Sarah Atkinson speech at Charity Reform
Sarah Atkinson talks about the challenges for fundraising practice and governance.
Trust in charities is at the lowest level since records began in 2005.
Today I want to talk about how we can correct that, and get trust in charities back on track.
Want to start by digging into the public trust research we did this year to see why trust has fallen.
I know many in this room will already have an idea about why this is – but let’s see what a survey of over 1,000 people says to see whether we’re right.
It’s perhaps no surprise that media coverage, accountability and fundraising were seen to be the big issues.
I am going to talk about 2 of the major issues here - fundraising and then management, or governance, which comes up in 2 of these 5 points.
Who is responsible for fundraising in your charity?
Pick one
a. The fundraising company we outsource to
b. The Treasurer/ finance director
c. All of the trustees
d. Our supporters
The right answer is ‘c’ – just like your finances, trustees are all responsible for fundraising….
Now a quick survey, who in this room has read our fundraising guidance?
Our new guidance on fundraising.
This comes on the back of the fundraising crisis last summer, which had the potential to seriously damage trust and respect for charities.
Our fundraising guidance is one of our most-used pieces of guidance with 80% of our consultees telling us they use it.
We believe trustees are central to fundraising. They set the strategy after all.
And the strategy is not just a piece of paper. Trustees need to understand your fundraising appeal or plan and spend time on it. It cannot be too complicated for them to understand it (if it is you either need a new plan or new trustees).
So what does the guidance do?
If I were to have a top line for you to take away today, it would be that you and your trustees all need to get across these 6 key duties:
Plan effectively
This says that the trustees are responsible for agreeing their charity’s fundraising strategy. Others might be responsible for developing the strategic options, but the trustees must have final ownership. The strategy should reflect the charity’s values and the trustees must be satisfied that it will be implemented.
Supervise your fundraisers
This is about trustees having oversight of the fundraising which others, whether in-house or 3rd party, carry out for their charity.
Some of the feedback we received in our consultation expresses a concern that the new guidance imposes an expectation that trustees have a more “hands-on” role than is feasible in charities of some sizes and undesirable for good governance.
Our expectation isn’t that trustees should get over-involved in the day to day management of their fundraising. We recognise that many charities, like other organisations, rely on effective delegation. But trustees must have systems in place for strong management of the people and organisations that the charity works with so that they can be satisfied that its fundraising is managed in its best interests. They are accountable if something goes wrong.
Protecting your charity’s reputation, money and other assets
This is about getting all the money in and having controls which reduce the risk of fraud. But it’s also about reducing reputational risk by considering the impact of your charity’s fundraising on its donors, supporters and the public.
Finding out about, and fully complying with, any laws or regulations that apply to your charity’s fundraising
The legal rules that apply to various types of fundraising can be detailed and complex. They cover compliance in important areas such as with data protection law, licensing, and working with commercial partners. These rules must be followed.
With the new version of our guidance we’ve moved away from providing a handbook approach which tries to cover the whole of the legal framework for fundraising, so that we can focus on compliance with trustee duties which we regulate.
Our guidance will cover the Charities Acts’ rules and regulations on fundraising , including the new act, and we will make sure that there are the best possible links to sources of other information about the wider framework.
Finding out about, and following, any recognised standards that apply to your charity’s fundraising These standards are in the Code of Fundraising Practice. The commission expects all fundraising charities to fully comply with the code.
Being open and accountable
This includes complying with any relevant statutory accounting and reporting requirements on fundraising and using reporting to demonstrate that your charity is well run and effective. In your fundraising communications it is about being able to effectively explain your fundraising work to members of the public and your charity’s supporters.
Ok, that’s the 6 key principles. But I hope that all of you will read our new fundraising guidance, and engage with the fundraising self-regulator.
It’s also worth pointing out there’s a checklist as part of the new guidance to make it easy to track what you have covered and what you still need to do.
Fundraising – a case study
Bait Ul Mall objects:
To advance the education of children, in particular orphans in Pakistan, and relieving sickness and preserving health among people in Pakistan
Allegedly gave unauthorised funds to trustees and used illegal immigrants to collect funds on its behalf. We investigated, and found inadequate record-keeping and that money passing through the bank accounts was not reported in the accounts. We found no evidence of private benefit.
There is now a new, more robust approach to record-keeping, cash collections and framework for trustee benefits.
Why the commission got involved
We received complaints about the charity’s fundraising and about the way the charity’s funds were being applied. It was alleged that funds were benefiting the trustees, rather than being applied for charitable purposes. It was also alleged that the charity used illegal immigrants to collect funds on its behalf.
As the regulator we needed to establish:
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How and by whom funds were raised and applied.
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If there was evidence of unauthorised personal benefits for trustees or their families.
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Whether the charity was complying with the terms of fundraising licences issued by local authorities.
The action we took
We used our powers to obtain the charity’s bank statements and compared these against the charity’s accounts. We also contacted local authorities who had granted collection licences to the charity and liaised with the Border Agency. We wrote to the trustees to clarify our understanding and seek explanations of our findings.
What we found
Our engagement with local authorities established that the charity had properly applied for licences to fundraise. However, in at least one case, the trustees had failed to prepare and submit the necessary financial returns to the authority. This made it more difficult for us (and the trustees) to reconcile income and expenditure.
