The 2015 charity fundraising controversy: lessons for trustees, the Charity Commission, and regulators Contents

3The role of trustees: governance

The role of trustees in fundraising

25.Our inquiry focussed on the quality of leadership and oversight provided by the trustees of all of the four charities that we saw. For this reason, we held two oral evidence sessions with the same charities, one with executives and one with chairs of trustees. We explored how trustees see their role, not only concerning the oversight of fundraising activities, but about how trustees had sought to ensure that governance and leadership of all of their charity’s activities reflected the mission and values of that charity. This included what sub-contractors and volunteers might be doing on the charity’s behalf. The Charity Commission agreed trustees had “let the general public down” and that these practices were “utterly unacceptable”, “horrific obviously” and “an appalling abuse of charity and the whole nature of charitable purpose”.48

26.The Commission told us that:

The governance of charities does not depend on anyone except the trustees. Trustees are utterly responsible for the governance of their charities […] It is the trustees who are responsible for employing fundraising organisations that use extremely dubious methods.49

The Government’s Taskforce on Nuisance Calls said that businesses should treat compliance with the law on consumer data as a board level issue; Which? told us that in the case of charities, the Board of Trustees should be responsible.50

27.The Charity Commission’s specific guidance on fundraising tells trustees that they “are legally responsible for making sure that your charity’s fundraising is carried out in compliance with your legal trustee duties”51 The guidance makes clear that a trustee’s obligations go beyond the letter of the law: the Commission says that “whether your charity’s values are implicit or explicit, you and your co-trustees have an important role in setting and protecting them”. This includes ensuring that “your approach to fundraising and your fundraising plan reflect the charity’s values’ and that ‘there are effective processes in place to communicate the charity’s values to its fundraising employees, volunteers and fundraising partners”.52

28.Many of the Daily Mail and Mail on Sunday’s allegations relate to the cumulative impact of fundraising on individuals. As Oxfam told us, this problem goes beyond any possible regulatory system and charities need to take responsibility for the cumulative impact of their fundraising.53

29.It is essential for trustees to reflect their values in the way that they conduct the governance of their charities. The Charity Commission supports this view. Trustees must ensure that their charity’s values are reflected in the way the charity operates at all levels, having regard to the Charity Commission’s guidance and the interests of the

charity, its beneficiaries, donors, employees and volunteers. Charitable ends can never justify uncharitable means. The conduct of sub-contractors should be subject to the same degree of governance. This is as true of fundraising as it is of any of their other activities.

The trustees’ responses to the allegations

30.In response to questions about the unethical and possibly illegal fundraising activities being carried out on their behalf, the charity trustees each outlined changes they are making, or have already made, to ensure that the values and ethos of their charity is reflected in the way in which their charities undertake fundraising activity.54

31.Many of the representatives of the charities who gave evidence to us, admitted there were flaws in their governance. For example, Karen Brown, Chair of Oxfam, told us that “our monitoring procedures were not adequate to the task,55 while Daphne Harris, Chair, RSPCA, conceded that “the truth is we did not know that this had happened” with respect to the allegations concerning Mr Rae.56 Mark Wood, Chair, NSPCC, said that although they had account management processes which were supposed to ensure compliance with good practice in fundraising, “what we have identified here are some breaches in terms of those suppliers who assist us with fundraising”.57 Sir Alan Parker, Chair, Save the Children, told us that “it is clear from the Daily Mail’s investigation that we haven’t been doing enough to ensure that these [our charity’s] values are enforced in practice across all our activities”.58

32.The representatives of the charities were contrite and apologetic in varying degrees about what has occurred, but all insisted that they only became aware of these failings at the time of publication of the media’s reports.59 Daphne Harris told us that:

We have reviewed the way we work with Listen, the company we use to do our fundraising, with more focus on quality instead of quantity. I think that is very important and that is something we have decided. We are happy with the way they have dealt with the accusations by disciplinary action or further training. We have put that into train as well and we have set up a new committee on fundraising to get better oversight with a specific group of trustees monitoring the issue.60

