DCH 23 ASSOCIATION OF CHARITABLE FOUNDATIONS
DRAFT CHARITIES BILL
INITIAL WRITTEN EVIDENCE FROM THE ASSOCIATION
OF CHARITABLE FOUNDATIONS TO THE JOINT COMMITTEE SUBMITTED IN
ADVANCE OF THE ORAL EVIDENCE SESSION ON 16 JUNE 2004
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 9000 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 £2.2b.[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 £1.5b 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!
ACF/8 June 2004/B
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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