Speech

Rathbones Charity Conversations series 2015: William Shawcross' speech

Charity Commission Chairman William Shawcross on regulating charities and promoting public trust at Rathbones.

Good afternoon,

I am delighted to be here with such a wonderful range of charities. Events such as this always remind me of the vibrancy and diversity of the charitable world. I cannot think of an area of our national life is not touched, in some way, by charity. In this room are charities working to promote animal welfare, a charity that cleverly aggregates small share holdings for the benefit of charity, charities working to promote excellent child care. And of course you represent just a miniscule proportion of the charities on our register. I hope to have a chance to speak to and hear from many of you this afternoon. I also hope you find this a valuable opportunity to meet and learn from each other.

I am of course also honoured to be taking part in the first of what promises to be a valuable new programme of events for charities.

I welcome all initiatives that help trustees manage their charities effectively.

Access to advice and training is absolutely crucial for the continued success of charities.

As I will explain, the Commission as regulator must continue to provide guidance to charities. But we alone cannot meet charities’ needs.

After all, there are over 165,000 registered charities, and over one million trustees. Few are charity law experts, and many are volunteering as trustees for the first time.

Our case work shows that problems often arise because well-meaning trustees simply do not understand what the law expects of them.

So it is vital that trustees know where to go for help.

Recently, I visited a group of charities in Southampton that are part of a Charity Forum, set up some years ago by the firm Paris Smith. The forum provides regular opportunities for trustees and chief executives of local charities to learn from one another and to exchange ideas. Exactly the sort of initiative the Commission is happy to encourage.

I hope that this new series of events also reaches many charities and proves a useful resource for trustees.

I have been asked to speak today about the Commission’s role in promoting public trust in charities and about our priorities in the years ahead.

As you may know, I became Chairman of the Charity Commission in 2012, at a time when charities seemed under especially intense public scrutiny and were adapting to increasing public expectations.

Two years on, that trend shows no sign of abating. On the contrary.

The Commission’s independent research into public trust and confidence in charities shows that while trust in charities remains high, people are less likely now to give charities the benefit of the doubt, simply because they are charities.

In fact, I believe it is precisely because charities remain so central to our national life that people care so deeply about them.

The public expect accountability, they expect probity from charity trustees and they expect shrewd financial management.

The sad case of Olive Cooke is the most recent example of how strongly charities’ actions – good and bad – resonate among the public.

As the charity regulator, we know that charities’ approach to fundraising has a significant bearing on public trust and confidence. Our research suggests that around two thirds of people feel uncomfortable about some methods of fundraising. Trustees need to keep in mind how important it is to preserve public goodwill when they are faced with the challenge of raising funds to support the work of their charity.

While the Commission does not regulate fundraising practice directly, we have a clear interest in how effectively the self-regulatory system responds to public concerns about fundraising.

The Fundraising Standards Board, the FRSB, is, as you will know, one of the three self-regulatory bodies for charity fundraising. It regulates charities’ compliance with standards set out in the Code of Fundraising Practice, compiled by the Institute of Fundraising, a membership body. FRSB is now investigating the Olive Cooke case. I hope this work takes place as swiftly as possible. It is crucial to establish whether or not there have been any breaches of the Code of Fundraising Practice, or of data protection law, or whether there has been any lack of propriety on the part of fundraisers.

If the investigation concludes there have been any such breaches, the Charity Commission will assess whether they amount to a breach of duty under charity law. That could prompt regulatory engagement on our part.

But, regardless the specifics of the Olive Cooke case, the issues it highlighted have clearly caused great anxiety among the public. We recognise that many charities rely on raising money from the public to carry out their important work.

But serious concerns about the extent and nature of direct fundraising risk damaging public trust and confidence in charity.

I believe this is a crisis for the charity sector which is testing the strength and capacity of self-regulation. I support the suggestion of a wholesale review of the Code of Fundraising Practice. I hope that the Fundraising Standards Board, the Institute of fundraising and the Public Fundraising Regulatory Authority work closely together in conducting the review and that they all commit to act on its recommendations.

The Commission itself is already revising and strengthening our guidance on fundraising and trustees’ duties, following the strategic statement on fundraising we published in December. You can find that statement on our website.

A draft version of the revised guidance will be published for consultation later this year. It will set out our expectations of how trustees of fundraising charities should meet their responsibilities. Trustees must do everything they can to prevent fundraising becoming a problem in the first place. I believe our guidance must therefore reflect on trustees’ responsibility to the protection of donors. We hope charities and the public take part in the consultation on this important piece of guidance.

And thinking beyond the issue of fundraising - the Commission’s role as regulator of charities must reflect changing public expectations.

My board and I believe that the best way for the Commission to promote public trust and confidence in charities is to concentrate on promoting compliance by charity trustees and on holding charities accountable.

This does not mean that we will come down heavily on every charity that experiences a problem, or every trustee who fails in his duties.

As I have said, we recognise that trustees are volunteers and that most are simply doing their best under difficult circumstances.

We will act in proportion to the risks we see.

And where we see evidence of serious concern, we will take swift, robust action, including through the use of our legal powers.

As you may know, in 2013, we were criticised by the National Audit Office for what they considered an insufficiently robust approach to tackling a serious abuse.

We have already made significant changes.

For example, we are opening more investigations. Last year, in 2014-15, we began over 100 new statutory inquiries and used our powers over 1,000 times. That is a significant increase on previous years. Two years ago, we opened only 15 investigations and used our powers 216 times.

