A tougher approach to fundraising regulation

Recently, harrowing stories have emerged of individuals who have suffered considerably through rampant targeting by charities to the point where donors could properly be described as victims. Indeed the pushy sales techniques and relentless approaches to, often elderly and vulnerable, potential donors in many ways mirrors the approaches by fraudsters in well-known and prolific telephone ‘vishing’ scams. It appears that some charities indeed subcontract fundraising to the private sector that may have scant connection or shared values with the charities whose coffers they are contractually bound to fill.

The vulnerable and elderly targeted

Perhaps the most shocking example of excessive targeting of donors is that of Olive Cooke who committed suicide having complained of being sent around 10 letters per day from charities seeking her donations. In just one month, Mrs Cooke received 267 items of post from dozens of different charities, asking her for a donation or help with fundraising. In addition to this, Mrs Cooke was plagued with frequent cold calls from other charities. Indeed, Mrs Cooke had devoted her life to charity work, spending 76 years selling poppies outside Bristol Cathedral, and had also supported dozens of other charities by donating to them monthly from her state pension. The Prime Minister David Cameron commented on Mrs Cooke’s demise and stated;

"I know there is a code that is meant to protect people from feeling pressured by charities and I hope the Fundraising Standards Board will look at whether any more could have been done to prevent this."

This indeed was one of a number of cases where elderly and vulnerable people appear to have been targeted for donations. It is hard to see how so many charities could have simultaneously contacted Mrs Cooke unless she was on some kind of list of potential ‘targets’ and without her personal data being passed from one charity to another.

Government review

Such outrages contributed to a decision to review the role and function of not only the Fundraising Standards Board (‘FRSB’) but the whole regulatory framework for charity fundraising, including the professional membership body for fundraising practitioners the Institute of Fundraisers (‘IOF’) and the Public Fundraising Raising Association (‘PFRA’) membership organisation providing specialist compliance, enforcement and allocation services to its members for both street and door-to-door fundraising.

The subsequent report ‘Regulating Fundraising for the Future: Trust in charities, confidence in fundraising regulation. September 2015’ (‘the Report) has recommended widespread reform, indeed involving the scrapping of the FRSB itself an instituting a new regulatory body, the Fundraising Regulator.

The Fundraising Services Board (FRSB)

The FRSB was established following the 2006 Charities Act as the self-regulator for charitable fundraising. It is intended to represent the public interest and act as the public-facing part of the current system. As part of a voluntary scheme, the FRSB is a membership body that regulates all types of fundraising in order to drive up the standards of the profession and provide the public with an effective platform for complaints.

Charities that sign up to the FRSB commit to a ‘fundraising promise’. This is broadly in line with the principles behind the Code of Fundraising Practice (‘the Code’), which FRSB members also commit to abide by. Anyone can instigate a complaint with the FRSB against the Code or the fundraising promise, which it will then investigate and adjudicate.

The FRSB should be the first point of contact for a complaint about fundraising. If the FRSB receives a complaint about a non-member, it will try to refer the complaint to another appropriate regulatory body.

The FRSB complaints process consists of three stages

Stage 1. When the FRSB is first contacted with a complaint, it will pass it on to the charity or supplier to resolve. The charity or supplier is required to try to resolve the issue within 30 days of receiving the complaint and to feed back on the outcome to the FRSB.

Stage 2. If the complaint is not satisfactorily resolved, the complainant can escalate their concerns to the FRSB within two months of receiving the charity’s final response. Once the FRSB has received the complaint, it will initiate its investigation. The process is informal and aimed at an amicable resolution: the FRSB works with the member charity concerned and the complainant to try to resolve the problem rather than sanction for a breach. The FRSB will generally not independently instigate a stage 2 review or take a view of whether the stage 1 resolution was satisfactory unless prompted to do so.

Stage 3. If the complainant is still not satisfied with the outcome, they can ask the FRSB’s Board of Directors to adjudicate. The FRSB Board will review the complaint and report its conclusion within 60 days. The adjudication of the FRSB Board is final and published in the form of a report. As with stage 2, the Board’s role is seen to be more focused on mediation than regulation.

It is clear from this that the current system is aimed at offering amicable solutions as between complainants and charities, and offering advice to charities, rather than imposing punitive sanctions on those in clear breach of the Code or who have acted in an unethical way in respect of fundraising.

The FRSB’s system of sanctions also came under scrutiny in the Report for lack of robustness and punitive sanctions for the most serious cases. 

The FRSB’s published guidance on sanctions where complaints have been upheld states:

For less serious cases:

• The member must issues an apology to the complainant.
• They must modify or improve the training systems or procedures to minimise the chance of a similar complaint reoccurring.

In more serious cases, or in the case of repeated complaints:

• The member must stop using the fundraising method or the conduct that was the subject of the complaint.
• The member must withdraw and/or reprint any fundraising materials that were the subject of the complaint.

In the most serious cases, or in cases where members have continued with unacceptable practice or failed to take remedial action:

• Their membership of the scheme will be withdrawn.

Given that the membership scheme of participation in FRSB is a voluntary one in any event, it is perhaps hard to see how withdrawal from the scheme would be seen as calamitous for a charity that has been found to have been involved in the most serious breaches.

