The effectiveness of the self-regulation of fundraising in Scotland: an informal review

The effectiveness of the self-regulation of fundraising in Scotland: an informal review

August 2015 Contents Foreword 1.0 Executive summary 2.0 Introduction 3.0 Fundraising in Scotland 3.1 Who fundraises? 3.2 How is money raised? 3.3 How much are charities raising in Scotland? 4.0 The regulation of fundraising 4.1 The statutory regulator of charities - OSCR 4.2 The self-regulatory system for fundraising 4.2.1 Fundraising Standards Board (FRSB) 4.2.2 The Institute of Fundraising (IoF) 4.2.3 Public Fundraising Association (PFRA) 4.2.4 Membership of the self-regulatory bodies in Scotland 4.3 Non-fundraising regulatory bodies 5.0 The self-regulatory system 5.1 Is self-regulation delivering good practice in fundraising? 5.2 What do we know about how the public is feeling? 5.2.1 Trust and confidence in charities and charity fundraising 5.2.2 Complaints about charity fundraising 5.3 What would improve the self-regulatory system? 5.3.1 A better understanding of charities 5.3.2 A measured, proportionate, response 5.3.3 A proactive approach to quality management 5.3.4 Mandatory membership 5.3.5 Effective sanctions 5.3.6 Clarity as to who is the ‘professional’ or ‘trade body’ 5.3.7 An effective ‘whistleblowing’ process 5.3.8 A less confused regulatory framework 5.3.9 A review of ownership of the Code of Fundraising Practice 5.3.10 Clear links to non-fundraising bodies and regulators 5.4 Does Scotland require a different regulatory approach? 5.4.1 The political context 5.4.2 Fundraising in Scotland 5.4.3 Devolved policy 6.0 Conclusions 6.1 A change of culture is needed within fundraising 6.2 Greater transparency is required in fundraising, and charities generally 6.3 Charities are not in control of fundraising self-regulation 6.4 Trustees are not sufficiently exercising their governance role in relation to fundraising 6.5 The poor awareness of the regulatory system means a structural change is required 6.6 Better enforcement, with more meaningful sanctions, is required 6.7 There appears to be a strong interest in a Scottish regulatory framework 6.8 The views of the public and donors are not sufficiently represented 7.0 Recommendations Appendices Appendix 1: NCVO review of self-regulation of fundraising - Terms of reference Appendix 2: Informal review of charity fundraising in Scotland – Terms of reference Appendix 3: Contributors Interviewees Round-table participants Appendix 4: Significant current and previous reviews of fundraising regulation and practice Appendix 5: FRSB complaints process

Foreword

Consensus can be hard to achieve in a sector such as ours where everyone has an opinion. Few would, however, argue against the view that public trust and confidence is pivotal to everything that charities seek to do. The public’s experience of fundraising can sustain or undermine that trust. Whilst our cause must be our focus, we cannot achieve this at the expense of those who fund our work by donating substantial sums of money in Scotland. I am heartened to see that our sector recognises the need for good practice, and effective regulation, in fundraising. We cannot be complacent: we must take action to prevent further scandals before they emerge instead of simply reacting to them. We live in an era where people feel increasingly empowered to challenge institutions and authorities. I’m proud that the third sector is home to much of this welcome rise in campaigning and activism. However, if we identify ourselves as part of the solution to society’s many ills, charities need to walk the talk about our own legitimacy, transparency and accountability. Failing to do so means we too become part of the problem. That is the context for this brief review of public fundraising in Scotland. I am grateful to those who have committed their time and energy to producing this report, especially the Reference Group for their wise counsel and to the many hundreds of people who completed the survey that helped inform the review. It is incumbent on all Scottish charities to take greater ownership of the issues raised in this report. The public standing of charity may be relatively robust in Scotland but this is surely not a time to rest on our laurels. In particular, we need to stay tuned-in to public concerns, take any complaints seriously and root out bad practice. The very future of our sector depends on keeping the public onside. Martin Sime Chief Executive, SCVO

1.0 Executive summary

The summer of 2015 saw unprecedented attention focussed on fundraising, sparked by the death of Olive Cooke. Whilst the concerns primarily originated in England, Scottish fundraising has not been immune from criticism. Earlier in 2015 The Kiltwalk had come under scrutiny due to the proportion of its income passed to other charities. A review of the UK-wide self-regulatory system for fundraising, led by Sir Stewart Etherington from NCVO, was announced in July 2015. This was followed shortly afterwards by the announcement of an informal review of the same area by the Scottish Government. This would be performed by SCVO, with the purpose being ‘to identify whether the Scottish public, Scottish Government and (Scottish) Parliament can have confidence that the current system of charity fundraising self-regulation is working and, if not, (to) recommend how it can be strengthened in Scotland.’ Gaining an accurate picture of fundraising in Scotland is challenging. An organisation doesn’t have to be a charity to fundraise, some charities don’t fundraise and some charities, such as universities or museums, may not be recognised by the public as charities. There are also a range of methods that may be used, from static collection cans in shops, to mailing, calling or asking people directly for money or a direct debit. However, we can establish that those living in Scotland are the most generous by the size of gift in the UK, with their average donation of £16 being higher than any country. Total individual giving in 2013 totalled more than £1/2 billion, equating to 39% of small charities income but only 6% of larger charities’ incomes. The regulatory picture is also confusing. OSCR, the Scottish charity regulator, has limited powers in relation to fundraising and the Scottish Government has mainly permitted the fundraising sector to self-regulate. Beyond the individual charity, which is the first responsible body in the self-regulatory system, there are three bodies all with voluntary membership arrangements. The Fundraising Standards Board is the overall regulator, assessing its members’ compliance with the Code of Fundraising Standards. This code is set by the Institute of Fundraising, the professional body for fundraisers. The Public Fundraising Association (PFRA) sets standards and proactively ensures compliance around its members’ street and door to door fundraising. A range of other statutory and non-statutory regulators and trade bodies cover the techniques used in fundraising. Of particular relevance to the current concerns are the Information Commissioner’s Office (ICO), which is responsible for the Data Protection Act 1998 and the Privacy and Electronic Communication Regulations 2003, and the Telephone Preference Service and Mailing Preference Service. The current period of austerity, which has reduced income from grant makers and increased the demand for services, was seen by contributors to have led to charities fundraising for more income, or starting to fundraise for the first time. There was also recognition that some fundraising techniques, such as direct mail and telephone calling, generated higher rates of complaints even when the Code of Fundraising Practice was adhered to. It was accepted that some fundraising issues had been allowed to go unchecked under self-regulation, and that a tightening up of the system was therefore required. The evidence from the data that is available doesn’t give a clear picture of the levels of concern amongst the public and donors. SCVO’s survey, primarily of those in or close to the third sector, showed levels of trust in fundraising dropping. A large proportion of respondents also reported personal experience of poor fundraising techniques. Despite this, complaint levels in Scotland remained very low. The apparent lack of data showing significant public concern was not seen to allow complacency and a range of proposals were made for improvements to the current regulatory process. The review has highlighted that:

• A change of culture is needed within fundraising
• Greater transparency is required in fundraising, and charities generally
• Charities are not in control of fundraising self-regulation
• Trustees are not sufficiently exercising their governance role in relation to fundraising
• The poor awareness of the regulatory system means a structural change is required
• Better enforcement, with more meaningful sanctions, is required
• There appears to be a strong interest in a Scottish regulatory framework
• The views of the public and donors are not sufficiently represented

To address these issues, the following recommendations have been made:

1. Charity trustees should take ownership of fundraising in Scotland in order to maintain public trust in fundraising, and not delegate this to fundraisers
2. Charities should lead the design of their own fundraising regulation system, with the associated rules, codes, thresholds and sanctions
3. The charity sector in Scotland must decide whether membership of this system should be compulsory for all charities that fundraise
4. Sanctions should be determined by charities, but ultimately enforced by an appropriate regulator
5. A ‘fundraising guarantee’ style document should be developed which specifies how the general public can expect to be treated by fundraisers
6. Further work is required to establish processes and practices which avoid vulnerable people becoming overly-burdened by fundraising requests
7. The Institute of Fundraising must take the lead in changing the culture in fundraising
8. Trustees should take greater strategic control over fundraising
9. Compliance with, and the effectiveness of, the regulatory requirements relating to sub-contracting fundraising should be investigated
10. Whistleblowing by fundraisers must be enabled and supported
11. Complaints processes must be redesigned in order to empower the public and trustees
12. New reporting processes are required that deliver greater openness and transparency about the operation of charities

Significant further work will be required to establish how these recommendations should be implemented and to ensure the public are, in the future, at the centre of fundraising self-regulation and policymaking.