Karen Brown said:

Ultimately trustees are responsible for what has happened and we take that responsibility very seriously. I think there are two things. We have let the general public down insofar as those who are working in our name—agents—have acted in ways that are simply not acceptable. We are very sorry that that has happened.61

33.The Etherington review makes the observation that “Charity trustees and managers have too often been absent from discussions on fundraising practice or values”.62 Though Karen Brown said she “had some sympathy with that view”, the Direct Marketing Association told us that “the main problem is that some charities do not properly understand their obligations under current direct marketing regulation”.63 In September 2015, Civil Society Magazine reported a poll of charity professionals which showed 80% were ‘satisfied’ or ‘very satisfied’ with the ethics of their charities’ fundraising.64 Many of the allegations of abuses focus on the work of sub-contractors like GoGen. Sir Stuart Etherington indicated that many charity trustees and executives were unaware of what happened inside sub-contractors.65

34.Last summer’s controversies were evidence of a failure of governance by trustees. The evidence reported here suggests that there is still some reluctance on the part of many trustees to accept that this was not just a failure of process or an excusable oversight, but a failure of trustees to understand that their primary role is governance, which means their overriding responsibility is to sustain the mission and values of their charitable organisation. Managing reputational risk is central to this role, for without good reputation, no organisation can be effective. In this role they failed. Trustees are as responsible for the activities of any sub-contractors, as for any part of a charity’s operations. All the chief executives of the charities that gave oral evidence to us admitted that they did not scrutinise fundraising sub-contractors enough. The only possible conclusion is that, by failing in this responsibility, trustees were either negligent, or wilfully blind to what was being done in their names.

Proposed improvements to governance

35.The Etherington review focussed on the regulatory and self-regulatory structures around fundraising, and less on improvements to governance and leadership, although Sir Stuart Etherington accepted that they had to be part of the solution. 66 Rob Wilson MP, the Parliamentary Under Secretary in the Cabinet Office (Minister for Civil Society), told PACAC that he believed that “we need to make sure that the culture in the sector changes alongside the enforcement and regulation that we are proposing to implement”.67

36.The Government’s Charities (Protection and Social Investment) Bill includes clauses to assist in making fundraising more transparent. Should the Bill become law, charities with an income over £1 million pounds would have to say in their annual report whether they use commercial fundraisers, whether they subscribe to any voluntary code, if and how they have monitored fundraising activities, the number of complaints they receive and how they protect vulnerable people in fundraising.68

37.Several charities commented that transparency would assist in changing the culture of charities. Guide Dogs for the Blind and Save the Children told us that these disclosures could enable the public to compare charities and their ethics.69 The British Red Cross said that:

Responsibility is both individual and collective. It must be clear and unambiguous with a clear line of sight from the public through to the governance of the charity and ultimately to the regulator70

38.The Etherington review focussed on the regulation of fundraising. The Government is right to promote greater transparency in annual reports about fundraising, however, this is no more than a means to an end. Stronger regulation is no substitute for the required change of attitudes and behaviour from trustees. The Fundraising Standards Board is right to say that maintaining public trust in charity fundraising must be the first priority for the industry. Trustees must accept this in full, demonstrate this acceptance in changed attitudes and behaviour, and recognise it is their mission and values which should drive the governance of their charity.

What trustees should do

39.The Etherington review, as well as many submissions to our inquiry, have proposed measures trustees should take, such as: improving trustees’ scrutiny of fundraising at board level; improving the skills of trustees; trustees themselves monitoring fundraising activities; and ensuring vulnerable people are protected.71 It is for trustees, in the first instance, to examine whether they are satisfied with their own ability to ensure that their charity lives up to its values.

40.In all the cases we examined, trustees need to take positive action to ensure that they are not blind to their charity’s fundraising activity. It is welcome that trustees of these charities are taking such action. It is vital that these changes are effective so that trustees can have confidence in the methods and ethics of fundraising conducted on their behalf, whether by employees, volunteers or by contractors.