The weaknesses identified in the current regulatory framework

The Report identified a number of weaknesses in the current regulatory framework, including:

• Complexity: The current landscape of fundraising regulation is a complex ‘patchwork’ system of bodies, self-regulation and statutory regulation, which regulate a mix of specific activities and organisations. There is considerable overlap between the FRSB, the IOF and the PFRA which, apart from anything else, can be confusing for potential complainants.
• Voluntary regulation: Currently charities opt-in to regulation by FRSB rather than being automatically subject to it by the nature of their fundraising activities.
• Lack of funding: The FRSB is dependent on the payment of membership fees from charities opting in which causes the regulator to operate with insufficient resources and lack of effectiveness.
•  Lack of independence: The FRSB is not independent. Rather, it is accountable to a membership of fundraising charities and this lack of independence can be linked to a certain lack of vigour and robustness.
• Ineffective sanctions:  The absence of effective sanctions available to the FRSB means that the complainant doesn’t receive adequate retribution.

The Recommendations

The Report came to damning conclusions about the current regulatory landscape and stated (Section 5.3):

‘The evidence submitted throughout the Review made clear that the FRSB has ultimately failed. While it has some significant achievements to its name, it has proven insufficiently effective in dealing with the major ethical and cultural issues that have arisen in recent times. As a result, the existing system has lost the confidence of parliament, of the government and of the public, all of whose support is essential if self-regulation is to succeed. Crucially, the FRSB has also lost the support of parts of the charity fundraising sector. The Review agreed that ‘tinkering around the edges’ would not be sufficient and that this was the last opportunity for the sector to come forward with proposals for a new system.’

The Report then went on to make wide-ranging and sweeping recommendations for the regulation of this sector. The chief recommendations include:

• A model built along ‘three lines of defence’. First line of defence – trustees are the first line of accountability for the charity’s fundraising activities and have the responsibility to ensure fundraising is carried out in compliance with the law and to high ethical standards. Second line of defence – if malpractice occurs, a specialised fundraising regulator has the power to intervene to ensure the public interest isProtected. Third line of defence – the relevant statutory regulator (such as the Charity Commission) acts as the backstop in cases that raise regulatory concerns on issues that fall within their remit and power.
• The abolition of the FRSB and the establishment of a new Fundraising Regulator, which no longer has a membership structure but universal remit to adjudicate all fundraising complaints and stronger sanctions for noncompliance. The new regulator would have the ability to proactively investigate if there has been a breach of regulatory standards regardless of whether a particular individual has made a complaint.
• Adequate resources to reflect the enhanced role of the Fundraising Regulator through the introduction of a mandatory levy.
• A strong co-regulatory relationship with the Charity Commission or other relevant statutory regulator.
• The move of the Code of Fundraising Practice to the new Fundraising Regulator. Thus the new regulator would be the owner of the Code and charged with upholding its standards.
• A single Code of Practice, clearly aligned with the Charity Commission’s guides on charities and fundraising.
• The speedy merger of the IOF and the PFRA into a single organisation.

Specific measures to protect donors

As well as seeking to make the regulatory landscape more robust generally, the Report contains specific proposals to safeguard potential donors, including:

• The creation of a registration ‘badge’ which organisations can display as a sign of their commitment to regulation and high standards.
• The creation of a ‘Fundraising Preference Service’, which would enable members of the public to prevent the receipt of unsolicited contact by charities and other fundraising organisation.
• A move by fundraising organisations towards adopting a system of ‘opt in’ only in their communications with donors. It was noted that at the moment there is no way to ‘opt-out’ of being approached by fundraisers other than contacting the organisation concerned directly and relying on their good will to unsubscribe an individual. A mechanism should exist whereby a person can quickly and easily exempt themselves from being contacted.

A new regime of sanctions

A key part of the new proposals therefore is a tougher regime of sanctions to answer wide-spread public concerns.

The Report states (Section 5.6):

‘The Fundraising Regulator should be equipped with increased powers of enforcement to demonstrate that there are consequences for breaching the rules. Stronger sanctions should provide a credible deterrent for poor practice and drive greater compliance. An effective new regime must provide credible ways to deter and sanction breaches of the fundraising standards, in order to command the confidence of both the individuals directly affected and of the wider public’

The Report then recommends that the Fundraising Regulator should have powers including those to;

• ‘Name and shame’ the organisation and/or individuals against which there has been an adjudication.
• Order compulsory training for fundraisers who have not adhered to the rules.
• Issue an order to ‘cease and desist’, requiring the organisation to stop engaging in a certain type of fundraising for a period of time. Require the organisation against which it has adjudicated to take specified steps to inform its donors about the ruling.
• Require the organisation against which it has adjudicated to submit any future fundraising campaign plans for its approval (in addition, the provision of pre-launch advice to fundraisers, on request and upon payment of a fee, would be a useful service for the regulatory body to provide).
• Make a referral to the relevant statutory regulator in cases where the fundraising malpractice indicates a governance failure or a breach of other legal requirements.

The recommendations are currently only that and would require some statutory footing to be fully implemented. The Report was indeed only published in September 2015 and it is then perhaps unsurprising that the creation of a new Fundraising Regulator does not feature in the current Charities (Protection and Social Investment) Bill. The Report’s recommendations for a more robust regulatory regime do however chime with the thrust of the Bill for more effective sanctions against charities who abuse their status and cross ethical boundaries. A new more robust Fundraising Regulator may well also be in tune with public concern about the kind of abuses from charities towards vulnerable and elderly potential donors.

There is however a careful balancing act for the charitable sector. Underegulation will lead to abuses and may contribute to a lack of public confidence in charities, whereas overregulation may lead to a drying-up of charitable donations and financial difficulties for charities. Perhaps the most powerful argument for regulatory reform in the sector, however, is that restored public confidence in charities may lead ultimately to further and more generous donations from the public.