CC20 – final version and 6 things Chairs, CEOs and Fundraising Directors should be thinking about.
If your next Board agenda is not cast in stone – then add a session on CC20 to it. And if it is cast in stone, but your Board has not considered how it will oversee your fundraising post Etherington, then add a CC20 session to it anyway. CC20 is the Charity Commission’s guidance on trustees’ duties to oversee fundraising – and we now have the new version following the consultation process that closed in February 16. Given the fundraising environment that emerged out of last summer’s news it is vital that your trustees understand their newly articulated responsibilities.
And I apologise for that clunky ‘newly articulated responsibilities’ phrase – but it is important to recognise that most of the responsibilities are not ‘new’. However, they have been at best misunderstood, and at worst ignored. The new fundraising regulator gearing up for business should add impetus to your thinking about that next Board agenda. If you have previously tackled it, then a quick review of what has changed in the final version might be sufficient. But if this is new territory for your trustees… a more in depth session is called for.
The consensus that emerged from the Etherington and PACAC reports on fundraising was deeply critical of the way in which some trustee boards have exercised oversight of fundraising. This is now a critical leadership issue for the Commission and will be for the new regulator. The CC20 guidance sets out the legal and best practice obligations for trustees – and beyond our governance and legal responsibilities, we owe a duty of care to our trustees to ensure they understand the expectations of the Commission and consider the frameworks needed in their charities to give them confidence in compliance. The guidance applies to all charities who fundraise from the public – a point not always recognised by some charities I have spoken with over the last couple of months!
‘Operating effective control’...
The new CC20 explicitly reminds trustees that together they are legally responsible for their charity’s fundraising. ‘Operating effective control’ over fundraising is a ‘vital part of … compliance with your legal responsibilities’. These are summarised as:
The six core principles/duties articulated in the consultation paper are, in essence, the same in the final version. But there is some (mostly) helpful change of emphasis in wording. Here’s a quick and dirty overview of key themes and changes in the way the 6 duties are summarised:
Planning effectively: broadly unchanged, but they added income ‘needs’ to income ‘expectations’. This little hint towards the charities need to generate funds for their cause, and in many cases, for the support of beneficiaries, is welcome.
Supervising your fundraisers: The draft talked of trustees ‘overseeing the fundraising which others carry out’. The final version recognises that this will be usually be by ‘having systems in place to oversee…’.
Protecting your charity’s reputation, money and other assets: unchanged from the draft.
Identifying and ensuring compliance with the laws or regulations that apply specifically to your charity’s fundraising: slight change of title, but in essence the same obligation as in the draft. The new version explicitly recognizes new reporting responsibilities for some charities carried in the Charities (Protection and Social Investment) Act 2016.
Identifying and following any recognised standards that apply to your charity’s fundraising: again a slight change in wording, but the intent is the same. Based on some discussion I have had with charities over the last few months, it is worth reminding people that all charities that fundraise are expected to comply with the IOF’s Codes of Practice, regardless of whether they are members.
Being open and accountable: no change to the draft.
Themes and comment from the main text:
Governance vs executive responsibility
There is a welcome step back from the challenges the Consultation presented to the boundaries between governance and executive responsibility. The new wordings will make it much easier for SMTs and Boards to agree workable terms of reference!
The focus on ensuring fundraising is in line with your charitable values remains. There is additional explanation in the new version, the trustee role in setting and protecting those values is explicit.
One of the more important areas of oversight is that of how the charity works with commercial partners. While the final provisions are broadly in line with the draft, there is one concerning addition: that trustees should ‘not allow remuneration or reward for a commercial partner which is excessive in relation to the amount raised” (My emphasis.) While non fundraisers may, at a glance, think that reasonable, those working on recruitment may worry that benchmarking expenditure solely against funds raised is a rather blinkered and worrying test.
There is also an additional paragraph (5.4) dealing with charities who have trading companies that raise funds for the charity.
