Regulation of the Charitable Sector and the Charities Act 2006

Written evidence submitted by Clothes Aid (Services) Ltd (CH 52)


· Clothes Aid hereby submi t s evidence which considers the Charities Act 2006 from a perspective of a Commercial Participator working alongside charities to raise revenue for their respective charitable purpose

· The submission concerns predominantly the regulation of fundraising

· Current fundraising regulation is outdated and Part 3 of the Charities Act 2006 is not practical to implement

· Legislation should not add an extra burden on legitimate fundraisers whilst allowing purely commercial operators to compete in the same field, for example collecting used textiles, without similar legislative restrictions

· Ensure resources are available to enforce any strictures

1. Background

a. Clothes Aid is a social business which collect goods door-to-door across the country, to raise money for a range of UK charities including the NSPCC, Macmillan Cancer Support, Make-A-Wish Foundation UK , Zoë’s Place Baby Hospice, Noah’s Ark Appeal, Yorkshire Cancer Centre, Leeds Children’s Hospital, Papworth Hospital Charity and the Children’s Hospice Association Scotland.

b. Households across the UK are asked to give clothes, fashion accessories and other goods which are weighed and then sold in shops in nearby countries . After costs are covered, the profit is shared with our charity partners. The collection arrangements are governed by detail ed Commercial Participator Agreements and require zero investment for the charity. To date Clothes Aid have passed on over £ 7 million of unrestricted funds to UK charities .

c. Clothes Aid only makes door-to-door and other bespoke arrangements for collections of goods and not direct debit, cash collections or street collections , therefore this submission will only relate predominantly to door-to-door collections of goods .

d. Clothes Aid itself makes applications to over 403 local authorities for house-to-house permits to collect. The actual number of single permits granted during 2011 numbered just over 1,200 with a further 806 notifications of collection for our exemption holder charity partners (following best practice guidance issued by the Cabinet Office ) .

2. The current licensing process requires a substantial resource to enable our operations to function. These include operational planning, making the actual application using the proscribed form, applying for certificates of authority ( HMSO Green Badges ) , issuing permits to collectors and preparing return statements of accounts for each of the 1,200 permits and also exemption holder collections .

In 2008 the resource was estimated at being close to £250,000 however, it is currently between £100,000 and £150,000. Licensing procedure is labour intensive and reduces the amount that can be paid in Royalty to the charity. Our exemption order charities receive a higher royalty rate per tonne because of this single fact.

3. Saturation

a. During w/c 26 th March 2012 Clothes Aid made 1.2m visits to households ( charity collection bags distributed), received only 36 complaints against 45,000 households who chose to g i ve a full bag of clothes.

b. Therefore we believe that any issue of public nuisance is more closely related to ‘bogus collectors’ than legitimate organisations making bona fide collections. Public perception is being damaged by lack of enforcement, bogus collectors and theft. If unregulated door-to-door collections were prevented and standards raised withi n the door-to-door collection sector , saturation l evels would drop substantially and a lot of the concern from homeowners and potential donors would reduce concomitantly .

4. Inconsistency and examples

a. Many councils have straight forward licensing application process but around one th ird (c irca 140 councils) have their own very different policies. The most challenging of these are Birmingham and St Albans councils, both with differing but equally difficult positions.

b. Tandridge, St Albans and Ketterin g are regimental in applying local licensing policy criteria in a well meaning but misguided effort to curb bogus collections . Along with an almost complete lack of in the field enforcement , t his means legitimate charities and collectors face an extra legislative burden whilst bogus and commercial collectors not aligned to a charity , gain an advantage as they are rarely if e ver punished for unlicensed collections .

c. Conwy council have in the recent past r equired only a letter and not full application.

d. Communications from Gateshead Licensing implies no h2h permit is needed , " you will not require a licence as householders are not canvassed in person… [and donors are]… voluntarily leaving sacks on doorsteps".

e. Lack of regulation for non-aligned commercial collectors provides them with a distinct competitive advantage.