41.Some trustees may lack the skills to guide their charities in raising funds. Battersea Dogs and Cats Home suggested that it would be useful for the new regulator to run training for trustees.72 Sir Stuart Etherington told us that it was important to have an “appropriate balance of skills” on any board of trustees.73 In the case of some smaller charities, it would be inappropriate to mandate a level of skill and scrutiny that is not required to protect their reputation. There is a danger that an overly aggressive approach to regulating trustee boards and their remit could lead to a reduction in the number of people willing to be a trustee.74

42.Some charities have already made changes to their fundraising practices. For example, the RNLI has decided to move to an ‘opt-in’ system from 2017, where donors would have to opt in to be contacted by the charity.75 This move is welcome and moves by other charities to reform their governance over fundraising practices are necessary to ensure that the practices identified last summer do not recur.76

43.The Charity Commission and the new fundraising regulator should reinforce the fiduciary responsibility of trustees in their guidance. The new regulator, and where necessary, the Charity Commission, should validate and recommend suitable training courses for trustees. The Charity Commission is right to have reviewed its fundraising guidance in the light of the events of the summer 2015, and in that guidance to emphasise the primary responsibility of trustees in respect of fundraising. The future fundraising regulator should publicise its view of good trustee practice once it has been set up.


44.CAGE is an organisation which describes itself as “an independent advocacy organisation working to empower communities impacted by the War on Terror”.77 It “highlights and campaigns against state policies, striving for a world free from oppression and injustice…. Cage has been campaigning against the War on Terror for more than a decade” and has “provided a voice to survivors of the War on Terror through its media work.” CAGE is not a charity. Its website adopts a political Islamist tone. 78

45.Prior to 2015, the Joseph Rowntree Trust and the Roddick Foundation funded the organisation CAGE. From December 2013, the Commission “engaged with two charities”, scrutinising “each charity’s relationship with CAGE during this period, including analysing whether the grants were appropriate and whether the trustees had ensured that their charitable grants were used for exclusively charitable purposes in line with their charity’s objects.”79 The Commission said in March 2015 that

public statements by CAGE officials heightened concerns about the use of charitable funds to support their activities.’In our view, those statements increased the threat to public trust and confidence in charity and raised clear questions for a charity considering funding CAGE’s activities as to how the trustees of those charities could comply with their legal duties as charity trustees. In these circumstances, the Commission took robust action and on Monday 2 March 2015 required further unequivocal assurances from the two charities that they have ceased funding CAGE and had no intention of doing so in the future.

The Commission said that the two charities responded as follows:

The Roddick Foundation provided all the assurances within 24 hours as requested, stating that it has not funded CAGE since December 2012; it gave assurances that it has no further payment pending and no intention or proposal to fund CAGE in the future. The Joseph Rowntree Charitable Trust did not provide all the assurances within 24 hours. It did confirm that it last made a grant payment to CAGE in January 2014, that no further payments would be made under the 2011 grant, that no funding proposals were under consideration, that the Trust had no current plans to fund Cage and that no further grants would be made without written consultation with the commission. However, it did not initially provide an unequivocal assurance that the Trust would not make any future grant to CAGE under any circumstances. Yesterday, the Trust stated that this was an extremely difficult decision to make, but in the interests of all its grantees and the other work of the Trust, the trustees confirmed that they have decided to give the commission an assurance that it will not fund CAGE either now or in the future.80

46.CAGE “commenced judicial review proceedings against the Charity Commission for what it… [believed was] an unlawful exercise of powers in the wake of the Mohammed Emwazi case and the subsequent pressure exerted by the Commission on charities associated with CAGE. After the publicity CAGE received around Emwazi, it… [claimed] that the Charity Commission acted outside of its powers by exerting unlawful pressure on charities not to fund or associate with CAGE, despite CAGE not being a charity itself. As a result CAGE [said that it found]… it much more difficult to fund its advocacy and [it said that] charities have been deterred from sharing a platform with it”. 81

