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Registration and levy consultation response: closed July 2016

Registration and Levy 

Final Arrangements Following Consultation

Purpose of this paper

This paper sets out the arrangements for the Registration and Levy to be introduced by the Fundraising Regulator from 1 September 2016. In the light of responses to the discussion paper issued in late June 2016 a number of amendments have been made to the proposals which are explained in this paper and Annex A.

Comments on the earlier discussion paper were invited by 22 July 2016. Annex B to this paper sets out a summary of the points raised in the 123 responses received, including a list of those responding (Appendix 1), a frequently asked questions document (Appendix 2) dealing with questions raised about the Fundraising Regulator in the registration and levy responses but which were not directly within the scope of that discussion document.

The Registration and Levy paper is still available to read on the Fundraising Regulator’s website but please note that no further comments can be accepted.

About the Fundraising Regulator

Role 

The Fundraising Regulator is a company limited by guarantee without a share capital (registered company number 10016446). It aims to ensure that fundraising is respectful, open, honest and accountable to the public. Its role as regulator is to:

  • Set and promote standards of fundraising practice (the Code of Fundraising Practice and associated Rule Books) in the charitable sector in consultation with the public, fundraising stakeholders and legislators.
  • Investigate cases where fundraising practices have led to significant public concern.
  • Adjudicate complaints from the public about fundraising practice, where these cannot be resolved by the charities themselves.
  • Operate a Fundraising Preference Service to enable individuals to manage their contact with charities.
  • Where poor fundraising practice is judged to have taken place, recommend best practice guidance and take proportionate remedial action.

Governance

The Fundraising Regulator is governed by a non-executive Board of Directors, drawn from both inside and outside the fundraising sector, including members with extensive experience of regulation and codes of practice. The Directors are responsible for the overall control and strategic direction of the company. The Board is chaired by Lord Grade. 

Geographic remit

The Fundraising Regulator is the voluntary, independent regulator for charitable fundraising in England and Wales. 

It also regulates charities with headquarters in England and Wales which fundraise in Scotland, following a lead regulator model as used by the Office of the Scottish Charity Regulator (OSCR) and the Charity Commission for England and Wales.

Charities with headquarters in Scotland have committed to a new system of self-regulation for fundraising, overseen by an Independent Panel linked to OSCR.

Decisions on arrangements for fundraising regulation in Northern Ireland are expected to be taken in autumn 2016.

Further information

More information about the Fundraising Regulator is available on its website at www.fundraisingregulator.org.uk.

Please note that we move office on 26 August 2016. Our new address is: the Fundraising Regulator, 2nd Floor, CAN Mezzanine, 49-51 East Road, Old Street, London N1 6AH.

Registration and Levy

Background

1.    One of the main recommendations made in the cross-party Review of Fundraising Regulation chaired by Sir Stuart Etherington (1) was that the fairest and most effective approach to resourcing the new Fundraising Regulator would be a levy applying to organisations reporting annual fundraising expenditure of £100,000 or more to generate donations from the public.  This information is provided as part of the annual return and audited accounts that charities submit to the Charity Commission. Because the information is already available there should not be an additional administrative burden on those charities in the scope of the levy.

2.    The annual budget to support the Fundraising Regulator’s operations will be between £2m and £2.5m and to raise this sum about 2,000 charities with fundraising expenditure of £100,000 or more will covered by the levy arrangements to be applied on a stepped scale as proposed in the discussion paper available in July 2016; 123 responses were received and taken into account in making decisions on how to proceed.

3.    A small number of exempt charities in England and Wales (meaning charitable organisations not regulated by the Charity Commission) that also raise funds from the public but which have different accounting and annual reporting arrangements will be charged a flat rate because it is not possible to determine what they spend on fundraising easily. 

4.    In addition to the levy, there will be a registration scheme for charities below the levy threshold with a small administrative fee charged for annual registration. Other organisations carrying out fundraising will also be able to register. 

Our response to the discussion paper

5.    As a result of points raised in responses to the discussion paper we are going to make a number of changes to the proposals set out in it, whilst retaining the stepped, smooth banded levy set out in Option 1 of the paper. These will be adjustments at the top and bottom of the levy so that organisations spending more pay a higher levy whilst those spending less will pay a smaller sum. We will also move the start date for the levy and registration arrangements back a month to 1 September 2016 and use setting-up costs for a further month during August 2016.

Changes we will make to the original proposals

6.    In response to the points raised by respondents to the discussion paper (see Annex B), we will:

  • Start the levy on 1 September 2016 rather than 1 August 2016 and use setting up costs for an additional month (to 31 August 2016).
  • Use Option 1 as the basis of the levy.
  • Continue to apply the levy for 3 years from 1 September 2016 to give certainty to both levy payers and the Fundraising Regulator, enabling financial planning to take place.
  • Amend the bands so that they do not overlap (for example, £100,000 to £149,999 and so on).
  • Amend Option 1 to lower the levy charities spending £100,000 to £149,999 on fundraising will pay from £250 to £150 to help smaller fundraising charities.
  • Split the previous £5m- £20m band in two by adding a further step so that those spending £5m- £9,999,999 on fundraising will pay a levy of £6,000 (as previously proposed) but those spending £10m - £19,999,999 will pay a higher levy of £8,000. 
  • Split the highest band in two by adding a further step so that those charities spending £20m- £49,999,999 contribute a higher levy of £12,000 (instead of £10,000) and those spending more than £50m contribute a levy of £15,000 (instead of £10,000). 
  • Retain the registration fee for charities outside the levy at £50 a year.
  • Change the basis of the charge for registration for other fundraising organisations (largely meaning third party commercial suppliers) from a flat rate charge of £250 to follow the approach used by the Fundraising Standards Board (FRSB) and set a registration fee based on annual income on a sliding scale using the same bands as the FRSB to seek to attract the same level of income from this source.
  • Reduce the flat rate amount exempt charities in England and Wales contribute from £1,500 to £1,000. This will apply mainly to Higher Education Institutions in England and we accept the point made by HEFCE and others that the flat rate charge should also be applied to 18 Universities that are registered charities so that a consistent approach is applied.

