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Farrer & Co | Changes to fundraising regulation: What do HEIs need to know?

The regulation of charity fundraising is changing.  The changes follow extensive media coverage criticising fundraising practices.  Regulators and government responded swiftly in the face of the accusations in the press with an initial review of fundraising regulation being published in September 2015: The Etherington Review, followed by the report of the Public Administration and Constitutional Affairs Committee (PACAC); issued in January 2016: The 2015 charity fundraising controversy: lessons for trustees, the Charity Commission, and regulators. This briefing reviews the likely changes to fundraising regulation and how this may impact on HEIs.

Fundraising by Higher Education Institutions (HEIs) tends to differ significantly in approach from fundraising by those charities that attracted negative press attention, such as Oxfam and the RSPCA.  Irrespective of this, the outcomes from the review of fundraising regulation will impact on HEIs' fundraising, and the reports are well worth a skim.  According to evidence provided to PACAC by the head of the Russell Group, fundraising practices among some HEIs have already changed following the Etherington Review, with a number of HEIs restricting or stopping telephone fundraising as a result.

The headline points for HEIs are:

(1) A new Fundraising Regulator is likely to be up and running by the end of 2016 and will oversee all charity fundraising (including fundraising by HEIs).  The new regulator will have authority to investigate fundraising activity and apply sanctions and penalties.

(2) Charity trustees have been under fire for inadequate supervision of fundraising.  HEIs should consider whether their Governing Bodies have sufficient oversight and supervision of fundraising activity and methods.

(3) The Information Commissioner's Office has confirmed that no special exemptions apply to charities carrying out large scale fundraising.  Consequently, HEIs may wish to audit current fundraising activity to confirm it complies with data protection legislation.

(4)  Fundraising activity should deal appropriately with approaches being made to vulnerable people.  HEIs may wish to review current guidelines provided to fundraisers on contacting vulnerable groups to assess whether there is any need to strengthen or expand these guidelines.

This article provides a brief analysis of the Etherington Review, and the Charity Commission's consultation on its fundraising guidance.  It goes on to set out where we are in the process and what will happen next.

The Etherington Review

The Etherington Review was led by Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations (NCVO).  The Etherington Review consulted widely among large registered charities about their fundraising activities, but did not consult HEIs or other exempt charities.  Apparently the reason for not consulting universities was due to a lack of time and because Sir Stuart Etherington was not aware of any complaints about the fundraising techniques used by universities.

Key points raised in the Etherington Review, which were echoed in the PACAC report include:

1. charity trustees need to improve their oversight of fundraising activity;

2. the existing system of self-regulation is not working but there are significant disadvantages of statutory regulation;

3. a new fundraising regulator should be established (provisionally named "The Fundraising Regulator"), which will be funded by a levy on all charities (it is suggested the levy will be calculated by reference to fundraising expenditure);

4. the regulator will have (i) a remit over all charities; (ii) powers to proactively investigate fundraising activity; and (iii) the ability to apply penalties including naming and shaming, requiring compulsory training for fundraisers and requiring a charity to obtain prior approval from the regulator for a fundraising campaign; and

5. the role of the Charity Commission and the Information Commissioner in regulating fundraising should be enhanced.

The findings of the Etherington Review were accepted by Government, which committed to implementing its recommendations within a short time frame.

Charity Commission guidance

Following publication of the Etherington Review, the Charity Commission issued a revised draft of its guidance on fundraising for consultation: Draft CC20 - Charity fundraising: a guide to trustee duties. The draft guidance places a far greater onus on charity trustees to control their charity's fundraising and was accompanied by a one-page document on Key fundraising principles for trustees. The principles identified are:

  • supervise your fundraisers;
  • comply with fundraising law;
  • protect your charity's reputation and other assets;
  • follow recognised standards;
  • be open and accountable; and
  • plan effectively

Where are we now?

Lord Grade, the former BBC Chairman, was appointed interim chair of the New Fundraising Regulator in November 2015 and an interim CEO is also in place.

Some of the existing regulatory bodies will merge or close, following recommendations made in the Etherington Review.  The Institute of Fundraising (the IoF) plans to merge with the Public Fundraising Regulatory Association (PFRA) by March 2016.  The new merged body will focus on best practice and compliance.  Responsibility for the Code of Fundraising Practice will pass from the IoF to the new Fundraising Regulator. The Fundraising Standards Board (FRSB) is likely to close with its functions passed to the new Fundraising Regulator.

One of the recommendations of the Etherington Review was creating a Fundraising Preference Service (FPS), which would allow individuals to opt-out of receiving all fundraising communications. The Information Commissioner criticised this suggestion as potentially confusing and in part duplicating features found in the Telephone Preference Service. Charities have also raised concerns that a FPS that was 'opt-in' or 'opt-out' may result in fundraisers being unable to communicate with existing supporters and donors, who have registered to opt out from all fundraising communications. It remains to be seen whether a FPS will be established; the PACAC report was not supportive of the recommendation and the practicalities of setting up this service are currently being examined by the new Fundraising Regulator. If the FPS goes ahead as it is currently envisaged, this could restrict universities fundraising from alumni, if the FPS proves popular among the public.

What comes next?

The new Fundraising Regulator intends to be up and running by the end of 2016 and it will regulate HEI fundraising. The PACAC report suggests that the regulator should urgently consult with universities on its approach to regulating their fundraising, given HEIs were not consulted on the Etherington Review. This raises the hope that HEIs will have the opportunity to provide input on fundraising to the new regulator.  However, the message from Sir Stuart Etherington in a recent address to the Strategic Fundraising for Leaders in Higher Education conference was that HEIs should not expect the regime applicable to them to differ from the regulatory regime for other charities. Sir Stuart also recommended that fundraising issues should be added to HEI risk registers.

The Fundraising Regulator will be funded by a levy on charities spending more than £100,000 on fundraising (with the charge increasing for charities with a higher fundraising spend). Consequently, HEIs should note that fundraising compliance costs may increase.

More detail will emerge in due course on the Fundraising Regulator, and the Code of Fundraising Practice it will enforce and we aim to report on this in a bulletin later on in the year.

 If you require further information on anything covered in this briefing please contact Lizzie Jones (elizabeth.jones@farrer.co.uk; 020 3375 7138), or your usual contact at the firm on 020 3375 7000.

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