Charity Commission's Consultation on Fundraising Guidance: 'Charity fundraising: a guide to trustee duties'

In the last year charity fundraising has been, and continues to be, headline news. Media scandal, triggered by the tragic death of Olive Cooke, coupled with increasing political pressure for reform has led to a full review of fundraising regulations (the Etherington Review), amendments to the Institute of Fundraising's Code of Fundraising Practice, and has had an impact on provisions in the Charities (Protection and Social Investment) Act 2016 (the Act).

The Act now includes a requirement for agreements between charities and professional fundraisers or commercial participators[1] to explain how fundraisers and commercial participators will protect vulnerable members of the public in the course of their activities, and outlines what will be understood as unreasonable behaviour. Larger charities will also need, among other things, to report on their approach to fundraising and explain whether they have monitored their fundraising activities.[2]

In a similar vein, at the beginning of December, the Charity Commission launched a consultation draft of its proposed new fundraising guidance, which is intended to replace current guidance CC20. The guidance is aimed at trustees, who, it makes clear, are responsible for ensuring compliance. The Etherington Review stated that "it was widely reported to the Review (not only by the regulatory bodies but also by charities) that there is a current disconnect between ethos and values of some charities and their fundraising practices." By highlighting the duties and responsibilities of trustees, the Commission hopes that the new guidance will go some way to minimising that disconnect.

The consultation ended on 11 February 2016 and we await the results. Amidst changes to the system of regulation, which are as yet unknown, it is likely that whatever is decided will need to be revised again soon. The direction of travel is, however, pretty clear.

The focus on trustee responsibility is unsurprising given the Commission's recently updated guidance on the duties of trustees, the findings of the Etherington Review and the Commission's wish to respond positively to negative press. However, there is a risk that by focusing so narrowly on trustee duties, the guidance may be ignored by internal fundraising teams, senior management who oversee the implementation of fundraising strategies, and professional fundraisers, even though it is potentially also relevant to them.

The guidance is structured around six main principles for trustees: a) plan effectively, b) supervise your fundraisers, c) protect your charity's reputation and other assets, d) comply with fundraising law, e) know and follow recognised standards, f) be open and accountable.

Plan effectively

The guidance states that trustees should be directly involved with the creation and overseeing of a fundraising plan. Whilst the content and format of this plan may vary depending on the size of the charity, the trustees should decide the strategy and general approach to income generation. The guidance suggests that, in line with best practice, the plan should include details of: fundraising methods and how these will reflect the charity's values, potential financial and reputational risks, and how progress will be monitored. Trustees should have a clear overview of the fundraising methods used, why they have been chosen and whether they are suitable for the charity.

Supervise your fundraisers

Whereas the concept of a fundraising plan keeps trustee duties at a strategic level, when it comes to supervision trustees must be much more proactive. Emphasis is placed on reporting procedures and regular reports to trustees to enable them to monitor the implementation of the fundraising strategy. Implementation in larger organisations will likely be delegated to employees or volunteers and overseen by an executive manager. Regular reporting directly to trustees could cause trustees to become overly involved in the day-to-day running of the charity in some cases. The guidance does warn against this, but it is a fine line to plot and this tension between trustee delegation and supervision is a consistent theme.

The guidance is rather vague in its descriptions of charities' relationships with commercial partners and professional fundraisers. It does, however, list factors for trustees to consider when deciding whether the agreement which they are entering into with an external partner is in the charity's best interests. These factors include the level of due diligence which has been carried out, how the service provided will relate to the charity's purpose, values and fundraising plan, and how compliance with those criteria will be monitored. The concept of the charity's 'values' is one that runs through the guidance, despite the guidance at one point stating that 'there is no requirement for a charity to have explicit values'. In fact, it seems that such values may well be difficult to communicate effectively to commercial partners, professional fundraisers and the organisation as a whole unless they are explicit. These concepts might be difficult to describe and, as such, it would be helpful if the guidance provided some examples or wording, particularly for smaller charities with less access to legal advice.

Protection of reputation and assets

The focus on values is aimed at the prevention of unscrupulous practices such as the pressurisation of vulnerable adults. Whilst this may seem obvious, it requires trustees to keep a closer eye on the methods being used to raise funds and to oversee external fundraisers to ensure they act within the same boundaries. Interestingly, the guidance also reminds trustees that they need to bear in mind the type of fundraising they will be using when setting targets. This should give a clearer idea of what is financially achievable when using acceptable fundraising methods.

The guidance also suggests that charities should 'know their donors' in order to prevent fraud and money laundering offences. Whilst this is in line with previous guidance (including the "compliance toolkit") it may create difficulties in practice. The work involved in monitoring donors may lead many charities to determine that further due diligence is reserved for larger donations.

Comply with the law and follow recognised standards

The guidance emphasises trustees' duty to follow the law. However, by contrast with the current guidance, the detail of actual legislation concerning specific types of fundraising is rarely mentioned. The guidance refers often to the Institute of Fundraising's Code and mentions the Information Commssioner in relation to data protection; however, it may be unclear to some trustees where they are being referred to advice, and where they have a legal duty to comply. Some commentators have suggested that the Commission reinstate section H of the current guidance which signposts relevant legislation and guidance.

Be open and accountable

The basic concept of transparency is a positive one, though it will be important for trustees to understand when and when not to disclose information, particularly with regard to data protection laws. Some commentators have also questioned the Commission's suggestion that it is the role of each charity to uphold public trust in the sector as a whole. This, they argue, is the role of the Commission itself.

Next Steps

What emerges from the consultation remains to be seen. Assuming the guidance remains broadly the same, the key points for trustees to take are:

1. trustees are responsible for ensuring that the fundraising activities of the charity's employees, volunteers and external partners are legally compliant;
2. there are other legislative duties not mentioned in the guidance with which trustees must comply;
3. the charity's values should be defined, communicated through an internal fundraising plan and agreements with external partners and reflected in the fundraising methods chosen.

If you require further information on anything covered in this briefing please contact Nicole Reed or your usual contact at the firm on 020 3375 7000. Further information can also be found on the Charities page on our website.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2016