Charity Commission for England and Wales consultation on the Annual Return: response from the Fundraising Regulator

In August 2022, the Fundraising Regulator responded to the Charity Commission for England and Wales’ (CCEW) consultation about its approach to the Annual Return (AR) and a set of proposed new questions which would apply to charities’ financial years starting on or after 1 January 2023. Our response is in the form of a letter to the consultation team.

Our work with the Charity Commission for England and Wales 

We work in partnership with other regulators and representative bodies in the charitable and fundraising sectors to build public confidence and ensure consistent fundraising standards across the UK. Our commitment to working with the Charity Commission for England and Wales (CCEW) is set out in our joint Memorandum of Understanding.

We have worked closely with the CCEW since our establishment in 2016 to promote best practice in fundraising, provide clear guidance to the sector and investigate or refer complaints where these arise. Close working between ourselves and the CCEW, as well as other regulatory organisations, is valuable to the fundraising sector as it ensures that organisations receive consistent, timely advice; helping to maintain high standards and transparent practices. Our forthcoming five-year strategy commits to the continuation of this collaborative approach, ensuring the public are protected and excellent standards in fundraising are retained. 

Our interest 

The Fundraising Regulator is primarily funded by a voluntary Fundraising Levy paid by the largest fundraising charities (those recording fundraising expenditure of more than £100,000 in their annual accounts). In order to raise the correct invoices each year, we need to access the latest data on fundraising expenditure from audited or examined accounts submitted to the CCEW.

We use the financial information and narrative data collected as part of the Annual Return (AR) survey to identify and target newly registered charities that fundraise, tell them about the Code of Fundraising Practice, and determine whether they should be registered and within the Fundraising Regulator’s voluntary levy. Knowing which charities fundraise is important, as it allows us to raise awareness about the code, promote best practice in fundraising through a range of guidance and support, and ensure that the sector engages with regulation now and in the future. 

The AR survey is the only data set that presents this information from across the sector in one searchable database. As a regulator, we use the fundraising questions in the current AR survey to help us identify charities which fundraise, so we are particularly concerned about proposals to remove the fundraising questions. Without this data, identifying charities which fundraise would mean examining individual Annual Accounts and would make our role much more onerous and more costly. It also helps us ensure that all charities which should be within the scope of the levy are captured, so that the cost burden of funding the regulator is fairly shared across all those charities which should be contributing. 

Our response 

We welcome the opportunity provided by this consultation to consider how the AR survey can be improved to benefit charities, the public and the sector. Our response focuses on how we use the data gathered as part of the AR survey to help us fulfil our regulatory role, rather than the wording and substance of the new questions that the CCEW is proposing for the AR survey. As such, we have not responded directly to the specific questions outlined in the consultation. 

Much of the focus of the consultation is on simplifying the AR survey process for charities and bringing greater flexibility to the process. We appreciate the reasoning behind this – particularly for charities at the lower end of the income scale – however, we are concerned that the proposals will have significant implications for external organisations that rely on the data to carry out their own roles, as well as identify trends and maintain transparency in the sector. 

The AR survey data is the only source of data common to most registered charities that allow searching across the sector, without having to individually check charity accounts. Ensuring the ‘right’ data is collected is not only very important for the ongoing regulatory role of organisations such as ours, but also supports the CCEW’s strategic aims to build regulatory decision-making processes around the right data, as well as its statutory obligations relating to building public trust and confidence.

There are three main areas on which we would like to focus this response: 

Protecting the public

The AR survey is crucial in helping us protect the public. We use the data to support good standards of fundraising, assess our levy to ensure it is fairly shared across charities, support the public in making decisions about the information they receive from charities, and engage with the sector on regulatory issues. The fundraising questions are essential in helping us to protect the public and support good standards of fundraising. In doing so, they help us do our work to the benefit of the constructive partnership we have with CCEW and the sector more broadly. 

We are particularly concerned about proposals to remove the fundraising questions and would urge the CCEW to reconsider this proposal. 