47.The claim for judicial review was withdrawn in October 2015. The parties involved agreed that “trustees must be free to exercise their fiduciary powers and duties in the light of the circumstances that exist at the time if acting properly within their objects and powers. The Commission does not seek to fetter the charities’ exercise of discretion whether to fund CAGE for all time, irrespective of changed circumstances. The Commission recognises that it has no power to require trustees to fetter the future exercise of their general powers under its general power to give advice and guidance. In consequence there is no obligation on the trustees of J[oseph] R[owntree] T[rust] to fetter the proper and lawful exercise of their discretion in future”.82

48.The Charity Commission made it clear to PACAC that the case “made no change in our position in our responsibilities, our duties and our rights” and that their lawyers had concluded

The Commission’s ability to have regulatory engagement with charities under its powers, including asking for assurances about future conduct, and to move into inquiry mode if and when appropriate, remains intact and is unfettered by the case. Charities should, in the absence of good reason to the contrary, co-operate with the reasonable requirements and requests of the commission.83

49.They added that “our view still is, and is not in any way fettered by the court case, that trustees risk breaching their duties for charity trustees by funding groups like CAGE.”84 The Commission advised us that their “regulatory engagement with both the charities is continuing, so… [their] report will be published shortly”.85

50.The Charity Commission should be commended for pursuing charities who use their funds to finance CAGE, which describes itself as “campaigning against the War on Terror”. CAGE is a political organisation, not a charity. The Charity Commission were right to resist CAGE’s attempt to bring a judicial review, which CAGE were wise to withdraw.

Donations from overseas

51.The CAGE case drew our attention to the issue of donations from overseas. PACAC has become aware that donations from overseas may in some cases reflect malign influences on the charities concerned but there is currently no system for alerting the authorities about funds arriving from hostile governments or terrorist supporting organisations. This is not a matter we have explored in any detail but we have had informal conversations that have alerted us to the issue.

52.The Charity Commission and the Government should consider proposals about how donations from overseas could be made notifiable through the Charity Commission so that the authorities become aware of charities in receipt of funds from potentially harmful sources. The Government might consider employing the same definition of an overseas donation and similar reporting mechanisms as are used in the Political Parties, Elections and Referendums Act 2000 in respect of foreign political donations.

51 Charity Commission Charity Fundraising a guide to trustee duties, December 2015

52 Ibid.

58 FCS42 (Save the Children)

62 Sir Stuart Etherington, Lord Leigh of Hurley, Baroness Pitkeathley and Lord Wallace of Saltaire Regulating fundraising for the future: trust in charities, confidence in fundraising regulation (September 2015)

63 FCS17 (Direct Marketing Association), Q 269

68 Q 422 Oral Evidence 3.11.15, Charities (Protection and Social Investment) Bill (HC Bill 69), we discuss the bill further in Chapter 7 of this Report.

69 FCS09 (Guide Dogs for the Blind)

70 FCS13 (British Red Cross)

71 Sir Stuart Etherington, Lord Leigh of Hurley, Baroness Pitkeathley and Lord Wallace of Saltaire Regulating fundraising for the future: trust in charities, confidence in fundraising regulation (September 2015) pp.61–2, FCS42 (Save the Children), FCS38 (NSPCC), Qq 266–73 Oral Evidence 20.10.15, Q 329 Oral Evidence 3.11.15

72 FCS18 (Battersea Dogs and Cats Home)

74 Q 329, Q 395 Oral Evidence 3.11.15

75 Royal National Lifeboat Institution RNLI is first major charity to give supporters control over contact (October 2015), FCS48 (Jim Brown)

76 Q 270, Q 309 Oral Evidence 20.10.15

79 Charity Commission Charity Commission Statement: Charities funding CAGE (March, 2015)

85 Ibid

© Parliamentary copyright 2015

Prepared 21 January 2016