Charity fundraising regulation in the spotlight

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Big charities were more likely to pay a voluntary fundraising levy than smaller ones, a University of Stirling academic has found.
Dr Alasdair Rutherford
The finding emerged in Dr Alasdair Rutherford's analysis of data from both the Fundraising Regulator for England and Wales, and the Charities Commission.

Dr Rutherford said: "It is critically important to build trust in the charitable sector, and to ensure good practice in fundraising. But in naming charities who have decided not to contribute, a distinction should be made between those large charities who have opted out, and the smaller charities who have been caught up in the Levy due to an exceptional year in 2014.

"This affects only a small number of charities, but being named and shamed could have consequences for their reputations."

About 84% of the 1,665 eligible charities have paid the Levy and signed-up to the new Fundraising Regulator. The largest charities are most likely to have paid (93%), with lower take-up amongst smaller charities (82%).

Dr Rutherford said: "Some smaller charities with fluctuating fundraising expenditure refusing to pay may feel that the way the threshold has been assessed is unfair. Most of the largest fundraising charities have joined the new Regulator, but it is right that questions are asked of those large charities that have taken the decision not to participate in the regulation."

A number of recent fundraising controversies led to calls for increased regulation and, in July 2016, the new Fundraising Regulator took over from the Fundraising Standards Board. The new regulator was to be funded by a ‘voluntary levy’ collected from all charities fundraising in England & Wales who spent over £100,000 on fundraising in 2014.

This consisted of an annual payment of between £150 and £15,000, depending on how much each charity spent on fundraising. In addition, charities spending less than the threshold could also choose to register for £50 per year.

Registration involves committing to upholding the revised Code of Fundraising Practice, and allows charities to use the Fundraising regulator’s badge on their website and marketing materials as a marker of good practice. The new regulator has also committed to greater transparency, and has published details of all the charities who have joined in the first year.

The Fundraising Regulator originally indicated around 2,000 organisations would fall under the levy, confirming at the end of August that 1,665 charities had been approached. The responses of 1,570 charities were released, with a further 95 unnamed charities still in negotiations.

Of the data released, 104 are exempt from registration with the Charity Commission, while the remainder can be linked with Charity Register data in order to explore their characteristics.

However, charitable funding is volatile, and the amount spent each year on fundraising for those close to the threshold of £100,000 can vary dramatically. A total of 93 charities who crossed the threshold in 2014 spent less than £100,000 on fundraising in 2015.

More than a third of these reported no spending on fundraising at all in 2015.

Dr Rutherford, a Senior Lecturer in Social Statistics, said: "Many of these organisations may understandably feel that determining eligibility based on one year of data is unfair."

The data released by the Fundraising Regulator confirms that 1,407 charities have paid, or 84% of the organisations approached. If all ongoing negotiations were successful, this has the potential to take this figure to over 90% for the next year.

Nearly 90% of the charities who spent large sums on fundraising across both 2014 and 2015 have paid the Levy in the first year. Charities with falling fundraising expenditure are a little less likely to have paid, with 86% joining the scheme.

The vast majority of the Levy payers operate in the fields of Education and Research; Health; or Social Services. This includes many universities, as well as large charities providing health and social care services.

Participation is fairly consistent across different fields of charitable activity. The lowest participation in the regulation is amongst organisations operating in the fields of Religion; Professional Associations; and Culture & Recreation - although all of these have achieved participation above 75%.

Dr Rutherford said: "In order to ensure that the Levy is as fair as possible, the Fundraising Regulator should consider ways in which multiple years of fundraising expenditure are taken into account when assessing eligibility to pay the Levy.

"Reputation is a critical element for charities building relationships with donors. The reputation of the sector can be affected by the actions of a small number of misbehaving charities, and the firmer focus on good fundraising practice and independent regulation is designed to build confidence in those charities who are taking their responsibilities seriously.

"Increased transparency - and the availability of data - makes checking up on the charities we support even easier."