Charity 2020 Group Governance Talk
26 September 2019
I wanted to start today by asking if anyone here remembers the wonderful Fiona Middleton.
Fiona was one of three brilliant lawyers who established the charity practice at Bates Wells – Andrew
Phillips, a visionary and serial founder; Stephen Lloyd, an innovator with a brilliant commercial mind;
and Fiona Middleton, I would say one of the finest charity lawyers ever to have practised.
Fiona died 15 years ago today. Before she died, she taught me from being her trainee onwards.
She taught me to try to stand back and look at the bigger picture, while keeping a grip on the detail.
She also taught me not always to accept an accepted state of things, especially if things as they are
are not things as they should be.
And that sets the theme for today. I don’t think that trusteeship is how trusteeship should be. And,
unfortunately, I also don’t see it changing soon.
My view is that society is in breach of the social contract for trusteeship; and that in this environment
we need new operating models.
And I am going to propose one possible new model.
If you have heard me speak on this subject before, please bear with me. I really hope we can have a
good debate in this relatively intimate setting and test my idea.
My views on this have been forged among the recent tribulations of large and complex charities, often
operating nationally and internationally but I think my concerns apply more broadly.
Benefits of trusteeship
First of all, I am hugely in favour of trusteeship. It is something I have advocated for 25 years as a
lawyer practising in this field, as a member of a firm that is a partner in Trustees Unlimited alongside
NCVO and Russam, and until recently as a member of the Trustees Unlimited board. And, of course,
as a trustee myself.
For individuals, it brings personal growth and development; it helps build strong social bonds; it helps
to develop a sense of self-worth and one’s value to society.
For society, trusteeship brings, free of charge, the skills, experience and commitment of people to
help solve some of our most pressing needs.
It also brings these skills to fundamental aspects of our lives, without which we would not even
recognise our own society – our schools, our hospitals, our churches, mosques, synagogues,
gurdwaras and temples, our theatres and other cultural institutions, our sporting and other clubs, our
Trusteeship is the warp and weft of society’s tapestry.
What more can society ask?
Well, the answer, it seems, is ‘one hell of a lot’.
Breach of the social contract
Given what trusteeship delivers for society, you would think that there would be an annual public
holiday to celebrate trustees or maybe medals given out like the Mėdaille de la Famille française,
which is given in France to mothers of large families for their service to society.
Instead, society likes to carp and criticise. It seems to enjoy feeling outraged. Whenever anything
goes wrong in a charity, we freely criticise what the trustees did or did not do.
None of us was that ‘man in the arena’ described by Theodore Roosevelt, “whose face is marred by
dust and sweat and blood; who strives valiantly; who errs, who comes up short again and again…”
and to whom the credit must be given. We are all just unforgiving spectators, none of whom could
have done better and few of whom would even have tried.
And among the unforgivingly critical, you will find parliamentary committees the Charity Commission
and the government, whom you might expect would have the backs of trustees who make mistakes
while trying their best.
The problem with the current model
One reason I think trustees sometimes come up short is that they are often asked to perform a task
that is too great in a manner that is too burdensome.
The Charities Act 2011 tells us that the charity trustees are the people ‘having the general control and
management of the administration of a charity’. If you have ever genuinely had the general control
and management of the administration of any institution, you will know that it is a pretty full-on job. But
trustees are asked to undertake it part time.
When charities have staff, and I am really talking about those charities, we tell the trustees that they
should not get involved in day-to-day management – but that they have to ensure that this
management is undertaken properly.
How? How as part timers with a helicopter view of the charity do they get the assurance that they
need? Where do they obtain it from when even a statutory audit does not now provide sufficient
Trustees feel overburdened by regulation; by a vast array of (admittedly very good) Charity
Commission guidance that they feel they must be on top of; by the detail of what they now seem
expected to know about the inner workings of their charities; and what they are expected to know
about safeguarding, data protection, fundraising and many other issues.
This would be fine if our regulators, our government, parliamentarians, our press and, frankly, all of
us, kept our part of the bargain in the social contract for trusteeship.
