Furthermore, national exemption orders – which occur when charities write to every local authority to say they will raise money on that day thereby exempting other charities from raising money on that day – should be abolished.
Charities need to attract new talent to keep charities alive and fresh. Lord Hodgson described, “the classic moribund charity has 4 trustees, who are all over sixty and meet for lunch four times a year at a golf club mid-week.”
The role of the Charity Commissioner is to enforce charity law. Lord Hodgson stated he is “keen to keep them in that box otherwise we will have cross referencing where we get situations like Ofsted checking whether the projector is attached to the ceiling when assessing teachers.”
The Big Lottery Fund’s approach to the changing UK charitable landscape
Dharmendra Kanani, Director England Big Lottery Fund presented on the future of charity funding, and their new mandate, defined as: people powered change to create fulfilling lives in successful communities, in enriching places.
By 2015, the Big Lottery Funding hopes to have improved the lives of communities and people in need by having given £1.5 billion worth of funds directly to the voluntary and community sector. Dharmendra said this figure may seem like a lot, but demand is likely to increase. The Big Lottery Fund wants communities to be seen as an asset, and to see how the organisations they fund will “take people with you on a journey.”
Dharmendra explained that to understand the problems facing those in need in the UK, you need to have a data set, to create an evidence-based approach and be able to show metrics at the end of the support programme to demonstrate what has been achieved. Their support model of delivery requires cross sector partnership and focuses on prevention – as he said, “we all know that it’s better to prevent than to cure.”
The Big Lottery Fund’s new mandate advocates for an asset-based response – people powered change that focuses on prevention. Some examples of their programmes include targeting youth employment by investing £100 million in 20 areas throughout the UK. The ‘Better Start for Babies and Toddlers’ programme assists those in tough circumstances across four areas in England. The programme targets those for whom strong literacy and a good diet will positively impact future opportunities and outcomes. While the Big Lottery Fund has supported infrastructure projects in the past, at this time the organisation has decided it is more important to give additional funds to front lines causes.
Stakeholder response regarding third sector regulation, trust and diversity following Lord Hodgson’s report
Debra Allcock Tyler, Chair Small Charities Coalition, advocated for charity registration to be easier to use. Debra also spoke against the report’s recommendation for late fines for filing accounts for smaller charities. She argued that late submission does not occur because these charities have something to hide, but because they have difficulties in finding the resources to submit on time. Overall, Debra felt Lord Hodgson’s report will not affect the charity sector, stating, “it will be business as usual.”
Elizabeth Chamberlain, Policy Officer for the National Council for Voluntary Organisations (NCVO), stated the real problems for charities are the funding environment, the commissioning process and regulation from other sectors.
Elizabeth diverged considerably from Lord Hodgson on dealing with public benefit requirements, by suggesting that perhaps a statutory definition needs to be created. Broadly, public benefit is the legal requirement that every organisation set up for one or more charitable aims must be able to demonstrate that its aims are for the public benefit if it is to be recognised, and registered, as a charity in England and Wales.
Elizabeth explained that public benefit is a contentious and hard to define term, and currently within the UK there is confusion over what trustees have to do to create public benefit, including whether parliament can in fact define it. She thus recommended the UK pursue the Scottish Parliament’s approach. Scottish legislation has set in law some key principals by which one can define public benefit, which would make it easier for people to understand the idea of public benefit over the rafts of guidance and case law relied on by the English system.
Jane Tully, the Head of Public Policy and Affairs, Charity Finance Groups, spoke on charity accounts and their accounting practices. While Lord Hodgson proposed fines for late filing of accounts, Jane argued that fines would take money away from the very sector that needs money, and will impact the very charities which have the least amount of resources. Penalties would also take significant time to implement and questioned if they would be a source of revenue for the sector or the Charities Commission?
Jane also warned about getting carried away with the idea of social investment, which while the sector welcomes it as a funding model, is reticent that it will only impact the funding of a small percentage of charities
Michael Kelly, Head of Corporate Social Responsibility, KPMG outlined how much the mood of the country has changed compared to five years ago when the government was funding third sector, school attainment was improving year on year and statistics showed the UK was heading towards full employment. Most startlingly, the FTSE is now 30 percent of what is was at its height in 2007.
In this previous environment, the private sector had been a benevolent funder of the charitable sector. Now, capacity building has to grow because funding structures that were in place before are not there anymore. Michael stated, “I think it is a real shame the review did not go into more detail on business funding of charities, aka the ways in which tax works.” Adding, “Overall, there is less free money around but people are building more meaningful relationships.”
Alistair McLean, Chief Executive of the Fundraising Standards Board found that most of Lord Hodgson’s recommendations were very achievable, and charity self-regulation has been done well to date. Separate to the Report, a number of the regulatory bodies got together to decide who would be responsible for complaints regarding charities. Alistair also advocated that membership should become compulsory, and charities with a turnover of over one million pounds should justify why they are not members. As a whole, the charitable sector needs to continue to raise the bar as the public is placing charities under increasing scrutiny.
Jane Hobson, the Head of Policy Charity Commission discussed the future of fundraising and appreciated that Lord Hodgson’s Report emphasised the role of trustees and hoped that debate over the regulation and functioning of charities continues within parliament.
Jane explained that the strategic priorities of the Charity Commission is to promote the self-reliance of trustees to use the power that the law grants them, along with guidance that focuses on explaining charity law. Jane stated the Charity Commission needs to work more closely with umbrella organisations to complement guidance and to create more partnerships and collaboration and have done so on initiatives like a charity guide for tips to avoid fraud.
The Charity Commission recommends taking a proactive approach to regulating the industry and they have expanded random account inspection to serve as deterrent to poor account management.