This note provides good practice guidance on meeting the reporting requirements in Section 13 of the Charities (Protection and Social Investment) Act 2016 which came into force for accounting periods beginning on or after 1 November 2016.
The Charity Commission for England and Wales’ guidance Charity fundraising: a guide to trustee duties (CC20) makes it clear that trustees should be assured that their charity’s approach to fundraising is compliant with charity law and best practice. Good reporting and participation in the voluntary system of fundraising regulation operated by the Fundraising Regulator demonstrates that trustees are taking these responsibilities seriously.
In addition to this general duty, Section 13 of the Charities (Protection and Social Investment) Act 2016 ('The Act') requires some charities to include information on a number of points related to their fundraising in their annual reports. The requirements are mandatory for all larger charities whose accounts are subject to audit under Section 144 of the Charities Act 2011.
Why has this good practice guidance been developed?
This guidance has been developed following a review we undertook of annual reports made in the first year of the new reporting requirements. We found that although some charities met their obligations in full, less than half were compliant with the Act or did not adequately cover all the requirements.
Common issues include:
- limited detail about how fundraising campaigns are run and managed, including who carries out the work;
- failure to demonstrate how the Code of Fundraising Practice is used to guide their work;
- a lack of thorough description about fundraising carried out on behalf of the organisation;
- frequent omission of the number of complaints received; and
- limited explanation of how vulnerable people are protected in the organisations’ fundraising work.
What can charities do better to meet the requirements?
Charities that are required to have their accounts audited must include a statement on each of the following points in their annual trustees’ report:
1. The charity's approach to its own fundraising activities and any fundraising activities done on its behalf. In particular, by a professional fundraiser or commercial participator.
Your statement should describe how your fundraising campaigns are run, not just what they are and how successful they have been. This should include which teams or third parties undertake the work, the methods used and how the public are asked to participate.
2. If the charity or someone acting on its behalf was signed up to a voluntary fundraising regulation scheme or standard. If so, what scheme or standard.
The Fundraising Regulator represents the only voluntary regulation scheme for fundraising which operates across the charity sector in England and Wales. Registering with us ensures compliance with the Act. The statement should set out clearly that your organisation is registered with us and works in a way that is compliant with the Code of Fundraising Practice.
If you are not registered with Fundraising Regulator and adhere to the code, you need to set out any equivalent approach and how it meets the standards required in law and reflects best practice.
3. If the charity failed to comply with the scheme or standard mentioned above.
Your organisation should set out how and when it has not complied with the voluntary fundraising scheme you work with. This includes any investigations into your charity carried out by Fundraising Regulator, where we found that the Code of Fundraising Practice had been breached.
4. If the charity monitored fundraising activities done on its behalf. If so, how did it monitor these activities.
Your statement should set out how you manage and monitor the fundraising work undertaken by others. This should include how you work to maintain standards whether this be through training and support, checking work or by managing the contracts. This is typically going to be third-party organisations and businesses, as well as commercial participators.
5. The number of complaints received by the charity or anyone working on its behalf, about fundraising activities done by itself or someone on its behalf.
Your statement should contain a specific number of complaints received about your fundraising work. Stating that you have received a 'small number of complaints' is not adequate. This requirement asks your organisation to demonstrate that you have systems in place to record and report on complaints you have received.
6. What the charity has done to protect vulnerable people and the wider public from certain behaviour during (or in connection to) fundraising activities. Behaviour includes: a) unreasonable intrusion on a person’s privacy b) unreasonably persistent methods to receive a donation c) undue pressure on a person to give a donation (of money or other property).
Your statement should set out the practical activities in relation to how you protect vulnerable people. This might include training for fundraising staff or specific guidelines which you implement around different types of fundraising.
What does a good annual report look like?
To help charities improve their reporting an exemplar report for a fictitious charity 'Our Hospice' is set out in Annex A. This template addresses the key reporting requirements of the 2016 Act. Charities should not boilerplate this example, but can use it as a template on which to expand their own fundraising activities for members of the public.
