The Fundraising Regulator has recently published further guidance on the Charities (Protection and Social Investment) Act 2016 (the 2016 Charities Act), intended to help charities, and charity auditors and independent examiners, comply with the requirements set out in section 13 of the 2016 Charities Act.
Although this might initially seem rather late for a guidance note on this section given that the section came into force on 1 November last year, the guidance note may be helpful for larger charities in the course of preparing or about to prepare annual accounts in relation to their first financial year starting after 1 November 2016. This will include those many charities with a December 2017 or March 2018 year end date.
Section 13 of the 2016 Act: what did it do?
A key provision of Section 13 of the 2016 Charities Act related to the contents of the compulsory fundraising agreements made between charities and professional fundraisers or “commercial participators”.
A commercial participator is any person who carries on a business and who, in the course of that business, represents that it will make donations to a charity. This kind of arrangement would include a situation where, for example, a company collects bags of unwanted clothes from the kerbside and promises to donate a certain amount of money to a particular charity for each tonne of clothes collected.
Section 13 of the 2016 Charities Act provided that agreements between charities and professional fundraisers or commercial participators should contain clauses setting out:
- Details of any voluntary fundraising standard or scheme by which the professional fundraiser or commercial participator agrees to be bound.
- Details as to how the professional fundraiser or commercial participator will protect vulnerable people and others from undue pressure to donate, unreasonably persistent fundraising and unreasonable intrusion on their privacy.
- Details as to how the charity will monitor the compliance of the professional fundraiser or commercial participator with these obligations.
These requirements drew a great deal of attention at the end of last year because, although the section itself did not specify that pre-existing agreements should comply with the new requirements, it was interpreted by the Fundraising Regulator as doing so. It is to be hoped that charities with such pre-existing agreements have by now updated them so they comply with the provisions of the section.
Section 13 also included provisions relating to reserve regulatory powers, making it clear the Government would introduce statutory regulation in relation to fundraising if self-regulation should prove unsuccessful.
However, this new guidance note relates to the requirements placed by Section 13 on certain charities to report on their fundraising in their annual accounts.
The section provides for the trustees of larger charities – those subject to the requirement to audit their annual accounts under section 144 Charities Act 2011 – which enter into fundraising agreements to include a statement in their annual report explaining a number of fundraising related issues, including:
- Their charity’s approach to fundraising, including in particular whether it uses professional fundraisers and / or commercial participators.
- How (or whether) the charity monitored fundraising activities carried out on its behalf.
- Details of any fundraising standards or schemes adhered to by parties to any fundraising agreements (including that run by the Fundraising Regulator).
- Details of any failures to comply with those fundraising standards or schemes.
- How many complaints the charity and / or those fundraising for the charity have received about the fundraising activities.
- What the charity has done to protect vulnerable people and others from undue pressure to donate, unreasonably persistent fundraising and unreasonable intrusion on their privacy.
What’s in the guidance for charities?
A guidance from the Fundraising Regulator flags up that the new requirements will apply to charities reporting their first financial year starting after 1 November 2016. It encourages charities to “say something positive about their compliance with the voluntary regulation scheme in their Annual Report”.
It suggests that one way trustees might show what the charity has done to protect vulnerable people and others from undue pressure to donate, and so on, is to state in the report that the charity has signed up to receive details of suppressions from the Fundraising Preference Service.
The guidance also points out that smaller charities, not subject to the audit requirements of the Charities Act 2011, can still choose to take part in the fundraising regulatory scheme and to comply with these new reporting requirements in their trustees’ annual reports, and in doing so will be showing that they are seeking to comply with best practice in this area.
What’s in the guidance for auditors and independent examiners?
Charity auditors and independent examiners are told that non-compliance with the Fundraising Regulator’s scheme of regulation will not lead to qualification of a charity’s accounts, but should be commented upon in the auditor’s Management Letter to the Trustees, and any advice provided by an independent examiner.
It also reminds auditors and independent examiners of their discretionary right to report matters which may be relevant to the work of the charity regulators, even if the matter might not be of “material significance”. It goes on to state that failure to comply with the reporting requirements will not constitute a matter of “material significance”, but that:
“Given the advice to trustees set out in CC20, any non-compliance with the reporting duties stated in charity law will be a matter of interest to the Charity Commission and it will consider use of its powers in individual cases.”
What should the trustees of charities subject to the new reporting requirements do now?
They should ensure they are familiar with the new reporting requirements in the area of fundraising, and that they can access the information which they need to include in their annual report, such as any known failures by those fundraising on the charity’s behalf to comply with any fundraising standards or schemes, and the number of complaints about fundraising received.
Some may also, of course, choose to “say something positive about their compliance with the voluntary regulation scheme in their Annual Report”, as suggested by the Fundraising Regulator.
Our content explained
Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.