Gareth Pearl: Regulations should help restore trust in charities – but at what cost? 

11 Jul 2019 Expert insight

Gareth Pearl, from Rathbones, considers the impact of regulation on the sector.

Over the last few years, the UK’s charity sector has come under increased scrutiny due to reports of poor operating practices at some organisations. A number of regulations and guidelines have been introduced in an attempt to curb these poor practices, while charities have also had to comply with new data protection laws. What do these changes mean for the sector and can they help restore the public’s trust?

At the centre of controversy

Some well-known charities have attracted negative press in recent years. From the collapse of UK charity Kids Company in 2015 to the recent sexual misconduct allegations at Oxfam, larger organisations are under pressure to reform their practices. According to the 2018 Trust in Charities report, public trust in charities has plateaued since 2016.  

Charity Commission chair Baroness Stowell believes the sector needs a cultural upheaval to restore public trust. The Commission aims to help in this process by challenging wrongdoing in the sector while also highlighting examples of best practice.

For example, the Charity Commission introduced the Charities (Protection and Social Investment) Act in 2016 after the government ordered a strategic review of fundraising in 2015. The Act is designed to help charities protect donors and the public, including vulnerable people, from poor practices.

Data privacy concerns

The increasing emphasis on data privacy has created challenges for the charity sector. In 2015, the Information Commissioner’s Office (ICO) fined the RSPCA and the British Heart Foundation for breaches of data protection law in their fundraising practices.  The ICO found that both charities had conducted wealth screening and sold donor data.

The outcome stemmed from an investigation carried out by the Daily Mail in September 2015, which claimed that an 87-year-old dementia sufferer, Samuel Rae, had been tricked into giving away £35,000 after his contact details had been sold by various charities. A follow-up article also alleged that the RSPCA had hired an investigator to assess how much money donors might leave in their wills

Controversy around the case of poppy seller Olive Cooke also increased pressure on charities to change their fundraising methods. A report by the Fundraising Standards Board found that before her death in 2015, Cooke had been ‘overwhelmed’ by charity requests. Around 70 per cent of the charities who contacted Cooke acquired her details from third parties

Following various allegations around the selling and sharing of data, the Institute of Fundraising (IoF) made a number of amendments to the Code of Fundraising Practice. The Institute banned the selling of donor data by charities, made it mandatory for addressed mailing to carry a clear opt-out message and said that charities could only share someone’s data with a third party if they had opted in and provided consent. The Fundraising Regulator was launched in 2016, which is now responsible for updating and enforcing the Code of Fundraising Practice.

The cost of compliance

Charities have had to further adapt the way they handle data following the introduction of the General Data Protection Regulation (GDPR) in May 2018. The laws apply to all EU countries and focus on how organisations can collect, store and use personal data.

Compliance with GDPR and other data privacy laws has proved to be a time-consuming and costly exercise for many small and medium-sized charities. Previously, they found it difficult to prioritise data security due to a lack of time and resources.

For example, cybersecurity has often been considered an unaffordable luxury in what can often be a culture of cost cutting. According to a government report in 2017, one medium-sized charity said it was prepared to accept a financially damaging cyberattack rather than increase cybersecurity as its donors were likely to be sympathetic about lost funds

However, GDPR has made people more aware of the sheer amount of data organisations hold about them. In order to restore trust, charities must prove they will operate ethically and fairly with the information they possess. 

Turning challenges into opportunities

Charities sometimes see data as a liability, but if used in the right way it’s also a significant opportunity, which should not be ignored. Recent changes have reminded organisations to consider data governance and security at the start of a project, rather than as an afterthought. Ultimately, charities can use data, and the information and insights it brings, to inform the decisions they make.

Although keeping up with new regulations can seem daunting, it’s a good chance to streamline operating practices. By ensuring compliance with fundraising and data guidelines, charities can build stronger, better relationships with donors. They are more likely to reach people who want to connect with them, saving time and resources that could otherwise be wasted reaching out to the wrong people.

Gareth Pearl is investment manager at Rathbone Investment Management

This content has been supplied by a commercial partner. Rathbone Investment Management is the overall partner for the Charity Awards.

 

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