5. Use of percentages and arbitrary figures

a. Current system is resource intensive with Clothes Aid Group suffering additional operational costs attributed to the extra effort and complex way of working due to the inflexibility of the licensing regime, e.g. trying to plan around licences as short as just one day, the huge amount of planning required to maximise an already low potential of collections, maintaining flexibility to adjust distribution area at the very last minute are some of the challenges. For example having to change on the day a planned collection area due to the presence of bogus collectors .

b. We believe that former Home Office Guidance for exemption holder charities advised that 75% of the proceeds should be applied to charitable purposes. There are two issues that come out from this in relation to the 1939 Act, the foremost being that local authorities have taken it upon themselves to impose % ratios for fundraising despite where charity trustees have expressed their satisfaction with revenue arrangements. Second problem is that if at least 75% of the proceeds as opposed to the net profit is meant to be applied to charitable purposes, then the Act should have used language such as "the majority of proceeds" or "all or most" rather than "inadequate". In addition "inadequate" must surely be a lower test than what is reasonable.

c. The trustees of a charity have a duty to ensure that any fundraising is efficient and effective and are responsible for the stewardship of the assets of a charity. They will assess fundraising costs against a broad range of fundraising activities. If the trustees have determined that the amount received is reasonable taking into account any investment required and the level of risk, then the question can be asked that on what basis can the Council’s Licensing Committee rule that this is inadequate?

d. The 1939 Act did not contemplate the collection of clothes as opposed to the collection of cash nor did it contemplate the new varied and sophisticated means of fundraising that charities engage in varying from licensing their name and logo, cause related marketing to face to face fundraising. When 1939 was passed there was no external regulation of charities by the Charity Commission and the disclosure rules for professional fundraisers and commercial participators had not come into force.

6. Statements: Part II, Section 60 of the Charities Act 1992

a. Clothes Aid believes that transparency is very important in terms of public disclosures, but the notifiable statement and guidance available on S60 of Charities Act 1992 is complex and challenging and does not really help in a simple and clear way . One challenge is reconciling the statements with certain local authority ’s policy when making licence applications under 1939.

b. The statutory requirements in relations to statements are complex and hard to understand and therefore need simplifying .

7. Lack of Enforcement

a. Licensing

i. Lack of robust enforcement of current regulations stands out across the entire current statutory arena, this is the same with codes of conduct and b est practice. Whilst there are quite clear regulatory tools and guidance in place, there is hardly any satisfactory enforcement of these items. Unscrupulous operators take advantage and are able to operate with impunity.

b. Bogus collectors

i. What must be recognised is that the bogus collector problem (those th at are clearly fraudulent or for whom their business operations fall into in a grey untested area) and the theft issu e has been allowed to fester and grow because of the lack of enforcement and presents a unique problem.

ii. The Charities Act alone cannot stop bogus collectors . W hat we believe is needed are for relevant government departments and agenc ies to consider again the problem with a view to tackling the probl e m holistically . A ny action taken by the review alone will not likely be sufficient in isolation and could prove counterproductive .

iii.   Clothes Aid have worked closely with City of London Police, National Fraud Intelligence Bureau (and currently sit on the Charity Fraud Resource Desk) , Trading Standards Institute and HMRC and have brought arrests and worked on prosecutions together with these organisations , we would be happy to be part of taking this forward .

8. Self-regulation

a. We believe there m ust be some regulation of fundraising mainly to maintain standards. Regardless of w hichever body takes this role going forward, self- regulation must be universal and every fundraiser included. Current p olicy of self-regulation is about right .

9. Summary of recommendations

a. Introduce national system of applications

i. Local authorities should not be able to set their own systems especially making judgments upon fundraising ratios

b. Support Institute of Fundraising position over problem of setting arbitrary percentages and ratios. Both Business in the Community and Institute of fundraising s tate that they never recommend percentages for fundraising. The Charity Commission also refuse to set benchmarks. Neither do es National association of Licensing officers ’ (NALEO ) guidance for House to House licensing procedures

c. Strict enforcement of Institute of Fundraising Codes of Conduct or fundraising best practice

d. Strict enforcement of licensing infringement with deterrent sentencing for unlicensed collections .

i. Nationally agreed procedures and education on this matter

e. Keep exemption orders . T o abolish would increase the burden on charities, collectors and licensing authorities

f. Joined up planning by Government departments to ensure bogus and poor practice are correctly dealt with (e.g. HMRC, Police, Trading Standards, Licensing etc . working together )

g. Reliance on the charity carrying out due diligence (Trustees responsibility) over fundraising returns

h. Must be some self-regulation of fundraising mainly to maintain standards. However, whichever body takes the role it must be universal (compulsory) and every fundraiser included.

i. NB in terms of door-to-door collections, without regulating purely commercial collectors this point will be moot

i. Current policy around self-regulation is probably about right, but we need a universal body to oversee fundraising and that could be the FRSB under the IOF

j. Self regulation needs teeth and enforceable powers

k. Tougher sanctions for bogus and stronger deterrent sentencing

l. Abolish green HMSO badges

September 2012

Prepared 28th November 2012