2.0 Introduction

Gifts from individuals to charitable organisations based in Scotland totalled more than half a billion pounds in 2013. These donations helped fund a wide range of activities including education, support services, preservation and the arts. The vast majority of Scotland’s twenty-four thousand charities that fundraise do so with the strong support of the public, and without issues. There has, however, been public concern at the fundraising activities of some charities in recent years, notably the Sick Kids ‘New Pyjamas’ campaign in 2010 and The Kiltwalk in early 2015. Media reports linking the death of Olive Cooke, a poppy seller from England, to excessive pressure for donations by charities was a catalyst for intense public and political attention on fundraising practices in May 2015. Subsequent newspaper coverage of apparently poor practice in call centres contracted by charities to sign up donors placed fundraising practices, and particularly the treatment of more vulnerable people, firmly under the spotlight. Despite Olive Cooke’s family clearly stating that her death was “nothing to do with charities”, the issue of fundraising practices remained under intense scrutiny. In July the UK Government asked Sir Stuart Etherington, Chief Executive of the National Council for Voluntary Organisations (NCVO), to review the effectiveness of the current self-regulatory system for fundraising. It is expected to report by 21 September 2015; the Terms of Reference are included in Appendix 1. Also in July, the Scottish Government asked the Scottish Council for Voluntary Organisations (SCVO) to undertake an informal review of charity fundraising in Scotland. The purpose was agreed as being: To identify whether the Scottish public, Scottish Government and (Scottish) Parliament can have confidence that the current system of charity fundraising self-regulation is working and, if not, recommend how it can be strengthened in Scotland. The report was to be submitted to the Scottish Government by the end of August 2015. The Terms of Reference are included in Appendix 2. A separate review was required in Scotland because charity regulation in Scotland is devolved to the Scottish Parliament. Legislation and statutory regulation covering some of the fundraising methods, such as cash collections, is also devolved to Scotland. The current, voluntary, fundraising self-regulatory system is, however, UK-wide. The same is true for data protection legislation, an important element of the recent concerns over fundraising activities. Many charities fundraise across the UK, some internationally, and whilst many are based in England, a proportion are based in Scotland too. The Scottish review has therefore recognised the devolved and reserved dimensions of current practices, legislation and policy. Its remit was to assess whether the Scottish public, Scottish Government and Scottish Parliament could have confidence in self-regulation, rather than whether they do. For this reason, the opinions of these three groups have not been surveyed. Instead, the review has been conducted with the fundraising and charity sectors, and their regulators, to appraise whether self-regulation is working efficiently and effectively in Scotland. Qualitative evidence was gathered through an online survey which elicited more than seven hundred and fifty responses. Whilst some respondents identified themselves as the ‘general public’ we recognise that the routes through which the survey was promoted means these people are likely to be closer to the third sector than the majority of the Scottish public. Interviews were also conducted with fourteen senior charity and fundraising representatives and two round-tables held with twenty-one senior charity and fundraiser participants. A list of contributors is included in Appendix 3. Quantitative data was provided by the Scottish Charity Regulator (OSCR), nfpSynergy, Rapidata, Citizens Advice Scotland, the Institute of Fundraising, the Fundraising Standards Board and Public Fundraising Association. This review, and that led by Sir Stewart Etherington, also draw on the findings of previous reviews of fundraising practice. The more significant current and previous reviews are listed in Appendix 4. Finally, the conclusions and recommendations in this report do not necessarily reflect the opinions of all of those who have contributed. They have been developed in the light of current circumstances, taking into account what contributors told us and the data provided. However, they don’t seek to address the problems of today. Instead, they are intended help develop a regulatory system that truly inspires trust and confidence in fundraising in Scotland long into the future.

3.0 Fundraising in Scotland

3.1 Who fundraises? The picture of fundraising in Scotland can be confusing because it is performed by a broader range of organisations than charities, and not all charities fundraise:

• An organisation doesn’t have to be a charity in order to raise money for good causes. Examples of this could be parents holding a fundraising event for school equipment, or a collection in a private venue for an international emergency. Private companies can also fundraise on a charity’s behalf.

• Not all charities fundraise. A large number are run solely on the basis of grants or contracts from public bodies.

• Many charities that fundraise may not be seen primarily as a charity by the general public. These include universities, heritage organisations and arts organisations.

3.2 How is money raised? A wide range of techniques are used to raise money. Some involve the public, some are aimed at particular individuals and some involve organisations such as companies and trust and grant makers. The approaches used include: Individual giving (by volume of method used by FRSB members)

• Static cash collection (n/a): Collection cans left in shops, offices and cafes
• Legacies (n/a): The leaving of a bequest in a will, which may follow a marketing programme encouraging donors to leave such a gift

• Major donors (1,632): Securing significant individual sums, or a promise of repeat gifts totalling a significant value, from high net worth individuals
• Cash collections (4,102): Volunteers or paid staff collecting cash in collecting cans or envelopes on the street, at events or door to door
• Events (33,206): Either run directly by the charity, or with places in events purchased from other charities or commercial enterprises
• Community fundraising (62,994): Engaging groups of people to encourage them to raise money for the charity through approaches such as events or bake sales
• Competitions/raffles (2,649,367): Can include small, local raffles or large, national, ones involving direct mailing
• Press inserts (3,004,789)
• Committed giving (4,227,514): Securing regular direct debits, or standing orders, from donors generally through telephone (3,576,607), door to door (627,425), street-based (703) or private site (22,779) - shopping centres, rail stations, etc. - canvassing
• Direct marketing (6,782,955): Mailing directly to people using either ‘warm’ lists of donors already known to the organisation or ‘cold’ lists that have been bought from agencies specialising in data sales
• Digital fundraising (18,362,596): Securing donations through emails (2,979,394), texts (6,735), social media or website adverts (15,376,467)
• Press advertising (23,499,025)
• TV and radio advertising (57,411,956)

Organisational giving (by volume of method used by FRSB members)

• Trust and grants (7,061): Applications to trusts or grant providers for funding, most often for particular programmes of work
• Corporate (9,637): Obtaining gifts, or in-kind support, from companies which may be through a ‘charity of the year’ style programme

The donor development pyramid (Picture courtesy of the Institute of Fundraising) The ‘donor development pyramid’ approach is common in fundraising, where the large number of people at the bottom of the pyramid are encouraged to give more, or more regularly, over time, moving up the pyramid. The model recognises that there will be a loss of some donors, but those left will be making bigger donations, hence the narrowing of the pyramid towards the top.

3.3 How much are charities raising in Scotland?

Research from the Charities Aid Foundation (CAF) in 2014 found that the proportion of those surveyed giving money to charity, or having sponsored someone, in the four weeks prior to interview were as follows:

• Wales: 58%

• Northern Ireland: 55%

• Scotland: 44%

• England: 43%

In terms of the median amount donated by individuals, the levels were:

• Scotland: £16

• England: £14

• Wales: £14

• Northern Ireland: £10

The following information is extracted from previous analysis by SCVO of individual giving in Scotland. It is based on detailed analysis of a selected sample of 800 charity accounts and reports for the financial year 2012-13, combined with additional data on the ‘regulated third sector’, including data on:

• 19,635 charities from the Office of the Scottish Charity Regulator (OSCR)

• 162 housing associations from the Scottish Housing Regulator

• 107 credit unions from the Bank of England

It does not include UK charities, but it should be noted that a substantial amount of Scottish individual giving goes to UK-wide charities based outside of Scotland. The key findings were that individual giving in 2013 reached a historic high of £537m, up £66m from 2012.

• The majority of donations were made by individuals donating small amounts to a charitable cause directly, or via sponsorship and fundraising events.