But we don’t. We tell trustees they are responsible if it all goes wrong and we make them carry the
can when it does. We watch, often in self-righteous ignorance, while trustees are publicly vilified.
And we ask them to do it with no reward except their own satisfaction in having tried to do some good.
We have collectively breached the social contract.
At the same time, we pretend that the people who are actually running the charity, the paid senior
executives, are not in fact responsible – are not acting as trustees. That is dishonest.
A new model of governance
I think this governance model, in this regulatory and social environment, is unfair on trustees. And this
set me thinking about what other models there might be. My suggestion is what I am calling ‘Assured
It recognises that the people ‘having the general control and management of the administration of the
charity’ are those who are actually running it – the senior staff, often with ‘director’ in their job title. It
then calls those people the trustees.
Alongside those executive trustees there would be a non-executive chair, normally recruited
externally, and another non-executive ‘senior independent trustee’. These would be much more
closely engaged in the work of the charity than most trustees, taking on the significant responsibilities
and time commitment that society now expects. They would be like the chair and non-executive
directors of a large commercial company. They could also be paid but of course need not be.
Essentially, this would be a unitary board but one with more executives than non-executives on it.
What, I hear you ask, about the voluntary principle?
I could answer that the voluntary principle was a fundamental term of the social contract that has
already been breached by society and that trustees are therefore entitled to repudiate the contract.
I could answer by asking you whether, if you were setting up a business to deliver anything as
complex as the operations of many of our charities, and you wanted to do it in the best way possible,
would your first though be, “Let’s get some volunteers to pop in every now and then and run it”?
But I am a believer in the voluntary principle. So, in the ‘assured unitary governance’ model, the thing
that would give assurance and maintain the voluntary principle would be an entirely unpaid ‘assurance
The members of this board would actually be, or be incorporated within, the membership of the
charity. They would not be trustees and would not have trustee responsibilities. In large part, however,
they would perform the functions that most trustees of large, complex charities currently perform:
They would be deeply informed about the work of the charity through the provision of
board papers and through observing the charity’s operations
They would meet up to four times a year
They would review and comment on strategy, policies and budgets
They would provide support and guidance to the executive
They would bring to that support the particular skills and experience they have
And they would be chosen with care, just like trustees.
But, unlike charity trustees, they would not be the decision-makers.
They would, however, have some serious powers that would enable them to give to the public the
necessary assurance while stopping short of turning them into trustees. Those powers would include:
Appointing and removing the trustees
Approving the remuneration of the executive trustees and any paid non-executive
Receiving annual reports and accounts
Providing advice and support to the trustees
Approving constitutional changes
So, under this model, those who currently run large, complex charities would continue to run them, but
would have the added regulatory burden, as well as the authority and the regulatory certainty, of being
charity trustees. Those people who do not actually run such charities on a day-to-day basis, but are
currently being held to account for doing so as trustees, would be able to provide some of the
oversight and assurance that the word ‘trustee’ signifies. But they would no longer be held to
unreasonably high standards by regulators and the public in respect of a task that they cannot
reasonably be expected to perform.
I make no claim that this model would lead to better-governed charities. What I do say is that it would
I’m interested to know what you think about it.
10 Queen Street Place
London EC4R 1BE
A New Approach To Fundraising Regulation
by Stephen Dunmore delivered on 5 September 2016
The Cross-party Review (the Etherington Review) of fundraising regulation was published in September 2015. Chapter 5 of the Review set out the criteria for and recommendations about what a new regulatory regime should seek to achieve, what it should do, how it should be structured and the rules to be put in place to achieve those objectives.
This was followed by the report of the Parliamentary Public Administration and Constitutional Affairs Committee (PACAC), published on 25 January, which emphasised the role of Trustees in protecting the values and reputation of the charities they are responsible for, as well as cooperating with the Regulator and the Commission in making strengthened arrangements work effectively to protect the interests of the public.
Subsequently, the Charity Commission issued new guidance for charities’ trustees about fundraising from the public (CC 20). The guidance emphasized that trustees have ultimate responsibility for fundraising and must provide effective oversight, focusing on donor care and ensuring that their charity complies with the law and follows best practice.
