Who watches the watchmen?

Change of any sort brings uncertainty. Change of the kind that has occurred within charities’ regulatory environment inevitably is going to cause disquiet. From a shift in the focus of the Charity Commission to the introduction of a new fundraising regulator there have been a number of developments within this space over recent months, and there are lots of people who aren’t happy about it.

In the case of the Charity Commission, it seems some in the sector expect more support and advocacy from a body that increasingly sees itself as responsible primarily for protection of the public and enforcement of regulation.

The commission has faced increasing criticism for taking a more interventionist approach, and these criticisms came packaged with others deriving from the regulator’s investigation of the Joseph Rowntree Foundation’s funding of the group CAGE.

In addition, members of the commission’s board have been accused of being non-experts on the sector, chosen for political reasons who have undue influence in directing its investigations towards their own political agendas.

Despite the independence of both charities and their regulators, it is politics that sets the backdrop to much of the discussion on regulation. There is a widespread belief among charities that reform of these specialist regulators was a piece of political opportunism by a Conservative government, grabbing the opportunity to stick the boot into a sector which it suspects is largely hostile to it. The actions of the nominally independent regulators, it is often insinuated, have the hand of the government behind them. Much has been made of the professional and personal relationships between senior Conservatives and Eleanor Shawcross, daughter of William Shawcross, the Charity Commission’s chair, and links between the board and prominent right leaning think-tanks have also been widely criticised. The situation is developed enough to give NCVO chief executive Sir Stuart Etherington the motivation to write to the Minister for Civil Society Rob Wilson with concerns about the appropriateness of appointments to the commission’s board.

But do the accusations of impartial or interventionist governance at the commission hold water, and is there accordingly a case for change?

How did we get here?

In 2013, Margaret Hodge, no friend of the Conservative Party, on the back of another charity scandal - this time into a tax avoidance scheme run through the Cup Trust - called the Charity Commission before the Public Accounts Committee of which she was chair and found; “The commission’s approach to regulation and enforcement lacks rigour. It has carried out few enforcement visits, rarely mounts prosecutions and removes very few trustees.”

She came to the conclusion it was “not fit for purpose” and a parallel report by the National Audit Office also criticised the commission for making very little use of its statutory powers and warned failure to be tougher “‘risks undermining public trust in the whole sector”.

It is understandable, set against this context, that when the events of summer 2015 occurred - with scandal piled upon scandal - that policy makers must have felt something must be done. Regardless of the work regulators were doing behind the scenes, public perceptions were that they were failing.

Recounting her experiences, Sarah Atkinson, director of policy and communications at the Charity Commission, described how during and after the Cup Trust scandal they were “challenged by Parliament, challenged by the Public Administration Committee and challenged by the National Audit Office to focus on our regulatory priorities”.

These demands were compounded by cuts; the commission was being asked to be more proactive with half the budget and half the staff it had 10 years ago. “In those kind of situations”, says Atkinson, “you do have to focus hard on what you’re really for. As the regulator and as the only body that can be the regulator for charity, we had to focus on that.”

Atkinson is clear in what this means: “we are for the benefit of the public,” she says, adding, “any regulator is there to represent the public interest in a sector being effective, operating properly in line with the law and in line with public expectations”. In their eyes, this means focusing on enforcement action.

Meanwhile, over in fundraising, a similar chain of events was panning out that began with the tragic death of Olive Cooke and associated furore over direct mail, and included a number of undercover exposés into the alleged aggressive fundraising techniques used by charities and their telephone fundraising agencies. Among the many outcomes of this period was the creation of the new independent Fundraising Regulator, established in response to criticism that the current system of regulation – delivered via the FRSB and the Institute of Fundraising’s Code of Practice – aligned the interests of those regulating the sector with the charities they depended on for funding.

Gerald Oppenheim, head of policy at the Fundraising Regulator, says the new regulator will operate differently despite still being funded by the sector. “Our role is to champion the public,” he says.

Charities with a fundraised income of over £100,000 a year will be expected to join and for the first time the power to amend and enforce the code of practice will rest in one body.

Regulation without representation?

However, there are some who would argue that if public interest is at the heart of the both of the new regulators, it comes at the expense of charities.

Take the Fundraising Regulator as an example. Concerns have been raised that the new regulator and the rules it intended to enforce, such as the Fundraising Preference Service, will be overly onerous on charities. In addition, at the time of going to press, just 39 charities have agreed to contribute to the set-up fee, with a number of others, including Tate, the Parkinson’s Society and the RNIB, being vocal about their uneasiness with the new system.

“We want to understand why and discuss that with them,” Oppenheim says. “There may be perfectly legitimate issues. It’s hard to know at this stage.”

He stresses the Fundraising Regulator’s desire to work with, and taIk to, charities. The standards committee will be the outwards face of the regulator, he explains, liaising with the sector both formally and informally.

While the public takes priority, “what we [the Fundraising Regulator] are about is trying to balance the interest of the public with the interest of the charities and their beneficiaries,” Oppenheim says.

He acknowledges that when individual cases come up, there may be differences in interpretation between charities and the Fundraising Regulator but insists they will do everything in their power to resolve them before lawyers needed to become involved.

For her part, Atkinson is clear that Charity Commission believes the sector needs to be involved in the formation of regulations in order for them to be effective. She cites the recent consultation on CC20, shifting the balance of responsibility for fundraising practices towards trustees, where feedback from charities has led to significant changes to the final regulation.

Ultimately, she says, as a regulator, “you need to understand how people are taking what you are saying” and use the experience of people on the ground to mitigate against any unintended consequences. Acknowledging the good and detailed work of the sector bodies, she says the one thing she would like to see more of is individual charities getting in touch to discuss their experiences in implementing regulations.

Both of the new regulators are going to be more muscular than they were in the past but each is clear in its desire to listen to the voice of the sector. To work effectively together, charities need to take them at their word and at least try to engage. While they may not like this new order, there really is no more palatable alternative on the table, as Oppenheim points out “charities do need to remember how concerned Ministers are about what happened in the past and that Ministers don’t wish to have a repeat”.

With the threat of further government intervention looming and a summer season that could well see another round of salacious stories in the media, charities would do well to listen to Oppenheim’s request: “we will work with you, please work with us, to get it right for the people who support and donate.”

    Share Story:

Recent Stories

How your property strategy can help beneficiaries in the long-term
In this podcast, editor Lauren Weymouth is joined by Jonathan Rhodes, national head of valuation at Cluttons and Nick Sladden, head of charities at RSM, to discuss how the current economic climate is impacting the property market for charities and how to implement a strategy that puts beneficiaries first.

Better Society