The five-minute policy manager – July 2015

The start of this month has not been a happy one for the charity sector, with news of the Kids Company closure and extensive media coverage about the organisation’s finances and management. We still do not have the full picture of what went wrong, and speculation is rarely helpful, but there are already important lessons to be learnt, as highlighted by Karl’s blog post on trustee responsibilities and Myles’ blog post on financial responsibilities.

And as we deal with the implications of this case, here is a roundup of what happened in voluntary sector policy during the month of July.

Fundraising regulation

Our chief executive Sir Stuart Etherington is currently leading a review into the self-regulation of fundraising. The review is focusing on the structure of the current self-regulatory framework and on what changes are necessary to strengthen it (see the full terms of reference for more details).

An open consultation is running until 14 August.

In the meantime, the Public Administration and Constitutional Affairs Committee (PACAC), has announced the key areas of its inquiry into fundraising practices and has issued a call for evidence.

The inquiry will focus predominantly on four key areas:

• the extent and nature of practices adopted by call centres raising funds for charities and the impact on members of the public, particularly vulnerable people
• the government’s recently proposed legislative changes on this issue
• how charities came to adopt these methods, and how they maintained proper governance over what was being done on their behalf
• the leadership of charities and how their values are reflected in their actions and activities.

The Scottish government has also called on the Scottish Council for Voluntary Organisations to conduct its own “informal review” into fundraising practices in the country.

Financial Sustainability Report

We have published the results of the review of the financial sustainability of the voluntary sector’s finances, which NCVO has been undertaking for the past year in partnership with Charity Finance Group, the Institute of Fundraising, NAVCA, the Small Charities Coalition, and Locality. The report paints a bleak picture, predicting that inflation and falling income will lead to a £4.6bn annual shortfall in voluntary sector finances by 2018/19.

For a more detailed overview of the report see Michael’s blog post.

Charities (Protection and Social Investment) Bill

On the last day of report stage on 20 July, the House of Lords voted in favour of an amendment which seeks to protect charitable property from the right to buy scheme.

The new clause stipulates that “the Charity Commission shall ensure that independent charities are not compelled to use or dispose of their assets in a way which is inconsistent with their charitable purposes”.

This is already an important principle so the amendment does not change existing charity law, but it could have ramifications for the government’s proposal to extend the right to buy scheme to housing association tenants.

The government has put forward amendments to regulate fundraising:

• making it an obligation for charities and fundraisers to have a written agreement showing how the vulnerable are protected
• requiring charities with incomes over £1 million to set out in their trustees’ annual report their fundraising approach (including the use of professional fundraising agencies) and the steps the charity has taken to prevent inappropriate fundraising from vulnerable people.

The Bill will have its Lords Third Reading on 14 September, and is expected to be debated in the Commons once Parliament returns from party conferences in October.

Gift Aid donor benefit rules

HMRC have been considering the donor benefit rules on an informal basis for the last year and have now moved to a more formal review. A consultation on simplifying the Gift Aid donor benefit rules has been published and will run until 9 October 2015.

Charity Commission

The Charity Commission has published its updated guidance The essential trustee (CC3) and an updated version of the shorter trustee guide CC3a Charity trustee – what’s involved?

As in previous versions, the guidance breaks down the trustee’s role into six clear duties, and explains the legal requirements that trustees must meet. However there is also a stronger requirement on trustees to follow good practice, in order to operate effectively and comply with their duties.

Cage judicial review

The High Court has given leave for a judicial review of the actions of the Charity Commission in obtaining an undertaking from the Joseph Rowntree Charitable Trust that it would never again fund the advocacy group Cage.

Although Cage is not a charity, the outcome of the case will have important policy implications for the charity sector, since it will address the following key questions:

• when does advice from the Charity Commission effectively turn into a regulatory order?
• does the Charity Commission have the power to make specific orders to trustees about the management of their charity?

Charity legacies

This is another case that could have important policy implications for charities: the Court of Appeal has ruled in favour of a woman who contested her mother’s will, in which the majority of the estate was left to three animal charities.

Legal experts have already warned that this decision either could result in fewer people choosing to support their favourite causes through their wills, or could lead to more legal challenges to the terms of wills when legacies are left to charities (and inevitably increased costs for charities as they defend the claim, something they are duty bound to do).