The fundraising questions and related data captured in the AR survey are important for a number of reasons: 

  1. Supporting good standards of fundraising. 

We screen newly registered charities using AR survey data and inform those that fundraise of the Code of Fundraising Practice and of their duty to fundraise in an open, honest, respectful, and legal way. We do not believe that the current question, which consists of a binary ‘yes / no’ answer on whether a charity raises funds from the public, is overly onerous to charities. 

It is important that charities have processes in place to address risks arising from fundraising, which may be risks to the public or to the reputation of the charity. By telling charities about good standards in fundraising, we can help to equip them to address those risks. 

We do think there is scope to improve the quality of responses to the ‘yes / no’ question by clarifying what is meant by fundraising. We use the wider Statement of Recommended Practice (SORP) definition of fundraising which includes costs of fundraising for events, costs of memberships that are primarily a donation, costs of seeking grants, expenditure on social lotteries etc. Making clear to charities what is defined as fundraising would likely result in more accurate data from the question and would be useful to charities when they consider whether they fundraise. 

  1. Ensuring the levy is shared fairly across charities. 

Charities which spend over £100,000 on fundraising pay a voluntary levy to the Fundraising Regulator. This ensures we can fulfil our aim to stand up for best practice in fundraising, in order to protect donors and support the vital work of fundraisers. 

When we started constructing the levy, we relied heavily on the AR fundraising question to identify charities which fundraise. Without the AR survey data, identifying charities which fundraise would involve looking individually at annual accounts, making our ongoing regulatory role much more difficult and costly. 

As our regulation is funded by voluntary contributions, we use the financial information on fundraising expenditure as the basis for setting the annual levy fee. The AR survey data helps us identify which charities fall within the scope of the levy, helping ensure that the cost burden of funding the Fundraising Regulator is fairly shared across those charities. This is especially important at a time when charities are facing multiple challenges to their income generation. 

The inclusion of the fundraising questions in the AR survey not only enables the Fundraising Regulator to carry out its role protecting the public and building trust in the fundraising sector effectively, but also complements the work of CCEW; supporting its statutory objectives relating to public trust and confidence and promoting charity law compliance by trustees. We would therefore urge the CCEW to retain the fundraising question and consider how this could be improved and clarified, rather than removed outright. 

We find that the supplementary questions on professional fundraisers provide a useful insight into how a charity organises its fundraising and assist us when assessing charities as part of our casework function. Like the fundraising question, these are binary ‘yes / no’ choices and we do not feel that they add a disproportionate burden on charities. We would therefore encourage the CCEW to retain these questions. 

We also use the data within the AR in other ways to support our regulation and to protect the public.

  1. Enabling the public to make decisions about the information they receive. 

The Fundraising Regulator operates the Fundraising Preference Service (FPS), which is a free service, and is the UK’s only official service that helps people to manage the marketing contact they receive from charities registered in England, Wales and Northern Ireland.

We know that some people can feel overwhelmed by the number of unwanted asks for donations they get, and do not know where to turn for help. The FPS was set up precisely because of this and allows the public to suppress communications from charities. 

The FPS is particularly useful to support those who are in vulnerable circumstances and may be unable to make informed choices about giving to charity. About a third of FPS suppressions are made on behalf of a friend or relative.

Our latest publicly available figures (1 April 2020 – 31 March 2021) show that 722 charities have received requests from the public to stop contacting them. In the time period since the service launched in July 2017, to the end of July 2022, there have been a total of 46,883 suppressions made about 2,265 charities. These figures show that the FPS is playing a significant role in helping members of the public to take control of how they are contacted by charities.

Our IT contractor for this service relies on CCEW data to route any suppressions made by the public to the correct charity; helping promote transparency and trust in the sector.

  1. Inform our engagement with the sector on regulatory issues.

Whilst we use the AR survey primarily for the fundraising question, we also use the AR data analysed by other organisations to better understand trends in the sector and ensure we are responding to these in our business plans and policy priorities.