• In recent years however, very large donations from wealthy philanthropic individuals setting up trusts have made an impact, such as Ian Wood’s gift to the Wood Foundation.

• Charities spent around £328 million in 2013 on generating income, which includes fundraising costs, as well as advertising and publicity, trading costs and investment management.

The graph below shows that as organisations increase in size, the total amounts donated also increase, but form a far smaller share of overall income:

• Individual giving is very important for smaller organisations, making up 39% of the total income for this group – around £32 million

• Individual giving makes up only 6% of the total income of large organisations when taken as a group, as many are funded via other sources such as public sector contracts.

4.0 The regulation of fundraising

The first responsible body in the self-regulatory system for fundraising, and the organisation people are most likely to complain to about fundraising according to SCVO’s survey, is the charity itself. Regardless of whether a complaint is made to the charity, or to the FRSB, the complaints process managed by the FRSB (see appendix 5) stipulates that the charity must attempt to resolve the issue leading to the complaint. The self-regulatory scheme beyond the charity itself has been developed primarily by the fundraising sector. Whilst regulations have been developed under subsection 83(1)(c) in relation to certain elements of fundraising (see below), the Scottish Government has so far chosen not to exercise its powers to make regulations under subsection 85(2)(h) of the Charities and Trustee Investment (Scotland) Act 2005. This provision enables it to make regulations to cover:

• Unreasonable intrusion into the privacy of people being asked for money

• Unreasonable persistent approaches to people to donate money

• Undue pressure on people to donate funds

• False or misleading representations about benevolent bodies or what they will use money raised for

4.1 The statutory regulator of charities - OSCR

The Scottish Charity Regulator (OSCR) was established by the Charities and Trustee Investment (Scotland) Act 2005. Its role is to regulate charities, and to hold their trustees to account for serious mismanagement or governance failures, rather than to specifically address unsatisfactory fundraising episodes. The law does not at present provide specific powers for OSCR or other statutory regulators to deal with concerns raised about persistent, intrusive, unreasonable or misleading pursuit of donations. OSCR could only address these in relation to a charity, where they amounted to misconduct on the part of the trustees, using their general powers. Part 2 of the 2005 Act includes some specific requirements in relation to fundraising:

• powers for local authorities to license collections of money from the public on the streets or door to door (Section 84-89)

• a power for a charity to get an interdict to prevent unauthorised fundraising on its behalf (Section 82)

• the requirement for a charity (or other fundraising body) to have a formal agreement in place with the professional fundraiser that is acting on its behalf (Section 81)

• OSCR’s limited ‘licensing’ role in relation to granting exemptions for promoters of cash collections (Section 87).

The Charities and Benevolent Fundraising (Scotland) Regulations 2009 specifies the following:

• What must be contained in the fundraising agreement between a charity and those fundraising on its behalf. (Section 2)

• The requirement to provide information to donors, setting out the payment arrangements a charity (or other fundraising body) has with the fundraiser (Section 3-4)

• The rights to a refund or to cancel agreements (Section 5)

• The passing of money or promises of money to charities and other benevolent bodies (Section 6)

• The availability of records held by professional fundraisers and commercial participators (Section 7)

As a reporting agency OSCR can also report to the Crown Office and Procurator Fiscal Service (Scotland’s prosecution service) a charity which has failed to comply with the regulations. The requirements outlined above for a charity, or other fundraising body, to have a formal agreement in place with the professional fundraiser that is acting on its behalf, and the requirement to provide information to donors, setting out the payment arrangements a charity or other fundraising body has with the fundraiser, address the issues that the UK Government recently announced it intended to legislate on. Generally speaking, the regulatory regime for charities in Scotland applies equally to all charities entered in the Scottish Charity Register. However, the Charity Commission for England and Wales acts as ‘lead regulator’ for cross-border charities with the aim of minimising the burden of regulation on such charities. In relation to fundraising regulation, OSCR’s factsheet ‘I have a concern about a Scottish charity’ explains: ‘…we cannot usually become involved in the following issues, as it is not within our regulatory powers to do so:

• Fundraising methods. You should contact The Fundraising Standards Board’

The organisation has a Memorandum of Understanding with the Fundraising Standards Board (FRSB) that sets out how complaints will be handled by each regulator.

4.2 The self-regulatory system for fundraising

4.2.1 Fundraising Standards Board (FRSB) The FRSB, established in 2006, hears complaints from members of the public about fundraising, highlights changes required in the IoF Code of Fundraising Practice arising from complaints and records the level and types of complaints received by its member charities. It describes itself as follows: ‘The FRSB is the independent self-regulatory scheme for fundraising in the UK. We support our members in complying with fundraising best practice and we help protect the public by ensuring charities are accountable for their fundraising and by dealing with any concerns.’[1] The complaints process is included in Appendix 5. Joining the FRSB is seen to help organisations raise more money for their cause, show they are accountable, prove their commitment to high standards in fundraising and enhance their image and the image of the sector as a whole. It also ensures they keep up to date with fundraising news and increase their knowledge. The FRSB ‘give with confidence’ tick logo is intended to give members of the public confidence that a charity is well regulated. The FRSB highlight that research[2] in 2013 found that three-fifths of people were more likely to trust a charity if they knew it was an FRSB member, and two-fifths said they would donate more. However, research carried out a year earlier found that more than nine out of ten people had not heard of the FRSB[3]. Membership is open to the following:

• Charities, not-for-profit and philanthropic organisations that raise money to achieve charitable goals and that have been set up for the benefit of the public, rather than an individual. They don’t have to be registered as a charity. Fees range from £31 to £5,125 per year, based on the level of voluntary income.

• Supplier organisations, consultants and individual advisors can join for a fee ranging from £100 to £1,200 depending on fundraising turnover. Proof of contracts from two charity clients, references from two charity clients and a copy of one year’s accounts must also be provided.

The fees for such private sector bodies with a fundraising turnover of more than £10m are lower than those charged for charities, not-for-profit and philanthropic organisations with a voluntary income over £10m. 4.2.2 The Institute of Fundraising (IoF) The Institute of Fundraising is not itself a regulator. It does, however, have a central role in the self-regulatory system because it develops and maintains the Code of Fundraising Practice on which the fundraising self-regulatory system is based. The IoF describes itself as the professional membership body for UK fundraising. Its mission is to support fundraisers, through leadership, representation, standards-setting and education, and it champions and promotes fundraising as a career choice. The IoF’s role in relation to the regulatory framework is as follows:

• The Code of Fundraising Practice represents the standards expected of all IoF members and is ‘set by the fundraising community through the work of its Standards Committee’. It contains specific sections of relevance to the different legislative framework in Scotland.

• The composition of the Standards Committee was amended in June 2015, following criticism of the lack of public voice on the Committee. It now includes positions for a lay chairperson and three lay members. These sit alongside a representative of the Fundraising Standards Board and of the Public Fundraising Regulatory Body; a legal representative and a consumer representative; a vice chair/IoF trustee, five IoF members and the Chair of the IoF Scotland Standards Committee.

• The IoF Scotland Standards Committee supports the work of the Standards Committee. It includes seven IoF members and observers from OSCR, SCVO, the Scottish Government and a law firm.

• Training courses, conferences, seminars and informal meetings, which contribute to compliance with the Code, are provided for IoF members and prospective members living and working in Scotland.

• Two members of staff, a Scotland Manager and Information and Marketing Officer, are based in Scotland. They help members with queries, promote the IoF’s work and the Code of Fundraising Practice, and engage with the Scottish Government, OSCR and other bodies as necessary.

Membership is open to the following:

• Individuals can join at either Associate (less than 5 years’ experience in fundraising, currently £95 per year) or Full grade (more than five years’ proven experience, currently £105 per year). Membership helps with an individual’s training and development and enables them to be ‘part of a community of over 5,500 fellow professionals’

In both cases a referee (two in the case of the Full grade) must confirm that they believe the applicant will abide by the Institute of Fundraising’s Code of Fundraising Practice. Individual private sector consultants, or those working in a small consultancy employing no more than three people, can also join as individual members.

