The charity sector is in the doldrums. The public has a lower opinion of charities in general now, and everyone in the sector is tarred with the same brush. We have a mountain to climb. So would increased regulation help to restore confidence?
Change to fundraising regulation is already coming. This has to be welcomed, but we need to ensure this is the right sort of regulation. In its editorial in February’s Economia magazine, the Institute of Chartered Accountants in England and Wales said: "Banking systems are not much more robust, even if they are more heavily regulated." So let’s not go the way of banking – more regulation, more costs, but few visible results. Parliamentarians typically call for more regulation, then forget about the problem. In fact, charities are already highly regulated for aspects of their work such as care and education. The next steps need to be carefully considered to ensure they actually help charities to deliver good results consistently.
One of the lessons from the banking sector is that it is about culture more than rules. You can introduce more regulations, but that does not necessarily lead to better-governed organisations. We need to focus on getting the tone right and engaging our values, so that we live them. Without being aware of it, trustees can send out contradictory signals to staff. If you set fundraisers ambitious financial targets and give them a strict ethical code for fundraising, it will be difficult to achieve both. Trustees need to communicate the priority of these goals. For example, you could say that the ethical code comes first and the achievement of financial goals might therefore take longer. This does not mean giving up on financial goals, but planning for finances needs to be more in tune with the values of the organisation.
Whatever happens, it needs to be proportionate. All the media coverage starts with the statement that there are 165,000 charities. This is the number of charities on the Charity Commission’s register, but it is misleading for a number of reasons. Nearly 80,000 charities have incomes of less than £10,000. Using commission data for September 2015, we can see that more than 71 per cent of the income related to about 2,000 charities with incomes of more than £5m. So, in terms of regulation, we need to think small first. The numbers are also misleading because they omit a large number of charities – universities, academy schools, Scottish and Northern Irish charities, churches and housing associations.
What would make the most difference is greater transparency. We already have changes coming with the introduction of Sorp 2015. This has come into effect for the accounts being prepared now, so we will see more depth to statements about risks and reserves in trustees’ annual reports. We will also see more details about the amount paid to the senior managers in charities as well as those sums paid in redundancy and settlements. This is going in the right direction.