Memorandum from the Association of Charitable
Foundations (DCH 23)
1. The Association of Charitable Foundations
(ACF) is the umbrella membership organisation for charitable grant-making
trusts and foundations in the UK.
2. ACF was extremely heartened to see that
the Joint Committee's press release issued on 13 May 2004 acknowledged
the distinction between "fund-raising and grant-giving-charities".
One of our chief concerns is to ensure that public policy-makers
are fully aware of the state and status of the grant-making sector
and what makes it work best in support of the public good. Recognising
and understanding the differences between service delivery (fund-raising)
charities and grant-making charities is an essential prerequisite.
3. The quintessential features of the grant-making
sector are as follows:
— Independent grant-making charities
have an important role to play in a pluralist society. There are
at least 9,000 in the UK,[1]
each with an independent trustee body which has discretion over
the use of relatively secure charitable funds, raised privately,
in the pursuit of objectives for the public good.
— Many of these grant-making charities
have both the capacity and the will to address issues and situations
that are largely untouched by other funders. They have the potential
to be creative, flexible, and sometimes unorthodox in the use
of their funds; they accept risks that other funders are constrained
from taking, with benefits that only emerge over the long-term
or are difficult to quantify; and at times they fund unfashionable
projects. The Joint Committee's question as to whether the draft
Bill strikes the right balance between flexibility and accountability,
and of the danger of over-regulation is extremely pertinent to
grant-making charities.
— The grant-making sector is not only
large, but complex too. There is great diversity in what they
fund, why, where, and how they do it. The classification of grant-making
charities in ACF membership covers 12 "types" of organisation,
such as family foundations, company foundations and other independent
trusts.
— Grant-making is concentrated in a
few, larger grant-making charities with less than 1% of grant-making
charities giving almost three quarters (74%) of the grants by
value. The value of the grant-making of the top 500 grant-making
charities in 2003 was £2.2 billion.[2]
— Excluding grant-making by the large
academic and scientific grant-making charities (such as Wellcome)
which account for almost one quarter (24%) of all grants, grant-making
by the general grant-making charities is very similar to the level
of grant-making by local authorities, at around £1.5 billion
in 2000. Grant-making charities are an extremely significant funder
for the voluntary sector—but this role depends on individual
philanthropists (and some companies) continuing to give their
money. They need to be encouraged and supported in so doing.
4. We support a regulatory and advisory
regime that goes no further than ensuring that grant-making charities
make grants within the scope of their objects, that they don't
persistently fund poor quality projects, and that their objects
reflect the public good. It follows that to be beneficial to the
public good, any policy measure that goes beyond a check that
"money is given and used (even modestly well) for the public
good" needs to pass two tests: it will genuinely further
increase the "public good" of grant-making charities'
work; and it will not dissuade future philanthropy. Indeed it
would be useful if it encouraged it! Whether current grant-making
charities welcome the proposed policy is a good criterion.
5. ACF welcomes the draft Bill and many
of the proposals, for example on common investment schemes and
community interest organisations. ACF will be pleased to submit
a fuller written submission after further consultation with our
members on particular clauses. Immediately we would like to draw
the Joint Committee's attention to three issues in particular.
6. ISSUE ONE
The Revised Role of the Charity Commission (Clauses
4-5, Schedules 1-2)
— For the reasons set out above in
paras 3 and 4, the four proposed regulatory objectives for the
Charity Commission should not apply to grant-making charities
in the same way as they should to fund-raising charities. Key
to this is whether or not the huge diversity of grant-making charities
has been properly considered in the drafting of the Bill, especially
with respect to the regulatory powers of the Charity Commission.
In addition, we note that there is an unexplored "inter-connectedness"
between different parts of the legislation (eg clauses 4 and 5,
and others in the draft Bill which give the Charity Commission
greater powers to regulate charities eg clauses 21, 22, 23, 30-32).
— Grant-making charities should not
be held accountable to donors, beneficiaries or potential beneficiaries
in the same way as fund-raising charities should be.
— The differences between fund-raising
charities and grant-making charities should be included in the
Charity Commission's regulatory objectives.
— On balance it appears that the Charity
Commission may be being asked to do a great deal, and we have
concern as to whether it will be able to recruit a sufficient
number of staff of the appropriate calibre to fulfil its proposed
role. We hope that the Government supports the financial implications
for the new roles of the Commission
7. ISSUE TWO
Power of the Commission to give directions (Clauses
16-17)
— In drafting these clauses, we believe
it is crucial that the modus operandi of grant-making charities
is considered in order to prevent any new Charity Commission powers
having a detrimental impact on the grant-making sector. For example,
there is great scope for interpretation in clause 17(1)(a) of
the word "properly"—this could result in grant-making
charity trustees exercising their rights under their trust deeds
being "second guessed" by the Charity Commission.
8. ISSUE THREE
Power of the Commission to give advice and guidance
(Clause 20)
— The combination of this clause together
with clause 1C (2) gives the Charity Commission very wide powers
indeed to give advice. We fear this may end up blurring the boundaries
between the Charity Commission's advisory and regulatory roles
even more than to date; the Private Action, Public Benefit report
drew attention to these dangers. The Commission should be required
to restrict their general advice to those areas that are directly
within their regulatory purview.
9. Finally we would like to draw the Joint
Committee's attention to some of the recommendations emanating
from Private Action, Public Benefit that have not been addressed
within the draft Charities Bill itself.
Recommendation 18: re the Standard
Information Return, focusing on how a charity sets objectives
and measures its outcomes against these. And Recommendation
20: re improving the SORP to strengthen its focus on achievements
against objectives, organisational impact, and future strategy.
We believe these two recommendations could result
in grant-making charities becoming risk averse. This might occur
if the SORP framework fails to recognise the value of risk-taking,
those benefits that only emerge over the long-term, and the funding
of projects with benefits that are difficult to quantify, as part
of grant-making charity strategy. SIR and SORP need to be characterised
by a light touch—less performance management and more management
of performance.
Recommendation 34: re the SORP providing
for annual reports to include a statement of procedures for recruitment,
induction and training of new trustees.
This raises again the issue of to what extent
trustees of grant-making charities should be subject to the same
regulation as trustees of service delivery charities. There is
a risk that this could affect the enthusiasm of potential new
philanthropists for setting up a grant-making charity as a means
of disbursing their money, and perhaps tie the hands of those
family foundations that wish to appoint from within the family.
We believe that diminishing the "fun" factor for trustees
will surely constitute a barrier to the development of the grant-making
sector!
June 2004
1 Source: Dimensions of the Voluntary Sector, 1997,
CAF. Back
2
Source: Charity Trends 2004, CAF. We are very grateful
to the Charities Aid Foundation (CAF) for making these figures
available to us prior to publication. Back
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