What was proposed
A principal recommendations of Sir Stuart Etherington’s Review was the creation of a new approach to fundraising regulation based on a ‘three lines of defence’ model: trustees, a new, independent fundraising regulator funded via a levy, and the relevant charity statutory regulators across the UK – the Charity Commission in England and Wales, the Charity Commission for Northern Ireland (CCNI) and the Office of the Scottish Charity Regulator (OSCR).
The Review concluded that the Fundraising Standards Board (FRSB) was under-resourced and lacking independence, both because of its membership structure and it reliance on the Institute of Fundraising (IoF), to secure changes to the Code of Fundraising Practice. The Review therefore proposed the establishment of a new body, the Fundraising Regulator, responsible for the independent, ‘voluntary’ regulation of all types of fundraising by UK based charities and for complaints about fundraising in the UK. Funded by a levy on the industry, it would take over the regulatory role of the FRSB and also the Code from the IoF, as well as the Rule Books on Door-to-door and Street Collections from the Public Fundraising Association (PFRA).
The Review also recommended that the Fundraising Regulator should have a convening role, to bring relevant regulators and industry bodies together to ensure that regulation takes place in the context of wider issues and trends.
In the new system, the Charity Commission and other statutory regulators would act as a ‘backstop’ in cases where there are regulatory concerns that are within their remit and powers, for example where there is evidence that, in addition to breaches of fundraising rules, there are wider concerns about a breach of trustee duties. The Government has taken reserve powers in the Charities Bill to introduce statutory regulation, should the new, voluntary system prove unsuccessful.
Governance and purpose
The Fundraising Regulator is a company limited by guarantee without a share capital, governed by a non-executive Board of Directors drawn from inside and outside the fundraising sector, including members with extensive experience of regulation, codes of practice and the charitable sector. The Directors are responsible for the overall control and strategic direction of the company. The Board is chaired by Lord Grade.
Our purpose is to ensure that fundraising is respectful, open, honest and accountable to the public. We will:
- Set and promote standards of fundraising practice (the Code of Fundraising Practice and associated Rule Books) in the charitable sector across the UK, in consultation with the public, fundraising stakeholders and legislators.
- Investigate cases where fundraising practices have led to significant public concern.
- Adjudicate complaints from the public about fundraising practice, where these cannot be resolved by the charities themselves.
- Operate a Fundraising Preference Service to enable individuals to manage their contact with charities.
- Where poor fundraising practice is judged to have taken place, recommend best practice guidance and take proportionate remedial action.
As a values-base regulator, we aim to –
- Protect the public, donors and potential donors, not least those who are vulnerable, from unacceptable fundraising practices.
- Sustain and enhance public confidence in the charitable sector.
- Support the sector to understand and carry out its responsibilities in engaging with the public, creating a positive donor experience.
- Act independently, transparently, fairly and proportionately.
A regulator, statutory or otherwise, cannot operate effectively without the confidence of the sector it regulates. Nonetheless, our first accountability is to donors and the public.
Setting up the Regulator
The Fundraising Regulator began work with a Chair and Chief Executive in early January. Our set-up funding, totalling £624K and covering the period January to August 2016, was provided by 45 of the 50 charities with the largest expenditure on fundraising. Five charities declined to cooperate.
In the set-up period, we have –
- Registered as a company limited by guarantee.
- Put in place robust governance arrangements (Board, Standards Committee and Adjudication Committee) and financial systems.
- Recruited staff (sixteen staff out of a provisional complement of nineteen are in post) and developed our HR policies.
- Negotiated transition from the FRSB, including two staff members and intellectual property.
- Developed our strategic capability, including a business plan and budget, performance monitoring, risk management and a communications plan.
- Developed appropriate IT systems, a website and a published complaints process.
- Published proposals for a Fundraising Preference Service (FPS), arising from the report of the FPS Working Group.
- Published proposals for a levy to meet our annual running costs
- Published proposals for a registration system for charities and fundraising agencies, through which they demonstrate a commitment to best practice.
- Signed a MOU with the Charity Commission.
