This week the Charity Commission closed their latest
consultation on their Annual Return for 2015. As one of the main regulatory tools,
which makes up the Commission's Register, it is important to ask the right
questions. We took a strong line at ACEVO (see
our website here) in opposition to the Commission's proposals – which
received third sector press coverage here,
here
and here.
Here's our submission in full:
Association of Chief
Executives of Voluntary Organisations (ACEVO)
Consultation
response: Charity Commission Annual Return 2015
August 2014
General comments
ACEVO welcomes the opportunity to comment on the Charity
Commission’s consultation on the Annual Return for 2015. We have discussed our
initial concerns with Caroline Cooke, Head of Policy Engagement and Foresight
at the Commission, and would welcome the opportunity of further discussion with
the Commission if this is necessary. We also have discussed our response with
ACEVO’s membership of 1500 charity and social enterprise leaders, through two
calls to action online and through our regional engagement work right across
the UK.
We are sympathetic to the imperfect options open to the
Commission for increasing the data collected about charities – and we are aware
of the constraints imposed by IT resources in the short term.
We also believe, however, that some of the Commission’s
proposals for the Annual Return 2015, especially the proposed burdens placed
upon charities’ historic right to campaign – are disproportionate and illogical.
We have grave reservations over their potential inclusion in any future Annual
Return. We explain why in our submission below.
Q1 Do you agree with the proposal to introduce a question
into the annual return to ask how much of a charity’s total expenditure has
been on campaigning activities?
ACEVO is clear: this is a corrosive proposal for the reasons
set out below.
Illogicality and
irresponsibility
Charities exist for the furtherance of public benefit: to
‘do good.’ Charities do good both by providing services that help people, and
also by recognising that no one charity can eliminate the harm entirely. That
is why charities speak out, make connections with other charities and attempt
to influence donors and statutory bodies to change the system in which the
charity operates.
A charity’s service and its advocacy about the service are
completely indivisible. It is illogical to suggest otherwise. Indeed, it would
be a dereliction of duty for a charity seeking to alleviate harm to not speak
about that harm or its experiences of alleviating harm so as to compel others
to join in the struggle.
ACEVO’s Chief Executive Sir Stephen Bubb explained on BBC Radio 4’s World at One on 27 June 2014 that “charities’ work in delivering services is inextricably linked with our campaigning and advocacy roles”. To attempt to separate different parts of charities’ work towards their public benefit mission is deeply irresponsible. It risks creating the false impression that their campaigning work is somehow separable from, or an optional addition to, service delivery to beneficiaries.
Impracticality
On a practical level, accounting for a charity’s total spend
‘on campaigning activities’ is difficult when the Charity Commission has not
precisely defined the scope of the term. In the words of one ACEVO member, “it
would be hugely time consuming and difficult to define the difference between
awareness raising and political lobbying”.
It is important to consider this proposal in the context of
a range of pressures on charities’ ability to speak out in public on their beneficiaries’
behalf. These include limits placed on charities’ ability to speak out in an
election year through the Government’s Transparency of Lobbying Act and limits
on charities’ ability to criticise bad practice on the part of government by
way of ‘gagging clauses’ in public service delivery contracts. These pressures
– both of perception and practicality - are considerable. As such, we are
strongly opposed to any regulatory measure that would increase the actual or
implied pressure on charities that speak out. We trust that the Commission will
agree with this analysis as the commitment expressed in its guidance document
CC9, Speaking Out, is clear:
“Campaigning and political activity can be legitimate and
valuable activities for charities to undertake.”
CC9 also makes clear that:
“Charities can campaign for a change in the law, policy or
decisions where such change would support the charity’s purposes.”
ACEVO recommends in the strongest terms that the Charity
Commission do not introduce a question on campaign spending into the Annual
Return and that they resist any future pressure to do so.
Infantilisation of the
public debate
We believe that the UK deserves a world class charity sector
and that this requires a strategically focussed, innovative regulator. Across
the world, forward thinking philanthropists are recognising the indivisibility
of a non-profit organisation’s service and its voice. Mark Kramer’s article
‘Catalytic Philanthropy’, for example, refers to catalytic, next generation philanthropy
as a synthesis of delivery and advocacy, or taking innovative social ideas and
‘mainstreaming’ them.[1] It is a matter of regret that on this matter
the UK’s debate, which often is world leading on the subject of philanthropy,
actually appears to be regressing. The Charity Commission must work harder to
lead this debate, not follow it.