• Organisations pay a membership fee in line with their voluntary (charitable) income; the fees vary between £195 and £10,950 per year. It enables such organisations to demonstrate ‘their commitment to best practice, increasing public trust and confidence in fundraising.’[4]

• Private companies can join as a ‘Corporate Supporter’ for a fee of between £795 and £2545 (depending on turnover) to ‘enable companies committed to the not-for-profit sector to communicate effectively with the fundraising community.’ The fees for companies with a turnover of more than £10m are lower than those charged for ‘organisations’ (such as charities) with voluntary income over £10m.

The aim is to provide corporate supporters ‘with an excellent business opportunity and (Institute) charity members with insight and access to the sector’s leading suppliers.’ 4.2.3 Public Fundraising Association (PFRA) The PFRA works with fundraising organisations and councils to manage street fundraisers (often known pejoratively as ‘chuggers’) and doorstep fundraising. It describes itself as: ‘the self-regulatory membership body for charities and agencies carrying out street and doorstep Direct Debit fundraising.’[5] The PFRA has had a site agreement with Glasgow City Council since 2012 and with Perth and Kinross since 2014. It also manages the diary for street fundraisers in Edinburgh to ensure only one charity turns up to the available sites at any one time. The PFRA states[6] a typical Site Management Agreement will:

• Delineate the location in which fundraisers may work. This is usually very specific, containing instructions such as ’90 yards along High Street as far as junction with Main Road’ etc.

• Specify which days of the week fundraisers may attend. The SMA might, for instance, preclude fundraisers from working on market day. Most SMAs allow fundraisers to attend three or four times a week.

• Specify how many fundraisers may attend. Depending on the size and layout of the location and the population density, most SMAs allow between three and six fundraisers.

• Include various other criteria and stipulations, such as whether or not bags may be left on the pavement, or whether a non-fundraising team leader is allowed to be present.

The PFRA will then manage the street diary and ensure fundraisers operate according to the terms of the Agreement and comply with the Institute of Fundraising's Code of Fundraising Practice. Membership is open to any fundraising organisation or professional fundraising organisation that either is actively engaged in street or door to door fundraising or advises on its use.

• ‘User’ membership is for charities that use face to face fundraising either by contracting out to a provider or running an in-house team. It costs £100 per year plus a 70p levy on each donor recruited.

• ‘Provider’ membership is for the professional fundraising agencies that provide face to face fundraising services for charities. It costs a flat rate of £250 per year.

As of 19 August 2015, the organisation changed its name to exclude the ‘Regulatory’ element. The organisation’s press release explained: ‘By dropping ‘regulatory’ from our name, our aim is to ensure there is no room for confusion about who we are, who we represent, or what we do. During our consultation with both charities and agencies, it became increasingly clear that compliance is something our members want delivered jointly by ourselves and the IoF, with regulation overseen separately by an effective and truly independent body. This name change provides a step in the right direction toward some much needed clarity.’ 4.2.4 Membership of the self-regulatory bodies in Scotland

Type of membership	Scotland	UK	Scotland % of UK
Fundraising Standards Board (FRSB)
Charities, non-profit and philanthropic bodies	175	1,948	9%
Supplier organisations, consultants and individual advisors	6	96	6.3%
Institute of Fundraising (IoF)
Individuals	593	4,797	12.4%
Organisations	66	520	12.7%
Corporate Supporters	3	111	2.7%
Public Fundraising Association (PFRA)
User (charity) members	6	122	4.9%
Provider (company) members	n/a	41	n/a

4.3 Non-fundraising regulatory bodies

There are a range of statutory and industry regulators that have direct relevance to some or all of the different types of fundraising. These include:

• The Information Commissioner’s Office (ICO) was established under a different name by the Data Protection Act 1984. It was set up to ‘uphold information rights in the public interest, promoting openness by public bodies and data privacy for individuals.’

Of particular relevance to fundraising practices is its role enforcing and overseeing the Data Protection Act 1998 and the Privacy and Electronic Communication Regulations 2003. The latter covers the sending of electronic marketing messages by phone, fax, email or text, the use of cookies and the provision of electronic communication services to the public. Further data protection safeguards are expected within two to three years as a result of the European Commission’s General Data Protection Regulation.

• OFCOM is the communications regulator in the UK and operates under a number of Acts of Parliament, including the Communications Act 2003. It regulates the TV and radio sectors, fixed line telecoms, mobiles, postal services, plus the airwaves over which wireless devices operate.

• The Gambling Commission was set up under the Gambling Act 2005 to regulate commercial gambling in Great Britain. It licenses ‘large society’ lotteries where the value of tickets on sale is more than £20,000 and the proceeds from lotteries are £250,000 or more.

• Local authorities license and oversee public cash collections and ‘small society lotteries’.

• The Mailing Preference Service (MPS) is run by the Direct Marketing Association and allows consumers to remove their names and home addresses from lists used by the direct marketing industry.

• The Telephone Preference Service (TPS) is run by the Direct Marketing Association on behalf of Ofcom. In 2013 it launched a certification scheme for the UK telemarketing industry TPS Assured.

• The Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP) produce codes that are independently administered by the Advertising Standards Authority (ASA).

• Payphone Plus is the independent regulator for UK premium rate services, which include fundraising texts and smartphone apps which include donations.

 

5.0 The self-regulatory system

5.1 Is self-regulation delivering good practice in fundraising?

There was consensus from those contributing to the review that the period of austerity, which has reduced income from grant makers and increased the demand for services, has led to charities looking to fundraising for more income. It has also led to charities starting to fundraise who have not previously done so. Analysis of fundraising income and expenditure data suggests that large UK-wide charities have been spending more on fundraising but not receiving the equivalent rise in income. The implication is that, with reasonably static income levels, charities generally are having to contact more people, more times, to ensure they maintain or grow their income levels[7]. It was also accepted that certain fundraising methods, covered by the Code of Fundraising Practice, generate higher rates of complaints from the public. These include telephone calls, street sign up, doorstep sign up, telephone calling and direct mail. It was also noted that some fundraisers, charity senior executives and trustees also disliked such approaches. It was understood by contributors that, whilst fundraisers may have been utilising new methods, or increasing volumes, of fundraising ‘correctly’ in terms of the Codes of Fundraising Practice, this could still have been experienced by the public to be high pressure or aggressive fundraising. Concern was expressed that the fundraising sector had not stepped back and reviewed, at a macro level, what the effect on the general public would be. Overall, contributors generally felt that, whilst standards had been below what was expected in some cases, they had to be viewed in terms of the many millions of fundraising ‘asks’ which are performed without a complaint each year. Views differed between representatives of charities operating UK-wide, and those fundraising solely in Scotland, as to how indicative of a poor culture and behaviour the recent public attention on fundraising has been. Those fundraising solely in Scotland were more likely to believe that the issue was being led by the media and that the poor behaviour was limited to a small number of large UK-wide charities. Those working for UK-wide charities tended to believe that the fundraising sector as a whole has underestimated the public’s mood. They believed there to be significant complacency in fundraising and that this is a ‘wake-up call’ signifying the public’s unhappiness at the approaches being taken. It was viewed as simply being luck that an event like that involving Olive Cooke hadn’t arisen in Scotland. It was accepted that some issues had been allowed to go unchecked under self-regulation, and that a tightening up of the system was required following the recent issues.