Perhaps most important, we have put considerable time and effort into building relationships with the charitable sector – individual charities and representative bodies – through meetings, seminars and presentations, and with a range of stakeholder organisations, including the Information Commissioner’s Office (ICO), Charity Commission, OSCR, CCNI, the Direct Marketing Association, the IoF and the Commission on the Donor Experience.
We have also ‘brokered’ our geographical coverage across the UK. We will regulate charities in England and Wales. Scotland has opted for a co-regulatory arrangement, whereby we regulate the fundraising in Scotland of charities based in England/Wales and an Independent Panel linked to OSCR regulates the fundraising of charities based in Scotland, albeit with a single Code of Fundraising Practice. Arrangements for Northern Ireland will be determined in the autumn.
In early July, we took over responsibility for fundraising regulation, complaints handling and adjudications from the FRSB, inheriting the Code of Fundraising Practice from the IOF and the Rule Books on Street and Door-to-door collections from the PFRA.
Since our launch in early July, we have handled 143 complaints and over 200 enquiries from the public. 51 complaints have been about non-fundraising issues and we have redirected them as appropriate; 48 complaints have been referred back to the charities concerned, to be resolved within 28 days. The remaining complaints are either being investigated (wider public interest) by our own staff or are pending allocation.
Complaints include a range of issues – doorstep fundraising, addressed mail, cash collections, fundraising behaviour, misleading fundraising, data protection breaches, frequency of contact and approaches to vulnerable people.
We are also investigating a case, revealed by The Sun, of alleged fundraising malpractice in Bristol; this involves a fundraising agency (Neet Feet) and eight client charities. Our Adjudication Committee will adjudicate on all cases where we carry out an investigation.
The Code of Fundraising Practice is central to our consideration of complaints and public interest cases. The Standards Committee will be the keeper of the Code. We will be proactive in amending the Code, in consultation with the sector and the fundraising community, and have already identified several priority areas where changes will need to be made to reflect new circumstances and issues. The current PFRA Rule Books and the Code of Fundraising Practice will be merged into a single document and be cross-referred to guidance for trustees contained in CC 20 in England and Wales. We plan to launch a major consultation in the new year on Code development and changes.
In addition to producing reports with recommendations for charities to amend their practices, the Fundraising Regulator will have an appropriate range of sanctions to use if necessary. These may include ‘naming and shaming’, cease and desist orders, requirements for training and clearance of future fundraising campaigns.
The expectation is that all charities wishing to demonstrate their compliance with the Code and be badged accordingly will, from September, register with the Fundraising Regulator for payment of a nominal fee.
We will also implement the proposals for a Fundraising Preference Service (FPS), so that members of the public can register if they no longer want to be contacted by charities for fundraising purposes. Organisations spending over £100k on fundraising would have a responsibility to check their contacts against a list of those individuals who have opted out before seeking to fundraise from them by telephone, email, mail or SMS/MMS. Our aim is to have the FPS up and running by March 2017.
It is clear that the majority of larger and medium-sized charities have failed and in many cases are still failing to observe the requirements of data protection legislation in relation to data sharing and selling and establishing unambiguous donor consent, although a number of large and some smaller charities have now led the way in taking vigorous steps to address the problem and implement a change in culture.
We will work closely with the ICO, the Charity Commission and the Institute of Fundraising to ensure that guidance for charities in this critical area is consistent, clear and well-publicised. The forthcoming report of the NCVO’s Working Group On How To Secure Donors’ Consent, which will be passed to the Fundraising Regulator, will provide an opportunity to reinforce these messages and showcase some examples of good practice.
In Scotland, we will continue to discuss with OSCR and the Independent Panel the operational details of the co-regulatory system, to ensure that it works seamlessly for donors and cross-border charities.
A key task from September onwards is to roll out the levy. Just over 2000 charities, based on the volume of their fundraising expenditure declared to the Charity Commission, and all fundraising agencies are being asked to contribute, to meet our annual running costs of c. £2.1m to £2.4m (as indicated in the Etherington Review).
21 May 2018 Caroline Mason CBE Chief Executive Esmee Fairbairn Foundation
Chair of the Charity Commission, Baroness Stowell, outlines why charities need to change to fulfill their much needed potential in a speech at Charity 2020.