In terms of the style of reporting we suggest that charities take the opportunity to say something positive about their compliance with the voluntary regulation scheme. It is to the charity’s advantage to give donors confidence about the charity’s compliance with best fundraising practice.
Trustees of smaller charities who comply with the reporting duty voluntarily and participate in the fundraising regulatory regime demonstrate that the charity is seeking to comply with best practice. There are additional advantages to registration for these charities, for example, funders are more likely to support charities that are signed up to the code and display the Fundraising Badge.
What should charities expect from the Charity Commission?
Given the advice to trustees set out in CC20 any non-compliance with reporting duties under charity law will be a matter of interest to the Charity Commission carrying out its functions. Research for the Commission has consistently identified the high level of public concern about charity fundraising practices (Public trust and confidence in charities 2016).
The Commission expects trustees to follow the guidance set out in CC20 so that a charity’s fundraising is explained clearly and openly, and fully complies with accounting and reporting obligations. In those cases where complaints are made to the Commission then it will consider whether it needs to use any of its powers in individual cases that give rise to regulatory concern.
What should charities expect from their auditors and independent examiners?
Auditors and independent examiners will read the trustees’ annual report as they are (broadly speaking) required to report on whether the information given in it is inconsistent with the financial statements. They also have a discretionary right to report matters that may be relevant to the work of charity regulators even if the matter may not be one of material significance.
Failure to comply with the Act in this regard is not considered to be a matter of “material significance” according to the advice issued by the Charity Commission in November 2017. Non-compliance by a charity with the reporting requirements outlined above may, therefore, be a matter of concern to auditors and independent examiners.
The Fundraising Regulator will review compliance with Section 13 of the Charities (Protection and Social Investment) Act 2016 reporting requirements on a regular basis to measure improvements in reporting.
Annex A: Exemplar fundraising report for Our Hospice charity
Donors to Our Hospice can be assured that we comply with the regulatory standards for fundraising. We are registered with the Fundraising Regulator and are committed to the Fundraising Promise and adherence to the Code of Fundraising Practice. We encourage our fundraising service providers we engage with to also be signed up to the code. This report covers the requirements charities must follow as set out in the Charities Act 2016.
It has cost us £10 million to provide our hospice services this year. Roughly a third of this came from statutory funding, a third came from our permanent endowment and we need to raise the balance through fundraising.
Our fundraising effort involves encouraging donations and gifts in wills, running events and operating a lottery. Our in-house fundraising team sometime engage professional fundraisers to help us deliver fundraising initiatives. We aim to ensure those agencies we employ also observe the highest standards in terms of fundraising practice.
This year, we ran our popular hospice 10k event and were supported by 5,000 runners. Individual donations were static but amount raised from legacies increased.
We are registered with the Fundraising Regulator and comply with all the relevant standards set out in the Code of Fundraising Practice. Several of our in-house fundraising team are members of the Institute of Fundraising.
We use third-party suppliers to help us raise funds particularly where we do not have the expertise in-house. We have safeguards in place when working with suppliers so that we protect our supporters and the reputation of our charity.
We ensure that the correct safeguards are in place with our suppliers and those who fundraise on our behalf. We require them to confirm that they comply with the Code of Fundraising Practice.
Our website outlines our complaints policy for the public and clearly explains how an individual can complain. We received 10 complaints in the 2017-18 financial year. In contrast, last year we received 20 so this represents a 50% decrease.
We responded to all complaints within 10 days. Complaints are dealt with in-line with our fundraising complaints policy. Most serious complaints are escalated to our Senior Leadership Team (SLT) and trustees so they can consider lessons learnt. SLT and trustees also consider an annual report about complaints. We report to the Fundraising Regulator on the totality of our complaints.
We have published our vulnerable persons policy on our website. We are also signed up to the Fundraising Preference Service to enable individuals to opt out from receiving fundraising communications from us. We actioned 15 requests from this service last year.
In addition to our policy we have an agreed operating procedure to protect vulnerable people. Our fundraisers (both staff and third party) are familiarised with the code of conduct to ensure that it is applied properly.