5.2 What do we know about how the public is feeling?

Whilst the review was asked to look at whether the public could have confidence in fundraising regulation, rather than whether it did have confidence, there is a range of data available that suggests how the public might be feeling about fundraising. 5.2.1 Trust and confidence in charities and charity fundraising OSCR collects data on the Scottish public’s attitudes towards charities, the latest data being from 2014. Whilst the respondents highlight fundraising techniques as a concern, they score relatively low with most concern relating to how money is spent by charities. What issues or concerns, if any, do you have about how charities are run? (Ranked in order of issues mentioned spontaneously).[8]

	Total (n=1,001)	%
Running costs	308	31%
Not enough money reaches the actual cause	223	22%
I don’t know how they spend their money	90	9%
Money is lost through corruption	43	4%
They use fundraising techniques I don’t like	27	3%
They waste the money	17	2%
No issues or concerns	394	39%

There has, however, been a significant increase over time in the proportion of people reporting higher levels of concern about fundraising methods when prompted. The proportion reporting a level of four or five (where five is ‘very concerned’) increased from 29% in 2011 to 48% in 2014. Higher levels of concerns were noted for older age groups. Level of concern: Methods of fundraising used by charities[9] Data on whether the public is withdrawing their support as a result of the recent media coverage is limited at present. One of the few sources currently available is Rapidata, a company that supports charities, not for profits and commercial companies with the collection, administration and processing of Direct Debit payments. It has not noticed any pattern of UK donors cancelling their gifts as a result of the recent media coverage: ‘Cancellation rates for 2015 Q2 shows April (2.86%) May (2.72%) and June (2.81%) as steady, having registered very slightly up on 2014’s figures (June 2014 2.39%). The rate for June year on year has risen by less than half a percentage point (notable spikes in cancellation rates are generally expected to be 1% increase or more). Therefore there is no indication of a dramatic increase in regular giving supporters cancelling their donations last month during the period of markedly negative publicity and an influx of complaints made to the FRSB.’[10] SCVO’s online survey was conducted right in the middle of the media coverage around fundraising. 753 people responded, with the profile being as follows:

‘Answering this survey as’	Responses
a paid fundraiser	21.2%	160
other charity employee	45.2%	340
volunteer	7.0%	53
board member/trustee	12.1%	91
a member of the public	11.0%	83
other	3.5%	26
TOTAL		753

Average trust levels of charities were relatively high, with an average rating of 7.21. It is accepted, however, that due to the survey being publicised primarily through third-sector routes, the views may be more positive towards fundraising. Similarly, those replying as the ‘general public’, who scored their trust the lowest, may understand the third sector better than the average person, since they could well be a friend or relative of someone in the sector. Respondents were asked whether their trust in charity fundraising had increased or decreased in the last year. Whilst ‘no change’ was the most common answer, more than half of those responding as the ‘general public’ reported their trust decreasing ‘a lot’ or ‘a little’. This drop in trust may not solely be due to negative media coverage surrounding fundraising. 45% of respondents had personally experienced bad practice by fundraisers; a particularly large proportion. 5.2.2 Complaints about charity fundraising The SCVO survey asked who people would complain to about a charity’s fundraising. Whilst those responding, even those referring to themselves as ‘members of the public’, are likely to have more knowledge of the third sector than average, their answers give us an indication of which organisations people are likely to complain to:

1. The first choice was the charity itself. Charities were not asked directly for complaint data during the review since this should be the same as they submit to the FRSB. However, we were told of two examples. In the first, a large UK-based charity had emailed more than 1/2 million donors in relation to the recent media coverage. The negative responses totalled less than 50, equivalent to 0.01%.In the second, a Scottish charity told us how, over the past 15 months, they had gained agreement from 40,000 people to host a home money box. The donors were contacted by a commercial telephone call centre contracted by the charity. It was estimated that they had phoned around 180,000 homes in the name of the charity to obtain the 40,000 placements. The charity received just one complaint.

2. OSCR was the second choice. Since 2011 OSCR has opened forty-three inquiry files where ‘fundraising issues’ were identified as either the primary or secondary inquiry issue. These account for just 2.69% of all inquiries opened since then, and in three quarters of cases fundraising was the main issue.

Inquiries opened where primary or secondary inquiry issue is ‘fundraising issues’[11]

Year	Number	All Inquiry Files Opened	Percentage
2011	14	399	3.51%
2012	10	425	2.35%
2013	10	312	3.21%
2014	8	344	2.33%
2015 YTD	1	120	0.83%
Total	43	1,600	2.69%

A higher number of inquiry cases involve bodies misrepresenting themselves as charities, with 148 opened since 2011, accounting for 9.25% of all inquiry files. In 95% of cases misrepresentation is the primary inquiry issue. However, not all of these cases will be directly related to a fundraising concern and there may be different ways that the misrepresentation has been detected.

3. The third choice was the Their 2014 data shows that of the total Scottish members (175 in August 2015), 160 submitted returns regarding fundraising methods and complaints. 148 of these were carrying out fundraising and three-quarters (111) reported zero complaints.

The highest volumes of complaints identified in their August 2015 data were received in relation to addressed direct mail, email and telephone fundraising. These are highlighted green in the following table. The figures for telephone complaints appear low in comparison to the UK as a whole, particularly when 19% of the volume of telephone fundraising is reported as being performed in Scotland. Direct mail was also the top UK complaint, but telephone fundraising received the second highest volume of complaints and door to door donor sign-up the third highest. Breakdown of FRSB Scottish fundraising approaches and complaints[12] Green shading is the top three by volume for Scotland, and red shading is top three as a proportion of the UK. Note - green shading is top three by volume for Scotland, and red shading is top three as a proportion of the UK

4. The fourth choice was the IoF who would pass complaints to the FRSB.

5. The fifth choice was the police.

6. The sixth choice was ‘other’. We approached the Society of Chief Officers of Trading Standards in Scotland (SCOTSS) to see whether they received fundraising complaints. They noted they did receive such complaints but, like OSCR, many related to misrepresentation as a charity fundraiser.

They also explained that Trading Standards’ UK partnership with Citizens Advice has resulted in the significant proportion of all consumer complaints being routed through the Citizens Advice consumer helpline. The helpline only refers more complex cases, or those involving criminal breaches to local authority Trading Standards services. We asked Citizens Advice Scotland whether their helpline or the Citizens Advice Bureaux they support had received fundraising-related complaints. They explained that cases are coded as criminal by an advisor when they think that there has been a breach of criminal legislation. Across the UK there were 836 cases coded by CABs in this way. Out of the 37 cases found that were noted as Scottish residents there were none that related to any Scottish charity.

5.3 What would improve the self-regulatory system?

Further legislation or regulations were not seen as being required by most contributors. The following were, however, highlighted as potential improvements to the current system: 5.3.1 A better understanding of charities The challenges facing the fundraising sector were seen by contributors to be broader than fundraising. They are seen to arise due to the public and the media’s lack of understanding of modern charities. This lack of understanding was seen to be the driver behind public concern over a range of issues including chief executive’s pay levels, the use of paid staff to fundraise and the amount of money spent on administration costs. Many fundraisers were disappointed by the lack of a supportive and effective response from the fundraising bodies, the senior staff of charities or charity trustees. 5.3.2 A measured, proportionate, response The current system is seen as being too reactionary, and subject to knee-jerk responses to complaints and negative media attention. An example given was the rush to change ‘ought-to’ requirements in the Code of Fundraising Practice to ‘must’ following the recent negative publicity surrounding fundraising. 5.3.3 A proactive approach to quality management The majority of contributors wanted a more proactive approach to improving and maintaining quality. Some saw donors as being expected to provide quality control by complaining. The work of the PFRA in attempting to reduce complaints in relation to face to face fundraising was highlighted as good practice. There was some concern that the FRSB took complaints data from charities on trust. Contributors did not seem to be aware that the FRSB reviews data returns from charities and checks complaint levels against the charity’s peer groups, investigating if there is a significant variance. The FRSB does not breakdown statistics by country; instead it gives UK-wide figures and analysis. It was noted that the lack of Scottish data prevented charities addressing specific areas of concern to the Scottish public. 5.3.4 Mandatory membership The opt-in nature of membership for the IoF, FRSB and PFRA was seen as problematic. It allowed a variation in standards to exist between members and non-members and all fundraisers and charities would be affected by poor behaviour of non-members. An alternative perspective was that FRSB membership demonstrated to donors that charities were serious about fundraising in an ethical manner. The FRSB’s voluntary membership arrangement was seen by some to be flawed. They questioned whether the FRSB could be expected to effectively sanction members if a sanction resulted in them losing significant membership income. Mandatory membership was also seen to address the issue of some choosing not to be members for financial reasons. Care was seen to be needed, however, to avoid overburdening smaller charities. 5.3.5 Effective sanctions Good complaint handling by charities will provide effective redress for the majority of those raising a complaint, and the knowledge gained can help improve a charity’s overall performance. In some cases sanctions will, however, be required. The voluntary nature of membership of the current bodies, and partial coverage of the potential members, was seen by many to undermine the ability of the FRSB to impose effective sanctions. The ultimate sanction, withdrawal of membership, was not seen as putting charities in a significantly worse place given the FRSB’s low level of awareness amongst the public. In contrast, in the year 2014/15, the PFRA awarded fines against sixteen organisations which totalled £36,440. This was just over half the amount paid in financial penalties in 2013/14. 5.3.6 Clarity as to who is the ‘professional’ or ‘trade body’ There was seen to be a lack of clarity as to which organisation was acting as the professional body, trade body and industry body. The IoF was broadly thought of as a professional body for individual fundraisers. The high cost of IoF training was, however, seen as excluding fundraisers from lower-income charities. There was also seen by some to be too much sensitivity to the views of fundraisers and charities, and not enough to those of donors. The inclusion of members from the private sector, and ability for them to take senior positions, was said by some to raise questions about the influence of those selling fundraising services. The PFRA was seen as an effective trade body for face to face fundraising, which was at odds with the ‘regulatory’ part of its name. This issue has since been addressed with the new name of the Public Fundraising Association. 5.3.7 An effective ‘whistleblowing’ process There was seen to be value by some contributors in the creation, by one of the fundraising bodies, of a channel to enable fundraisers to ‘whistleblow’ on charities that are acting unethically, outwith the Code or unlawfully. 5.3.8 A less confused regulatory framework Whilst contributors did not generally have a view on how it should be achieved, many believed that it was necessary to reduce the current number of bodies to create greater clarity and awareness for the public. 5.3.9 A review of ownership of the Code of Fundraising Practice The relationship between the development of the Code of Fundraising Practice, the public’s engagement in this, complaint handling and revisions to the Code was seen to be in need of revision by many contributors. There was, however, no firm view as to what the answers were, just a desire to see further work in this area. 5.3.10 Clear links to non-fundraising bodies and regulators Opinions differed as to how well the IoF, in particular, promoted the standards of bodies covering techniques used by fundraisers. These included the Direct Marketing Association (a trade association offering lobbying, events, research, and development) and Committees of Advertising Practice (CAP) who write and maintain the UK Advertising Codes.

