Update on the Charity Commission’s regulatory activity

01 June 2017

The Charity Commission’s annual summary of its regulatory activity in the year to March 2016 was published at the beginning of this year (view) and the results show a marked increase in regulatory activity:

  • The Commission opened 53 Statutory Inquiries into charities in the year ending March 2016, down from 103 the year before. However, an annex to the report reported that 136 Statutory Inquiries were opened between March and September 2016 alone.
  • The Commission issued 14 trustees with a notice of the Commission’s intention to remove them from their position—up from four the previous year.

The Commission also published its ‘risk framework’ setting out the Commission’s strategic priorities for 2015–18. The priority risk issues that the Commission will focus it’s regulation on fraud and financial abuse, safeguarding and terrorism.

Michelle Russell, director of investigations, monitoring and enforcement at the Commission said “This report demonstrates the need for trustees to get a real grip on their duties and do the basics better. We provide a huge amount of help and guidance for trustees and now more than ever it is important that these are used by trustees to help them fulfil their role.”

11 Charities fined by the ICO for data protection breaches

Following the penalties imposed on the RSPCA and the British Heart Foundation in December 2016 (view our report), the Information Commissioner’s Office (“ICO”) has handed down a further 11 penalties against charities for breaching the Data Protection Act. The penalties ranging from £6,000 to £18,000 were all issued against large, well-known charities.

Breaches included:
  • Wealth screening without consent—some charities hired companies to investigate their donor lists and rank donors based on their wealth so that the charities could better target their fundraising.
  • Data-/tele-matching—charities found missing information or updated out-of-date information about a donor using information they had been given. For example, they used a donor’s name and address to find out their email address (data matching) or their telephone number (tele-matching).
  • Sharing data with other charities without express consent.

The Charity Commission has said it has now opened compliance cases into all 11 charities and the ICO will lay an in-depth report before Parliament in 2017. These penalties will certainly prompt charities and their fundraisers to review and reform their data processing under the current regulation—as well as the imminent new General Data Protection Regulation regime which comes into force in May 2018.

Many charities will be keen to review the consents you have from donors to receive marketing and fundraising communications. In doing so, you shouldn’t email individuals who have not given you their consent to contact them. You cannot send marketing emails without consent. This is what Flybe and Honda did—and the ICO imposed a £70,000 fine on the airline and a £13,000 fine on the car manufacturer. Read more about those penalties here. The ICO said “Businesses must understand they can’t break one law to get ready for another.”

A Summer Bill

The Department for Culture, Media and Sport have said that the Law Commission will publish a draft charities bill this summer containing the Commission’s proposed changes to charity law. The bill aims to address various technical problems that currently cause uncertainty or impose disproportionate burdens on those involved in the administration of charities. Proposed reforms include changes to:

  • The regulation of charity land transactions;
  • The process by which Royal Charter charities make changes to their constitution;
  • Allow charities to make ex gratia payments (payments they do not have the legal power to make) in certain circumstances where they feel they are morally obliged to do so; and
  • Allow the Charity Tribunal to issue Beddoe orders, which provides a trustee of an unincorporated charity involved in legal proceedings with advance assurance that his or her costs from the proposed proceedings can be properly paid from the charity’s funds.

Charity collection bag companies debagged

The Advertising Standards Authority has published new guidance (view) for companies raising funds on behalf of charities by posting charity collection bags through letterboxes after complaints that members of the public thought they were donating directly to the named charities. The new guidance requires such companies to make it clear that they are commercial companies who only donate a percentage of their profits to charities.

Hurdles for charity mergers

Despite evidence of the potential benefits of mergers, charities are still finding mergers difficult. The Good Merger Index (view), a review commissioned by Eastside Primetimers consultancy analysed the 54 merger deals which took place the year ending March 2016, involving 116 organisations with a cumulative income of almost £800m. Many charity sector mergers were driven by “financial distress, rather than by sound planning and aims for growth” with many charities “simply not responding to the conditions they face” as many are going into liquidation rather than transferring services to a new home. Mergers are still considered incredibly tricky, especially for those with smaller incomes, with technical barriers as well as pensions, costs and finding the right partner. The report acknowledges that it can be a challenge to clearly demonstrate the benefits of a merger will outweigh the financial, time and resource costs. However, the findings from their data report found that the merged charities’ turnover increased by between 6-150% over the following two year period.

Fundraising preference service update

Following a public consultation, the Fundraising Regulator has outlined important changes to their plans for the Fundraising Preference Service (FPS). The FPS was a service proposed by the 2015 report published in the cross-party committee chaired by Stuart Etherington, the then chair of NCVO as a “reset button” donors could press to opt-out of all fundraising communications.

A reminder of the main changes:

  • FPS will cover all fundraising and marketing communications (in any form—email, text, telephone, and addressed mail).
  • An individual who registers on the FPS cannot stop communications from all charities (as was initially proposed) but must specify the particular charities they wish their registration to affect and then actively confirm they no longer wish to be contacted.
  • The FPS will not cover ‘member benefits’—which could include, for example, a quarterly magazine which a member receives in return for purchasing a membership. Charities may, however, be asked to justify their publication if the Regulator receives a complaint from a donor that it is disproportionately weighted towards fundraising appeals.

The Regulator has clarified that charities can still contact donors signed up to the FPS in limited circumstances. These include confirming direct debit details, to acknowledging and thanking a donor for a gift (where it is necessary to do so and no self-promotion is included), to meet Gift Aid requirements, to notify donors of their service provision and to conduct market research.

The FPS is due to be launched shortly—so watch this space!

The commission strikes back!

It is well worth keeping a beady eye on the Charity Commission’s decisions and reports (view). Whilst being a useful indicator of the Commission’s view on compliance it also provides a window into some of the more colourful regulatory decisions the Commission makes. In December last year the Commission rejected an application to register The Temple of the Jedi Order as a religious charity. Adherents of the Jedi way would have been disappointed that the Commission concluded that Jediism is not a religion and “lacks the necessary spiritual or non-secular element” for the purposes of charity law in England and Wales. Kenneth Dibble, the chief legal adviser to the Commission said “The law relating to what is and is not a charity evolves continuously and, as in this case, can be influenced by decisions in other areas. Our role is critical in interpreting and explaining the extent of what the law considers charitable.” Will see a return of the Jedi?

Election ahoy!

Theresa May’s call for a snap general election in this month (June 2017) will present both challenges and opportunities for charities. Charities wishing to campaign or engage in political activity should re-read the Charity Commission’s guidance on campaigning (view) and the Electoral Commission guidance on lobbying (view) to ensure they do so legally.

By Kenji Batchelor

For further advice on the above topics, please call us on 01483 543210 or alternatively email

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