Section 6 – protecting reputation, money and other assets – has been substantially reworked but retains its significant focus on reputational risk of fundraising – with further comment on managing the risks and costs of working with external fundraising companies – there is substantial focus on services where only a small part of a donation reaches the charity. The key message is that ‘you must be able to justify your fundraising costs and show how they are in your charity’s best interests.’
The section also provides useful steers on controls over public collections and sponsored events and to raise awareness of fundraising fraud (section 6.5), suspicious donations and cases where the charity’s name may be used without permission.
Like the consultation, the new version provides a set of guides and principles for ensuring the openness and transparency of public appeals. While the principles here (9.3) should be second nature to most fundraisers, it will be worth fundraising directors specifically bringing the charity commission expectations to the attention of their fundraising managers and facilitating discussion of lessons or implications for their appeals.
Section 10 has been much expanded, covering the establishment of the Fundraising Regulator, transitional arrangements for handover from FRSB to the Regulator and the Commission’s role – no surprises here.
Section 11, for those who have not got the message, sets out the Commission’s view of the risks poor fundraising practice can bring to the sector as a whole.
The series of annexes are a useful reference point, especially Annexe 1 which draws on existing codes of practice and the new Act to provide an overview of contractual arrangements with external fundraisers.
So what steps should you be taking now:
Fundraising directors:
1. ensure your CEO and Chair are aware of the publication of CC20
2. share the paper with senior fundraising colleagues – especially the sections on what the Commission is telling Trustees about appeals
Chairs and CEOs
3. consider the level of understanding your Board has of these issues, and schedule appropriate Board agenda time as soon as practicable
4. think about the requirement to exercise appropriate skill and care in fundraising oversight. In particular consider whether your trustees have sufficient fundraising understanding and knowledge to meet this requirement. Consider a Board skills audit, appropriate fundraising inductions for trustees, or if your Board has not yet engaged on these issues, contact me to arrange a Board briefing to kick-start your thinking.
CEOs, SMTs and Boards:
5. Consider how your Board can monitor fundraising. What are the key measures that you need? Have they changed as a consequence of the new fundraising environment?
6. Values values values: CC20 is riddled with the word. How are yours defined? How do they apply to your fundraising? Has there been engagement between your fundraising teams and your Board on what they are and how they apply? If not, consider how you can start this process - we owe it to fundraisers and to trustees to get it right!
Pick up the full text and response summaries here: Charity Commission CC20 Consultation
And finally... a personal plea: The Commission on the Donor Experience has identified the way in which trustees, CEOs and SMTs respond to the new fundraising environment as a key factor in the sector's response to the crisis. I am the volunteer leader of this project and need to speak with Chairs, trustees and CEOs to understand and articulate best practice and known gaps and risks. Covering governance, planning cycles, trustee / fundraising engagement, and trustee recruitment, induction and nurture - I need your views. So if you are a Chair, trustee, CEO or fundraising director who can help me find best practice, gaps and drivers of change - please message me! Commission on the Donor Experience
3 February 2016
Trustees, governance and fundraising: 2 PACAC reports; similar messages for Boards and important lesson for CEOs
This week’s report on the Kids Company debacle has stern words for everybody concerned – their Chief Exec, the auditors, independent consultants, the charity commission – and not least the Trustees. But while the Kids Company report is substantially about the failure of everybody to grasp the thorny question of the Charity’s financial fragility, the language used in the Public Administration and Public Affairs Committee (PACAC) report is remarkably similar to that in their previous week’s report on fundraising: “The proper meaning of governance, the role of charity trustees, and the role of the Charity Commission are themes common to both reports”
The Kids Company report lays strong responsibility on trustees for failing to deal with their financial fragility – reserves were too weak, but the Committee found no evidence that Trustees had seriously sought to address the concerns. Similarly, the fundraising report notes that trustees have always had responsibility for oversight of fundraising – but that many have not evidenced this. Indeed, the report notes that “The Etherington review makes the observation that ‘Charity trustees and managers have too often been absent from discussion on fundraising practice or values’”
The committee found a lack of cause-related expertise among the Kids Company Board – and observe that this in no way exonerates the Board from their responsibilities. Given the freshly articulated responsibilities for trustees, how will they fare on fundraising oversight without relevant expertise? Etherington and the committee conclude that to safeguard the interests of the charity, supporters and the wider public, trustees need to be more hands on in their oversight of fundraising. The report summary puts it like this:
“Trustees are ultimately responsible for every aspect of their charity’s activity, including fundraising. No system of regulation can be a substitute for effective governance by trustees. Good governance in general is about sustainability of reputation in the long-term, as well as the sustainability of finances. Each of the charities that gave evidence to us should re-examine their governance of fundraising and other charities should learn lessons from this episode.”