5.4 Does Scotland require a different regulatory approach?

5.4.1 The political context Those who felt able to comment, who were mainly those in Scotland, generally saw there to be a political difference between the approach towards the third sector taken by the Scottish and UK governments. 5.4.2 Fundraising in Scotland There was consensus amongst contributors that there is a difference in the way that fundraising is carried out by Scottish charities fundraising solely within Scotland. In particular, it is seen to be undertaken on a smaller scale than England and Wales due to Scotland’s size, geography and population density differences. There was also consensus from those contributing to the review that these factors meant the more controversial methods of fundraising identified in 5.1 were less viable in Scotland. Some believed there was a more close knit fundraising community in Scotland, and that this community has a more donor-focussed ethos than those operating large fundraising programmes across the UK. These views were mostly expressed by those working in Scotland for Scottish-based charities. Those whose remit was wider than Scotland, and UK-wide charities based outwith Scotland, did not generally see a need for a different Scottish regulatory system. There was a view that such a decision was subsidiary to a decision about the future of the current three fundraising bodies. It was believed by many that a single self-regulatory body would not cause undue issues for cross border charities. They were already seen to be coping with differences in charity legislation and regulation in Scotland and that a Scottish body would simply add another dimension to their compliance work. It was highlighted that a different regulatory framework north and south of the border could present a challenge for those using digital forms of fundraising, such as social media, for example. Whilst the original recipient of a digital ‘ask’ might be based in the charity’s regulatory area, the ease with which a digital ‘ask’ can be passed on to another person could lead to it being received in a different part of the UK subject to a different regulatory regime. The expectation was that charities would have to default to the highest regulatory standard in place in the UK. 5.4.3 Devolved policy Many contributors from Scotland noted the different legislation and policy environment in Scotland, both in terms of that affecting charities and that which affected their beneficiaries. They also recognised that the further devolution transition of power to Scotland, including powers to change income tax levels, could have an effect on fundraising in Scotland. There was frustration from many Scottish contributors about the English focus of all three fundraising bodies, although the IoF was also felt to engage well in Scotland. It should be noted, however, that it does receive a grant of £40,000 per year from the Scottish Government which meets a proportion of the costs of the IoF Scotland office.

6.0 Conclusions

6.1 A change of culture is needed within fundraising

The available data, albeit clearly limited, suggests that people have not been complaining to, or about, charities in Scotland at any significant level. There is also no evidence yet of a large scale cancellation of donations or any significant drop in confidence in charities over time. But SCVO’s survey, performed at the height of the negative media coverage, does, however, suggest there may be a loss of trust in charities. The survey also shows that changes in the level of trust correlate strongly with whether someone has personally experienced poor fundraising practices. Contributors to this review acknowledged that the public, and in many cases fundraisers, charity CEOs and trustees themselves, are simply not happy with some of the techniques used to raise money. These include street-based or house-to-house direct debit sign-up, telephone requests to give or increase giving, and the attempt by charities to sign up donors who are already known to be giving through the swapping of donor address lists. Used on a small scale, carefully, it appears that the public may tolerate these approaches. It is their large scale, indiscriminate, use, with the assistance of sometimes poorly supervised commercial agencies and a culture where donors are seen by some as ‘assets’ to obtain and be maximised, that appears to lie at the heart of the public’s discontent. Media coverage and the complaints data suggests the problem is more prevalent in large UK charities than Scottish charities raising funds solely in Scotland. Views differ as to whether these Scottish charities don’t generally pursue what has been termed ‘industrial-scale’ fundraising because they have a different culture, or because it’s simply not economically viable in a country the size and composition of Scotland. The application of these techniques to those who are more vulnerable is of significant concern. However, more work is needed to ensure that even fundraising being performed in line with the word and spirit of the Code of Fundraising Practice does not attract excessive donations from vulnerable people. It is clear that a culture where donors are not valued, and where those who are vulnerable are targeted, is far removed from the public’s expectations of how charities should fundraise. Self-regulation has addressed aspects of fundraising bad practice, and prevented others occurring. It has not, however, prevented a culture developing that has now led to what the FRSB has described as a ‘watershed for fundraising’.

6.2 Greater transparency is required in fundraising, and charities generally

The latest fundraising issues follow previous public concern in Scotland about chief executive pay levels, the amount spent on fundraising and the amount spent on charity administration, amongst others. It seems that a considerable proportion of the public has a vision of charities that does not bear any relation to modern Scottish charities, particularly those multiple incomes sources including fundraised and contractual income. Many contributors acknowledged that there were aspects of fundraising practice that they felt the public would not understand. Equally, there appeared to be significant differences as to what charities would record internally as complaints and report externally to the FRSB if they are members. The extremely low number of complaints reported by many fundraising organisations to the FRSB and the tiny number reaching the FRSB’s Stage 2 or 3 processes, must raise concerns about charities’ handling of complaints. Despite there being a Statement of Recommended Practice (SORP) for charity accounting, different practices exist between charities in how they account for expenditure. Universities registered as charities have a choice of two SORP they can follow, meaning their income and expenditure is not necessarily comparable with other charities. These variances in practice make it hard for a donor to assess whether a charity is investing their income well in comparison to other charities.

6.3 Charities are not in control of fundraising self-regulation

The system of self-regulation in the UK appears to have been driven primarily by fundraisers and their fundraising bodies. Whilst it is important that their skills and experience play a central role in a self-regulatory system for fundraising, it is the charities that rely on fundraised income that must ‘own’ it and control it. The current isolation of fundraising from charities broader activities is an artificial one. OSCR’s data shows that, when unprompted, 3% of survey respondents stated that charities ‘use fundraising techniques I don’t like’. However, a further 22% said were concerned that ‘not enough money reaches the actual cause’ and 9% were concerned that ‘I don’t know how they spend their money’. All of these are fundraising issues, and all are issues that must be addressed effectively by charities through a regulatory system that aligns with Scotland’s needs.

