In response to allegations made over the summer by the Daily Mail in relation to the unethical practices employed in fundraising activities, the Government set up the Etherington Review into the regulation of Charity Fundraising. PACAC also launched an inquiry, to examine both the regulation of charity fundraising and the way in which trustees of large charities govern fundraising.
Witnesses to our inquiry, including employees and trustees of some of the charities whose outsourced fundraising activities have been criticised, expressed shock at the Daily Mail’s discoveries. There was consensus amongst witnesses both that trustees had failed in their duty to extend their governance to fundraising, particularly in the management of sub-contractors, and in support of Etherington’s proposals. The Government is right to welcome Etherington’s recommendations. This is the last chance for self-regulation. It is essential that the Etherington system is made to work effectively, though it can only work by supporting effective governance by trustees.
Trustees are ultimately responsible for every aspect of their charity’s activity, including fundraising. No system of regulation can be a substitute for effective governance by trustees. Good governance in general is about sustainability of reputation in the long-term, as well as the sustainability of finances. Each of the charities that gave evidence to us should re-examine their governance of fundraising and other charities should learn lessons from this episode. Trustees must have the right skills, information and attitude to prevent poor practice in the future. They are responsible not merely for fundraising within the charity but for fundraising by sub-contractors as well. We welcome the Charity Commission’s new guidance on the duties of trustees over fundraising, in particular their emphasis that trustees need to ensure that charities (and their sub-contractors) always act in accordance with their values. Our forthcoming report on Kids Company will also draw out lessons from that case study for trustees.
The Government is correct to accept the findings of the Etherington review. The Etherington proposals should however be further enhanced. The Charity Commission should gain a higher profile and be more proactive to ensure the new system works, holding public hearings rather than solely the private inquiries it holds now. The Commission should act as guarantor of the system, ensuring that regulators cooperate with one another and that trustees understand their duties. Trustees, the Commission and regulators should assist the sector in developing a more ethical fundraising culture, and to make sure that bad practices are not tolerated.
The Government should monitor the sector to ensure that it is able to use its reserve powers under the Charities Act should self-regulation fail. It would be a sad and inexcusable failure of charities to govern their own behaviour, should statutory regulation became necessary.
Prepared 21 January 2016