And when we remember that trustees give their time voluntarily, seeking to serve the mission and objectives of the charity – it is up to CEOs to ensure not only the right mix of skills represented on their Board, but that every effort is made to ensure that these exceptional volunteers have the training and support to enable them to meet regulator, political and public expectations. As the report concludes: “Trustees must have the right skills, information and attitude to prevent poor practice in the future.”
We must nurture and develop our trustees.
Trustees: Your 6 responsibilities for Fundraising - and a deadline.
Charity Commission consults on new Trustee guidance and you have just 10 more days to comment.
As a senior fundraiser, I was once shocked and disappointed to hear a relatively new Trustee (of a charity that had better remain nameless) say that it was rare for more than 20 minutes discussion to be devoted to fundraising in a full day’s Board meeting. How could trustees support and engage with fundraising when all they heard were the budget and the results? When imminent new guidancefrom the Charity Commission in CC20 comes into effect, we can’t afford to ever hear that again.
The Charity Commission is consulting on revisions to CC20, applicable to charities in England and Wales. (There is separate guidance for Scotland andNorthern Ireland.) The new CC20 restates and reinforces trustees’ responsibility for the the fundraising undertaken by their charity. Yes, they may delegate management to staff, but no, they cannot delegate the legal and regulatory responsibility for what is done, or how it is done. The consultation closes on 11th February 2016 – and is just one of the changes facing trustees and fundraisers this year.
CC20 identifies six areas of explicit responsibility for charities:
Planning – all trustees will have a responsibility for setting the approach to fundraising, ensuring that activities accord with the charities values. Specific and detailed aspects need to come within their purview, even if there is a dedicated fundraising leadership team with delegated authority.
Trustees : Fundraisers 'keep control' says CC20
Supervision – the document suggests trustees need to ‘keep control’. Trustees must ensure that all those who fundraise on behalf of the charity know what standards and values should apply.
Protecting money and assets – trustees have always considered the needs of their beneficiaries as paramount. This section makes explicit the need to consider the impact of their fundraising on donors, supporters and the wider public. There is remarkably little here about beneficiaries. Of course, this section does also include duties around the prevention of fraud or mishandling of donations.
Specific laws and regulations – trustees are required to ‘find out about and comply’ with specific laws & regulations that apply to their charity’s fundraising.
Fundraising Standards? 'find out' & 'follow'
Specific recognised standards – ‘find out and follow’ – and in this case that is regardless of whether you are a member of the IOF, FRSB or any other body. The Commission expects all fundraising charities to fully comply with the Code.
Open and accountable – trustees are responsible for compliance with the various standards, and should use reporting to demonstrate that their charity is well run and effective. New regulations are likely to require detailed statements on fundraising in the annual report – you will find an overview of that in Annexe 2, page 30 of the Consultation paper.
Pages 5-6 give a good summary – but I recommend every trustee read the full paper to understand what will be expected of you and colleagues on your Board. And if you have not heard from your Chair or CEO about this consultation, ask now about whether – and how - your charity is responding. The first question in the consultation (pdf version here) is whether trustees have been consulted.
Deadline: Midday, 11 Feb 2016
The consultation closes at midday on 11/02/16 – it is time to read and respond. And it is time to ensure that fundraising oversight is on your Board agenda, soon!
Find the full consultation paper here.