6.4 Trustees are not sufficiently exercising their governance role in relation to fundraising

It is essential that charities themselves take responsibility for good practice in fundraising rather than devolving it to external regulatory bodies. Whether performed in house or contracted out to a private agency, it is a significant area of financial and reputational risk for any charitable organisation. It is therefore essential that trustees are well informed as to how fundraising is conducted, and are able to exercise good governance in decisions relating to it. The likelihood of charities beginning to fundraise who have not before felt the need to do so makes this even more important. Contributors were, however, almost universally negative about trustees’ skills in this area. It is therefore essential that the need for support and training is addressed across the fundraising sector.

6.5 The poor awareness of the regulatory system means a structural change is required

Most contributors felt that the current self-regulatory system, whilst in need of improvement, was not fundamentally broken. The low levels of awareness of the current bodies suggest, however, that the people the system is set up to protect, the donors, are insufficiently aware of it or confused as to the role of each body. The complicated set of responsibilities between regulatory bodies and the IoF contribute to the problem. The renaming of the PFRA to the Public Fundraising Association would seem to be recognition of the confusion as to who regulates.

6.6 Better enforcement, with more meaningful sanctions, is required

The FRSB’s core outputs during 2014 were[13]:

• Investigating seventeen complaints that charities had not been able to address, with six of these going to the final complaints stage

• The issuing of ‘benchmarking reports’ to 339 charities whose complaints exceed those of their peer group

• Two recommendations to the IoF for changes to the Code of Practice

Complaints processes by charities are not audited and only numeric data is required by the FRSB. This means considerable information as to what is troubling donors and the wider public, and how well charities are addressing complaints, is being lost. The sanctions available to the FRSB are also not strong enough. Its harshest sanction is to expel a charity from membership; insufficient when membership is voluntary and public awareness low. The PFRA can impose fines and the FRSB should also do so.

6.7 There appears to be a strong interest in a Scottish regulatory framework

Scottish charities that operate and fundraise in Scotland were highly likely to believe that a Scottish regulatory body was required. The most pressing reason was the belief that the UK Government and Charity Commission will seek to move away from a self-regulatory model that is still supported in Scotland. However, there was also an ongoing dissatisfaction with what is seen as a lack of attention to Scottish issues by the current UK-wide fundraising bodies. This is concerning when charity regulation, and the regulation covering some fundraising techniques, are devolved to Scotland. The broader recognition that most causes that are being fundraised for, such as health, the arts and higher education, are matters devolved to the Scottish Parliament also led some to desire a Scottish regulatory framework. The further devolution of powers to Scotland led many to believe that such a framework would ultimately become a necessity rather than a choice.

6.8 The views of the public and donors are not sufficiently represented

There is not currently an effective process for ensuring the views of the general public, and donors, are heard in the fundraising self-regulatory system. The recent announcement of the appointment of a lay chair and three lay members to the IoF Standards Committee was welcomed by contributors. However, many noted that the IoF’s Board ultimately accepts or rejects changes to the Code. There continues to be no lay membership on the Board. These appointments could also be seen as further evidence of the ‘knee-jerk’ reaction in the self-regulatory bodies that contributors were concerned about. The IoF commenced a review of its governance in autumn 2014. A consultation paper for IoF members was published as recently as February 2015[14]; there is no consideration in it of the need for public representation through lay membership. A more significant change is therefore required. The current Fundraising Promise required by the FRSB of its members is simply not specific enough to safeguard the public and donors. It is necessary to look instead at a ‘rights-based’ approach, where the rights of the public and donors become central, instead of peripheral, to fundraising.

7.0 Recommendations

The range of opinions included in this review has, due to the timescales, been limited. Further work is required, for example, to establish the views of the public and donors as to what would maintain and improve their confidence in fundraising and its regulation. However, the evidence that has been gathered is sufficient to identify the following improvements to how fundraising is regulated:

1. Charities should take ownership of fundraising in Scotland in order to maintain public trust in fundraising, and not delegate this to fundraisers

2. Charities should lead the design of their own fundraising regulation system, with the associated rules, codes, thresholds and sanctions

3. The charity sector in Scotland must decide whether membership of this system should be compulsory for all charities that fundraise

4. Sanctions should be determined by charities, but ultimately enforced by an appropriate regulator

Specifically, charities would need to establish:

• which bodies are required to deliver a regulation system
• with whom the responsibilities for developing a Code of Practice, promoting best practice, handling complaints and awarding sanctions should sit
• what sanctions should be applied
• how to involve relevant regulators for enforcement of sanctions
• whether the system is UK-wide as now, a hybrid operated from Scotland (with some but not all elements shared) or a Scottish system

5. A ‘fundraising guarantee’ style document should be developed which specifies how the general public can expect to be treated by fundraisers

Co-produced by representatives of the public and fundraisers, this should specify the public’s rights in terms of fundraising in practical, easy to measure, terms.

6. Further work is required to establish processes and practices which avoid vulnerable people becoming overly-burdened by fundraising requests

This research should address the needs of those who may legitimately sign up for donations but become over-burdened, and those who may be targeted through irresponsible or unlawful actions.

7. The Institute of Fundraising must take the lead in changing the culture in fundraising

As the professional body for fundraisers, the IoF take action to ensure fundraising is better aligned with the expectations of the general public and donors.

8. Trustees should take greater strategic control over fundraising

A sector-wide initiative is required to train and support trustees to ensure they can exert effective governance over both in-house and sub-contracted fundraising.

9. Compliance with, and the effectiveness of, the regulatory requirements relating to sub-contracting fundraising should be investigated

Research in this area will help ensure good practice in Scotland and aid the development of effective legislation covering the rest of the UK.

10. ‘Whistleblowing’ by fundraisers must be enabled and supported

Fundraisers who are concerned at the expectations, or actions, of the organisation they work for should have a direct and confidential route into the regulatory process.

11. Complaints processes must be redesigned in order to empower the public and trustees

Concerted action is required from the third sector to ensure that complaints, whether about fundraising or other charity operations, deliver greater transparency for the public and greater oversight for trustees.

12. New reporting processes are required that deliver greater openness and transparency about the operation of charities

The public, as one of the main funders of charities through both donations and taxes, must have a simple and clear route to information about the running of charities.

Appendices

Appendix 1: NCVO review of self-regulation of fundraising - Terms of reference

These terms of reference have been agreed by the Cabinet Office and the review panel. Purpose To review the effectiveness of the current self-regulatory system for fundraising in the light of recent high-profile cases. To make recommendations and proposals to ministers, the charity sector and other bodies involved in fundraising on the changes needed to ensure an effective system of self-regulation which protects the interests and the confidence of the public while serving beneficiaries. Scope The review will take the main forms of fundraising as in scope: direct mail, telephone, doorstep and textile collections. It will consider:

• The structure of self-regulation, and the relationship between standard-setting (including the Code of Fundraising Practice), enforcement and operational management.
• The operation of the self-regulatory system and the current self-regulatory bodies (Fundraising Standards Board, Public Fundraising Regulatory Association, Institute of Fundraising).
• The scope of regulation itself (who is regulated; who is not) and sanctions.
• The responsibilities of charity chief executives and trustees.
• The role of third-party fundraisers and their relationship with charities.
• The relationship between the fundraising sector and the public.

The review will be strategic. It will not make detailed recommendations on, for instance, the content of the Code of Fundraising Practice. Review panel

• Sir Stewart Etherington (chair)
• Lord Leigh of Hurley
• Baroness Pitkeathley
• Lord Wallace of Saltaire

Consultation The panel and secretariat will consult:

• Representatives of the public interest
• Consumer experts
• Parliamentarians
• The three fundraising self-regulatory bodies
• Chief executives/chairs of large fundraising charities; umbrella representatives of small charities
• Representatives of commercial fundraisers
• Representatives from the media
• Other self-regulatory bodies
• Academics specialising in regulation

Timing The review is expected to report by Monday 21 September 2015. Secretariat NCVO, with Cabinet Office support.