For example, NCVO and its partners use the AR survey data to inform the development of its Almanac, which is an important source of information in assessing the state of the fundraising sector and assists us as an organisation best target our resources. 

This wider sectoral information is particularly important to us as we move to a more proactive model of regulation, where we look to improve our capacity to identify fundraising concerns before they emerge and prevent harm by early intervention. 

We will do this through a combination of our own intelligence, data gathering and research, as well as continuous dialogue with the charitable sector. We have already put in place new managerial roles in Wales and Northern Ireland to anticipate higher engagement with the sector, as charities seek more diverse income streams. We are also committed to reviewing the Code of Fundraising Practice to ensure it keeps pace with changes in the fundraising sector. 

Information about the charitable fundraising sector

The AR survey data is critical in supporting transparency in, and understanding of, the charitable sector. The AR data, held in one central place, is one of the tools which donors and the public can use to understand the sector. 

AR survey data is an extremely important source of information about the charitable sector. It is used by many different organisations, including university researchers, consultants in the sector and, as mentioned above, for the NCVO Civil Society Almanac. It is the most reliable source of data of its kind that can be accessed for research on the charity sector and supports ongoing policy development across, and in support of, the sector. 

We already know that there is a paucity of data about the sector, and this is exacerbated by the absence of ‘live’ data which can give us an immediate view of issues happening in the sector. 

A recent report ‘Better Data, Bigger Impact’ by Pro Bono Economics, pointed to the lack of information that we have about the sector, and the difficulties this presented, particularly given the vital role it plays in the social and economic fabric of the country. This became especially apparent during the Covid-19 pandemic, as civil society and the structures that supported it tried to grapple with the impacts of the pandemic, with resulting decisions being made using very limited information. 

We welcome the increased flexibility that is proposed in the new AR survey to respond to such emergencies, but given the pre-existing data shortfall in the sector, it is critical that we do not lose the existing information that we do have, captured as part of the AR survey. 

We would urge the CCEW to work with us, and organisations that use the data, to understand how the data is used, identify potential gaps and ensure valuable information collected in the survey is not lost.

Increasing flexibility in the AR survey

We welcome the CCEW’s intention to increase flexibility in the AR survey so it can assess the impact of emergency events on the sector. If these changes are introduced, we would be happy to share our own insights to help inform one-off questions for the survey.

Through our enquiry and casework processes, we have a live view of issues happening in the charity sector at any given time. We have found that trends in enquiries are often followed by a corresponding increase in complaints, allowing us to anticipate potential issues before they arise. 

When the conflict in Ukraine started, we saw an increase in our enquiries of almost 40%, when compared with the average monthly figure for the previous year. Of the enquiries we received, 15% related to fundraising in response to the war in Ukraine, with the vast majority of these seeking advice on responsible fundraising. This insight enabled us to work in partnership with the CCEW to put out a press release on safer giving, and issue guidance on setting up a fundraising appeal

This contemporaneous dialogue means we have valuable information which we can share on major events impacting the sector and, as a regulator, allows us to put in place support to help the sector in a timely fashion, and to ensure the public understands any points of interest or concern. 

We know from our fundraising casework that some of the changes that happen in response to emergency events – such as around fundraising methods – can lead to long term changes to the way organisations fundraise. For example, during the pandemic we saw an increase in complaints regarding online fundraising. This was a change that was replicated in our Annual Complaints Report, which examines the complaints received by the UK’s largest fundraising charities. These charities saw a 357% increase in online fundraising complaints compared to 2018 and was the most complained about method of fundraising for that year.

The increased flexibility in the AR survey will be valuable in capturing and assessing how these changes are impacting the sector, both for the CCEW and the organisations that use the data. In turn, this will help address gaps and concerns where they exist. 

Anticipating fundraising concerns before they crystalise and prevent harm by early intervention is one of the key aims in our forthcoming five year strategy. We would welcome working with the CCEW to share intelligence and insights to the mutual benefit of both organisations.