The charity’s banking records showed that money was passing through the bank accounts but not being reported in the charity’s annual accounts. We were told that this was because trustees collected cash and held it at home. The annual accounts were not sufficiently detailed for the public or the regulator to get a sound understanding of the activities of the charity. However, we found no evidence that funds had been used for the personal benefit of the trustees. A relative of a trustee had been employed (but is no longer) but there was no evidence that this was inappropriate. It was clear from the records that the charity was making payments to Pakistan and that the charitable school had received those funds.
We found no evidence that the charity exploited vulnerable groups or used illegal immigrants to collect funds. As part of our case, we also considered the charity’s governing document and noted that it was incomplete and needed urgent revisions. For example, charity options in the model document the charity had used were not deleted, meaning that it was unclear whether the charity had power to pay any trustees.
Impact of our involvement
The trustees have prepared new annual accounts, which meet the statutory requirements and enable the public to understand what the charity does. The trustees have accepted that they need a more robust procedure for handling the cash collections, banking the money and passing funds to Pakistan. The trustees have amended the governing document so that the anomalies are removed and a clear framework for trustee benefits is in place. The charity will be monitored to ensure that the improvements are maintained.
Lessons for other charities
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Trustees must prepare accurate annual accounts including a detailed trustee annual report, even if it falls below the threshold for submitting these accounts to the commission. The public have a right to see a charity’s accounts regardless of income. This is the charity’s opportunity to tell donors (past, present and future) about the charity and the impact it is having in its chosen area. Setting out the work of the charity in plain language can help reduce misunderstandings/complaints. More information is available in our guidance on charity reporting and accounting and preparing a charity’s accounts.
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When collecting cash, clothing, shoes or any other house to house or street collection a licence is needed. Trustees must ensure that they adhere to all the requirements of the licence, including the prompt filing of financial returns in the form required by the local authority. The ‘Code of Fundraising Practice’, published by the Institute of Fundraising, sets standards for fundraising practice and includes guidance on public collections.
What trustees need to do, focusing on the governance of charities
I know there’s a lot of best practice to get across on charity governance, and sometimes trustees say they are too busy. As a trustee myself I’m aware of how much there is to do.
We’ve all heard trustees saying, “We can’t be across all of the best practice on good governance, good financial management, safeguarding and so on. We’re volunteers, we’re not getting paid and we don’t have time.”
From the regulator’s perspective, our message is that trustees have to fix it.
Trustees can’t be too busy to address your fundamental duties.
If you – or your trustees - can’t manage a particular part of your duties, get another expert on board.
One of the best ways for trustees to make sure that they are complying with their legal duties is to put processes in place that will encourage good governance.
This is about:
- setting and monitoring the charity’s strategic aims and direction
- ensuring that there is strong management of its money, reputation and other assets
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having effective systems, safeguards and controls in place However it’s not enough to just have these processes, you have to use them. It’s also about trustee boards:
- being committed to improving their own performance
- Having the right structure and enough time for effective discussion and decision-making
- having the right mix of skills and expertise
- making regular opportunities for re-assessing whether that balance is right
- making sure that the board has access to the right information and advice in the best format
- being prepared to ask those probing, challenging, sometimes even awkward questions
So what does this mean in reality? What advice would I give to ensure your trustees are aware of and upholding their duties and responsibilities as best you can?
My first stop would be to point you in the direction of the key piece of guidance, The Essential Trustee. In the past year we have updated this guidance to make it clearer and more succinct. It should, in my opinion, be read by each and every one of the million trustees across England and Wales.
The new version makes it easier for trustees to understand their legal duties and avoid many of the basic errors that often lead to serious problems. The guidance is clearer, shorter, includes links to other guidance, and sets out lessons from our work.
Case study
Our Local Heroes objects
The charity’s objects are to relieve the financial hardship of people who have served in the armed forces and are in need, by making grants.
We investigated complaints that the public was being misled and were not being properly informed that only 20% of the funds raised by the outsourced fundraiser Targeted Management Ltd went to the charity. The charity’s income in 2015 was £500,000, but only £10,000 had been used in to further the charity’s objects by providing grants. The rest went on administration.
What trustee duties does this case touch on?
- ensure your charity is accountable – did donors know only 20% went to charity?
- it is carrying out its purpose? If only £10k has been used….
- are the trustees acting in its best interests?
- are they managing its resources responsibly? Reputation is a huge asset – and this case excited journalists a lot?
We do not directly regulate fundraising, but we said that this was not acceptable and that there was likely to be justifiable public concern and damage to the charity’s reputation if the ratio of income to charitable expenditure remained so low. And we issued an action plan:
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to ensure that fundraising is conducted in an open and transparent way, and the public are informed how much of their donation would go to the charity
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to maximise the proportion of income given as grants and minimise administration costs
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to ensure money is not spent outside the objects of the charity
The result was that the costs were substantially reduced by over £100,000 a year. The trustees also stopped all projects that did not directly further the charity’s objects.
The charity is now aiming to provide a minimum of £140,000 worth of grants a year. New trustees have been recruited, and governance and financial controls have been put in place by the charity.
The fundraising costs of 80% remain high. It’s worth being aware there are public concerns about this, even though there is no legal set amount that a charity should spend on fundraising costs and no minimum proportion of a donation that must go to a charity.