7.    Annex A sets out the revised Option 1 smooth banded levy that we will apply as a result to provide income of £2.5m for the Fundraising Regulator. Later in September 2016, we will publish our full year budget and business plan and provide details of how setting up costs provided by 45 charities have been used. These details will be available on our website.

8.    The levy will be based on annual returns to the Charity Commission setting out fundraising expenditure in 2014, for the year ending 31 December 2014. During the first 3 years of the levy we will discuss with the Charity Commission for England and Wales how the new SORP arrangements can be amended so that by the time the levy is reviewed in, say, 2 years’ time, an appropriate measure for fundraising expenditure is again included in annual returns.

9.    These changes will allow the Fundraising Regulator to resource a full year budget of about £2.5m to cover day-to-day operational costs as well as one of capital needs to support systems, including the anticipated setting-up costs of the Fundraising Preference Service (FPS). A separate set of papers is being released about FPS, including the report and recommendations of the FPS Working Group and the response of the Fundraising Regulator’s board to them.

Next steps

10.    We will now write to those charities included in the scope of the levy to confirm the amount they are asked to pay and then follow up with the first invoice for the year beginning 1 September 2016. We will write in similar terms to exempt charities and to fundraising agencies. Although our financial year runs from 1 April-31 March we will invoice for a full year to allow the new system to bed in and to provide cover for rates of payment.

11.    Details of the registration scheme for charities not paying the levy but wishing to register will be made available during the autumn. At the time of publication of this paper over 1000 charities had registered to receive communications from the Fundraising Regulator and they will be contacted again as soon as the on-line registration system is ready to invite them to register formally and pay their first annual contribution.

12.    We also expect that charities will keep a record of their fundraising expenditure as a matter of good practice even if the SORP does not require it at the moment and keep us informed along with any other relevant change to their circumstances, for example if mergers take place.

Other matters raised in responses

13.    Some respondents raised other important issues in their comments on the discussion paper and Annex B identifies five in particular. Our responses to those points are:

  • Costs and transparency. We will publish our budget and business plan and how setting up costs have been used during September.
  • Timing of implementation. We have moved the implementation date for the levy and registration 1 month to 1 September 2016. The letter to charities covered by the levy will set out the arrangements, including any terms and conditions. Similarly, any terms and conditions for registration will be made available when we are ready to accept registrations.
  • Naming registrants and non-registrants. We will publish the list of the charities that pay the levy and register with us on our website as previously proposed and will do this for the first time when significant numbers have done so as part of our commitment to openness and transparency. We accept that “naming and shaming” those who do not pay the levy could be counter-productive and would not be our chosen response to start with. We will seek to engage with charities not responding to the levy first, to explore their concerns. We hope and expect that charities will pay promptly to show their commitment to regulation of fundraising. The success of self-regulation of fundraising depends on the support and cooperation of the charity sector. The Government has taken reserve powers in section 14 of the Charities (Protection and Social Investment) Act 2016 to ensure there is statutory back up for payment of the levy should it be judged necessary in due course. 
  • Making the case for regulation. We agree about building the case for regulation more strongly and that this will increase support from charities. We will do this through our annual report and accounts in due course as well as the annual report about complaints, building on the successful and important FRSB analysis of complaints and trends. Our wider engagement with charities through development of the Code of Fundraising Practice and guidance about changes to it will also be part of this wider process of offering guidance and support. Where resources allow, we will also engage with individual charities and this is already happening through enquiries received on our website and by phone. We have always been clear that our approach is a positive and proactive one because the Fundraising Regulator will be better resourced than its predecessor. 
  • Reserves. We acknowledge the financial pressure that many charities face but the Board of the Fundraising Regulator must also operate prudently so that it can resource its day-to-day operations and one-off requirements, provide for cash flow and build a proportionate reserve to deal with needs that may arise. Our annual budget and business plan will deal with these issues when it is published soon. 

14.    Otherwise Annex B, Appendix 2 answers other issues that were raised in the levy responses.

Thanks

15.    We would like to thank all those who responded to the discussion paper and are grateful for the constructive and thoughtful commentary we received. Whilst we have not been able to agree with all the comments offered and make changes that will please everyone, we hope that the amendments we have made will reflect positive engagement with charities that will continue as we develop the regulation of fundraising by all charities and others who work with them.

Footnotes

(1)   Regulating Fundraising for the Future: Trust in Charities, Confidence in Fundraising Regulation. NCVO, September 2015, available on the NCVO website www.ncvo.org.uk