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Charities Act Review: Self-regulation debated as consultation closes

Governance | Niki May Young | 18 Apr 2012

Reversing the funding cuts to the Charity Commission, restricting public fundraising licences to FRSB members only and comprehensive self-regulation are just three of the many recommendations put to Lord Hodgson in his Charities Act Review consultation.

Lord Hodgson advises that he has received 150 responses to his call for evidence to the Review which is looking at whether changes are required to the legal and regulatory framework for charities. 110 of these were from organisations and 40 from individuals.

The consultation is divided into 13 specific areas associated with the Act - from exempt charities, through the future of the Charity Commission, to reporting and accounting requirements. Umbrella bodies have submitted responses on behalf of their members but opinions are divided on a number of matters, not least the issue of self-regulation. 

To self-regulate or not to self-regulate?

While the Institute of Fundraising (IoF) and Fundraising Standards Board FRSB are united in their calls for comprehensive self-regulation of fundraising, the Directory for Social Change (DSC) and the Wales Council for Voluntary Action (WCVA) highlight a number of current and potential flaws in the system. 

The IoF calls for a "unified system of self-regulation" between separate umbrella bodies, with the Charity Commission at the helm. This would take responsibility for monitoring and regulating fundraising activities away from local authorities, which the IoF says are "inconsistent" in their approach, and towards collaborative regulation from within the sector:

"The inconsistency of the application of current licensing laws is costly for both the charities who have to jump through a variety of hoops, and the local authorities who 're-invent the wheel' to respond to perceived problems," the IoF submission advises.

However the Wales Council for Voluntary Action, representing over 3,350 member organisations, questions the capacity of the sector umbrella bodies to pick up sub-regulation responsibilities, and whether the measure would reduce confusion over regulation:

"There is a concern that along with the role that the Commission has already requested that umbrella bodies take in dealing with increased numbers of telephone queries... organisations such as WCVA may be asked to take on an additional role as sub-regulator.

"As well as the obvious issues of cost and staffing levels to meet such an additional role, there would be a concern that sub-regulation could potentially lead to increased inconsistency of approach in regulation of the sector." 

But while WCVA is concerned about capacity issues, the FRSB, already a regulatory body itself, calls for an extension to its functions under a new "Self-Regulation Plus" model, further enforcing its own regulatory powers and encouraging a larger membership for the organisation.

Currently only the 1394 members of the FRSB fall under its regulatory powers, which include fines for those breaching its code of practice. But the organisation has struggled to increase its membership in line with expectations, preventing a universal regulation system for fundraising activities. Its recommendations call for the restriction of public fundraising licences to FRSB member charities only, and a programme of promotion through the Charity Commission and other strategic partners to increase membership, and therefore the reach of its regulatory powers.

Reinstating Charity Commission funding

While the DSC advises that "in an environment of reduced resources, the only way forward is to rely even more heavily on self-regulation", it warns that risks of sub-regulation by umbrella bodies include the possibility of "whole classes" of charities being removed from the central register. It also warns that the boundaries between informal advice and formal regulation are under threat of being blurred.

Its preferred option is for a late reversal of the government's budget cuts to the Charity Commission, calling for the regulator to remain as it stands with legal regulator status in order to "maintain the integrity of the register of charities". 

"The biggest factor defining current debate is the government's short-sighted decision to drastically cut the budget of the Charity Commission," said DSC in its submission.

"Although the savings are paltry in terms of overall government spending, they are massive in terms of the Charity Commission's budget and the ability of hundreds of thousands of charity trustees to ensure their organisations conduct their affairs within the law.

"Crucially, the cuts also threaten to undermine public trust and confidence in charity, as the Commission will simply have far less resource available to ensure charities are operating properly. Decisions taken in the name of short-term efficiency are likely to have long-term negative consequences.

"We would urge the government, even at this late stage, to reverse the cuts to the Commission's budget," it said.

If this is not possible, DSC added, the government should "find a way to fund continued access to free help and advice for smaller charities about relevant law and regulation".

The IoF warns that "Whatever system is put in place should ideally be cheaper and as a minimum be no more expensive for a charity than it is at present,"advising that some of the larger charities incur membership costs in excess of £150,000 a year.

While the consultation was set to close at the end of the day on Monday, Lord Hodgson advises there is still time to respond: “We are now reaching the end of the evidence-gathering stage of the review. We are learning a lot about the views of the sector on key regulatory issues and we are most grateful to everyone who has let us know their views so far. There is still time to contribute by filling in the online questionnaire on the Cabinet Office website but please don’t delay!”

Lord Hodgson's full report on the review is expected to be complete and laid before Parliament before summer recess in mid-July. 

Terms of reference for the Charities Act Review can be found on the Cabinet Office website.

Directory: Charity Commission | Directory of Social Change (DSC) | Fundraising Standards Board | Fundraising Standards Board | Institute of Fundraising | Public Fundraising Regulatory Association (PFRA)
Who's Who: Lord Hodgson of Astley Abbotts