Appendix 2: Informal review of charity fundraising in Scotland – Terms of reference

The Scottish Government asked SCVO to undertake an informal review of public charity fundraising in Scotland to assess whether the existing framework for self-regulation of fundraising practice is sufficient to protect public confidence and trust in charities in Scotland. The review will report back by the end of August. Purpose & aim The purpose of the review is to identify whether the Scottish public, Scottish Government and Scottish Parliament can have confidence that the current system of charity fundraising self-regulation is working and if not recommend how it can be strengthened in Scotland. The aim of the review is to help Scottish Government Ministers make informed decisions on the future of public charity fundraising in Scotland. Review remit In Scotland the charity brand continues to be strong. We enjoy high levels of public trust, which thousands of organisations rely on for donations and volunteers. It is essential that we maintain high levels of trust, as without high quality fundraising, many thousands of people in Scotland would lose out on vital support and help from charities. This is a key reason why the wider third sector and the fundraising ‘industry’ must tackle bad fundraising behaviour. The main questions for the review include:

• Can the Scottish public, Scottish Government and Scottish Parliament have confidence that the current system of self-regulation is working and if not how can it be strengthened in Scotland?
• What reasonable steps can we recommend to strengthen public trust, taking proper steps to root out bad practice and provide a transparent charity fundraising environment in Scotland?
• Is there a framework with robust governance, clear standards and good operating practice which protects the public, allows charities to fundraise effectively but hits bad practice hard?

Methodology SCVO has consulted and engaged with the Scottish Government, OSCR and the Institute of Fundraising Scotland on the review, its remit and lines of inquiry. We have also been in regular contact with NCVO and the Fundraising Standards Board (FRSB). We have established a reference group chaired by a member of SCVO’s Policy Committee to oversee the process of the informal review. Members include:

• Paul Brown: Chief Executive, Legal Services Agency (Chair)
• Billy Watson: Chief Executive, SAMH
• Fiona Duncan: Chief Executive, Lloyds TSB Foundation for Scotland
• John Brady: Head of Fundraising, St Andrew’s Hospice
• Alison Greig: Development Team, Citizen’s Advice Scotland
• Theresa Shearer: Chief Executive, Enable Scotland

The purpose of the group will be to:

• Bring insights and experience of the third sector to the issues surrounding fundraising and the remit of the inquiry
• Help identify whom the inquiry should be consulting with
• Consider the draft review report and its recommendations

The reference group and report will be informed by:

• Review of the current codes (OSCR, FRSB, Institute of Fundraising, Public Fundraising regulatory Association and other relevant reports
• A focus group
• Six to eight one-to-one informal interviews
• Information and views from organisations the public may currently make complaints to i.e. Trading Standards, OSCR and FRSB
• Research undertaken by SCVO, including a survey to gauge and collate views from across the sector

SCVO will ensure that through a survey (to go live on week commencing 3 August), its own networks and TFN that the wider third sector has an opportunity to contribute to the review. This approach is designed to be as robust and inclusive as possible given the very the short time we have to carry out the review. The report will be sent to the SCVO Board of Trustees for final approval before submission to Scottish Government by the end of August. 

Appendix 3: Contributors

Interviewees  

Name	Title	Organisation
John Brady	Fundraising Director	St. Andrew's Hospice
Morag Fleming	Director Account Director Chair	Decaid Consulting Future Fundraising IoF Scotland
Peter Hills-Jones	Chief Executive Officer	Public Fundraising Regulatory Association (PFRA)
Fraser Hudghton	Scotland Manager	Institute of Fundraising
Ewan Hunter	Chief Executive Officer	Hunter Foundation
Tim Hunter	Director of Fundraising	Oxfam GB
Alistair McLean	Chief Executive	Fundraising Standards Board (FRSB)
Stephen Naysmith	Social affairs correspondent	The Herald
David Robb	Chief Executive	Scottish Charity Regulator (OSCR)
Joe Saxton	Driver of Ideas	nfpSynergy
Martin Sime	Chief Executive	SCVO
Henry Simmons	Chief Executive	Alzheimer Scotland
David Welch	Chief Executive	Beatson Cancer Charity
Nic White	Head of Scotland at Breast Cancer Care	Breast Cancer Care

Round-table participants

Name	Title	Organisation
Lynsay Allan	Executive Director	Scottish Cot Death Trust
Norman Barrett	Chief Executive	Worldwide Cancer Research
Susie Barron	Community Engagement Operations Manager – North	Save the children
Penelope Blackwell	Director of Fundraising	Chest, Heart & Stroke Scotland
Michelle Burns	Head of Individual Giving	Quarriers
Alison Cameron	‎Fundraising Manager	Leuchie House
Sally Cameron	Head of Fundraising	Scotland’s Charity Air Ambulance
Tess Campbell	Development Consultant - Sponsorship & fund-raising enquiries (Capital re-development)	Citizens Theatre
Claire Carter	Head of Fundraising and Communications	RSPB
Margaret Clift McNulty	Head of Fundraising	Capability Scotland
John Fitzgerald	Development Co-ordinator	Friends of the Earth Scotland
Colin Flinn	Head of Fundraising	Poppyscotland
Gary Kernahan	head of Volunteer Fundraising	Muscular Dystrophy UK
Andy Kerr	CEO	Sense Scotland
Ali McLeod	Director of Fundraising and Marketing	Mercy Corps International
Gregor McNie	Senior Public Affairs Manager (Devolved Nations)	Cancer Research UK
Iain McWhirter	Head of Fundraising and Volunteering	MND Scotland
Anne O'Neill	Fundraising Manager - Scotland, Wales, N Ireland & Isle of Man	British Red Cross
Barbara Osborne	Head of Community Fundraising	British Heart Foundation Scotland & Northern Ireland
Paul Thompson	Head of Community Fundraising (NI & Scotland)	Marie Curie
Ann Ward	Fundraising & Communications Manager	Scottish Catholic International Aid Fund (SCIAF)

 

Appendix 4: Significant current and previous reviews of fundraising regulation and practice

• Lord Hodgson (2012) Trusted and Independent: Giving charity back to charities - Review of the Charities Act 2006

Lord Hodgson reviewed charity law and practice in England and Wales, considering fundraising and its self-regulatory system amongst other areas.

• PwC (2014) Sustainability of fundraising self-regulation - IoF, PFRA and FRSB

As part of their consideration of how best to take on board the recommendations of the Hodgson report, PwC was engaged by the IoF, FRSB and PFRA to perform a review of the roles played by the three bodies within the fundraising self-regulatory system.

• FRSB (2015) Investigation into charity fundraising practices - Interim report (ongoing)

Following the media coverage around the death of Olive Cooke, the FRSB received a large number of public complaints about the way in which fundraising is currently conducted in the UK. In response, the FRSB launched an investigation into the issues that have been raised; an interim report has been published

• UK Parliament Public Administration and Constitutional Affairs Committee review of call centres raising funds for charities (ongoing)

Following media coverage of what are alleged to be poor practices in UK call centres acting on behalf of charities, the Public Administration and Constitutional Affairs Committee announced it would hold an inquiry into the issues raised. It will focus on four key areas:

• the extent and nature of practices adopted by call centres raising funds for charities and the impact on members of the public, particularly vulnerable people
• the UK Government’s recently proposed legislative changes on this issue
• how charities came to adopt these methods, and how they maintained proper governance over what was being done on their behalf
• the leadership of charities and how their values are reflected in their actions and activities

The call for written evidence closed on 26 August 2015; a Committee evidence session is expected in September.  

Appendix 5: FRSB complaints process

[1] www.frsb.org.uk/about-the-frsb/ [2] TNS Survey of 1,000+ UK respondents, May 2013 [3] Ipsos MORI (2012) Public perceptions of charity: a report for the Charities Act 2006 review [4] www.institute-of-fundraising.org.uk/membership/organisational-membership/ [5] www.pfra.org.uk/ [6] www.pfra.org.uk/control_and_regulation/working_with_councils/how_an_sma_works/ [7] Fundraising Detective (2015) Fundraising Controversy: What Does the Data from 10 Top Charities Tell Us? (blog) [8] From OSCR’s Scottish Charity Surveys 2014 [9] As above [10] Rapidata (2015) Rapidata announces regular giving donation cancellation stats since ‘Cooke outcry’ [11] Data and analysis from OSCR [12] Data from FRSB in August 2015, analysis by OSCR [13] FRSB (2014) Annual Report 2014 [14] IoF (2015) Governance Review: Consultation With Members