I am delighted to say that in a follow-up report published in January of this year, the NAO acknowledged the very significant progress we have made.

But the job is not done.

Two things in particular are crucial to our success:

First, we need the stronger legal powers that are set out in the Charities Bill announced in the Queen’s Speech.

I am delighted that the bill is part of the new government’s legislative programme. I have long argued that weaknesses in our current powers put charities at risk.

For example, it is currently possible to serve as a trustee if you have a conviction for money laundering or terrorism.

Similarly, unfit individuals can evade disqualification from trusteeship, simply by resigning before we have the chance to use our legal powers to remove them.

A ludicrous and dangerous state of affairs.

The bill addresses these loopholes and will make us a more effective regulator.

Most charities of course won’t be directly affected by the new powers. You will simply benefit from the increased trust that results from effective regulation.

Charities have had extensive opportunity to comment on the suggested powers, including through a formal Cabinet Office consultation.

And the bill received all-party support during pre-legislative scrutiny in the last parliament.

So I am confident that the legislation will be enacted soon.

Second, the Commission must use its data more effectively to assess and respond to risks facing charities.

Work to achieve this is well underway and is vital.

By getting better at assessing risk, we can focus our very limited resources where they make the biggest difference. Our budget has been cut by around 50% since 2007. So it is crucial that we make smart, evidence-based decisions.

There is also a benefit here for charities: by focusing our resources on the highest risk cases, we hope in time to automate lower risk case work, helping us provide a more streamlined and efficient service to charities.

Another important development is the new online charity search tool, which will help us and the public hold charities more accountable.

Earlier this year, we launched a trial version of the new tool, which makes it easier for people to find the information we know they want about charities.

For example, people can now see, at a glance, what proportion of a charity’s spending has gone on charitable activities.

We have received much valuable feedback from charities and members of the public and are making changes to the tool as we speak. We hope to launch the updated version later this year.

All these developments are vital in helping us to become the robust regulator that the public and charities expect and deserve.

But I would like to reassure you on one important point: we are focusing more of our resources on promoting compliance and accountability. But, as I said earlier, that does not mean we will stop providing guidance and advice to charities.

First, we continue to have a role to play in providing consents and permissions where the law requires this. Last year, we concluded over 1,400 substantive enabling cases. Many involved requests for permission for a charity to widen its purposes, or dispose of land.

This quasi-judicial work may not be exciting. It certainly does not attract national headlines. But our involvement in such cases means charities can modernise and adapt to the times, while we ensure the public interest in charities is protected. Our aim is to streamline our service in this area – including through automation where possible – not to stop it.

Second, we remain committed to providing excellent online guidance to help trustees understand their legal duties.

We will soon publish a new version of our core guidance, The essential trustee, after a consultation earlier this year.

The new version will be clearer about the law and what it expects of trustees and is written in way that even people new to charities and trusteeship can understand. Please do read and use the guidance when it is published – I hope you will find it an invaluable tool.

We are also taking a smarter, more innovative approach to raising awareness of our guidance – to letting people know it exists in the first place.

We are making more structured and targeted use of social media, for example with targeted Twitter campaigns.

This is proving successful. During a focus on fraud during March, views of a relevant piece of guidance (risk) increased by 1,200% compared to the previous month.

We have also widened the circulation of our trustee newsletter, CC News. It now goes to all trustees for whom we have an email address, rather than just to one contact in each charity. That’s over 220,000 people.

And we continue to work in collaboration with other organisations in providing advice to charities.

We recently began a referral partnership with the Ethical Property Foundation. The EPF is itself a charity, which provides free advice to charities about matters relating to property and land. We receive many queries about property from charities and some clearly need dedicated support that we as regulator cannot provide.

But rather than turning these charities away, we now refer them to the Ethical Property Foundation.

We are also working with umbrella bodies in trialling a pre-registration service akin to the Post Office passport checking service.

This would mean prospective charities can have their registration applications professionally checked by their umbrella body before submitting them to us. The aim is to help eliminate basic errors in applications, which slows down our work and causes inefficiencies for us and frustration for applicants.

If the trials prove successful, we will launch the service with a limited number of umbrella bodies, with a view to involving other groups across the charity sector in the future.

Together, these small steps and innovations will, I hope, ensure that trustees are more confident about their duties, charities are better managed and, ultimately, that the public’s trust in charity increases.

I would like to make one final point.

I am confident that the Commission can continue to deliver on the change expected of us. I have faith in the continued commitment of our staff and the shrewd management of our chief executive and team of directors.

But we continue to operate on a financial cliff edge, and we simply cannot absorb further cuts to our budget.

I made this clear to ministers in the last government, and I have made this clear to new ministers.

I hope they will listen and understand.

However, so long as the Commission relies on the Treasury for our funding, we will always be at risk of further cuts.

This is unacceptable to me. It puts public trust in charities at risk.

We must look into ways of placing the Commission’s funding on a more secure footing.

As part of that, we have to explore various options, including funding in whole or in part by charities themselves

No plans are in place yet. At this time, I am simply having conversations with senior charity people to understand their perspective.

So far, the people I have spoken to have been open to the idea – charities have always acknowledged how important it is that their regulator is well funded.

But of course there are those who have concerns. There are indeed very real questions to answer – including how the Commission’s independence, which is so vital, would be protected under such an arrangement.

So I would like to hear from you on this topic – what are your views, have you any suggestions, any concerns? Please come and speak to me, either here or in private.

But first, it is your opportunity to ask me questions, so I will hand back to Ivo and prepare for the grilling that he and you have prepared for me!