Q2 Do you agree with
the proposal to introduce a question to the annual return to ask how much of a
charity’s income was received from:
• public service
delivery
• private donations?
AND
Q3 If we did
introduce the questions set out above is it feasible for charities to provide
this information?
We are not against the idea in principle, but we oppose this
proposal.
Submitting income from only these two sources would not give
a clear picture of charities’ income. Grant funding from statutory sources, for
example, would not be covered by either of these two headings.
The SORP Committee observed that this reporting was neither
in the public interest nor was it proportionate. It would certainly place an
unnecessary bureaucratic burden on charities that we cannot sanction unless
further persuasive argument is given.
There is no doubt that the Commission are sincere in their
desire to give effect to the PASC report. Only asking for these two items,
however, adumbrates a further infantilisation of the important debate around
charity and public service that is regrettable.
Q4 Do you agree with
the proposal to ask whether a charity has a written policy on remuneration of
executive staff?
ACEVO’s Good Pay Guide
for Charities and Social Enterprises, published in December 2013 is the
sector leading publication on executive pay. In it we made clear our
organisation’s commitment to five principles of transparency and
proportionality over staff pay and the principle that sits primus inter pares: value
for money.[2]
There is strong consensus across the charity sector on the need for
transparency about pay – at all levels, not just in senior management.
Charities are working towards this end irrespective of any pressure from the
regulator.
At ACEVO we have been heartened by the positive response to
these proposals and the extent to which charity remains among the most trusted
of all the professions.
As such it is unclear whether a tick box of the kind
proposed will make any tangible difference. The regulator should have a
strategic vision for charities to follow, not simply ‘regulate’ for the sake of
it. ACEVO believes it is unnecessary for the Charity Commission to ask about a
‘written policy’ on executive pay in the Annual Return. It will merely duplicate
an initiative which is already widespread and self-enforced across the sector,
and asking a simple yes/no question collects so little information that it will
not substantively increase transparency about pay in the sector.
We do not agree with the proposal as written here. We may be
amenable to a revised proposal that aligns explicitly with the SORP.
Substantively, these requirements should not be extended to smaller charities;
and if the question is to be included, it should explicitly be stated that
answering is optional as good practice rather than as a regulatory requirement.
Q5 Do you agree with
the proposal to introduce a question into the annual return for 2015 to ask if
a charity has carried out a review of its financial controls during the
reporting year?
We support good quality financial management in the charity
sector. We have concerns, however, around whether this question is the correct
way to go about getting them.
Given the diversity in the size of UK charities – by turnover
and staff numbers – we do not think that it would be advantageous to ask all
charities whether they have reviewed their financial controls. This would risk
creating an expectation that charities should review their financial controls
every year. In small charities which may not have paid staff it is hard to
imagine that creating such an expectation would be advantageous to the sector’s
smooth operation or to the public’s trust in it.
Furthermore, the question may not actually yield appropriate
information. Charity Commission guidance CC8 contains the checklist that many
charities would use. Whether capacity exists to fully instantiate those
controls within the smaller charities on an annual basis is unclear. We are
concerned that the annual requirement would create a perverse incentive and
many smaller charities might simply wave through the ‘checks.’ This is not
quality financial management but regulation by box ticking, and would not
substantively deal with the problem. As such we cannot agree with this
proposal.
Q6 Do you agree with
the proposal to ask charities with incomes of between £10,000 and £500,000 to
provide some key financial information through the annual return?
We understand that the regulator is keen to collect data
about the smaller end of the charity market, but it must remember that its most
basic aim must be to do no harm.
Small charities are particularly vulnerable to excessive
bureaucratic burdens. ACEVO believes this proposal would, if implemented, need
to be optional. We want the charity sector to be being as transparent as
reasonably possible, but making this requirement mandatory could add
unnecessary pressure on smaller organisations, especially those without paid
staff. In the case of organisations with incomes as low as £10,000, we strongly
feel that being compelled to submit this information is particularly contrary
to the public interest. The only justification we can see is that it would be
convenient for the regulator, which we do not feel would be sufficient.
[1] Mark Kramer, ‘Catalytic Philanthropy’, Stanford
Social Innovation Review ((2009).
http://www.ssireview.org/articles/entry/catalytic_philanthropy/.
[2] ACEVO, The Good Pay Guide for Charities and
Social Enterprises (December 2013).
https://www.acevo.org.uk/sites/default/files/ACEVO_PayGuide_20131219.pdf.
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