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The State of the Sector: Governance in Context


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Presented on Monday 2 November at NCVO/BWB Trustee Conference 2015.

Philip Kirkpatrick, BWB - The State of the Sector: Governance in Context

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The State of the Sector: Governance in Context

  1. 1. NCVO / BWB Trustee Conference 2015 The State of the Sector: Governance in Context A year ago I addressed this conference on the theme "Is Regulation out of Hand?" I argued then that there was enough regulation; that calls for more regulation were unwarranted; that regulation needed to be proportionate; and I argued for an understanding, as expressed in a particular high court judgement, that we should be slow to find fault with charity trustees who, while doing their best, make honest, even stupid mistakes. What a difference a year makes… This year I am asked to speak about the state of the sector and to put "governance in context". I suppose one or two things have happened this year that may be worthy of comment and from which we may be able to draw some conclusions and learn some lessons. I think we can all agree that there have been some mistakes. Probably most of them have been honest. Possibly some of them have been stupid. Albert Einstein once said that only two things are infinite: the universe and human stupidity. And he wasn't sure about the former. So let's talk about fundraising. On the scale of human stupidity I would say that believing everything you read in the Daily Mail ranks fairly high. Charities did not kill Olive Cook. Neither did they hound her to her death. Charities did not prey on Samuel Rae and they did not target him because he was elderly and suffering from dementia; some charities had a 20 year relationship with him; a generous man who wanted to help. But the impression given by the reporting of some of our leading charities driving the elderly to suicide and tricking the vulnerable is the one that will remain in people’s minds. It’s how one gets attention. It’s how one sells a certain type of newspaper. But another thing that would rank fairly high on the scale of human stupidity would be to assume that there was not a nugget of truth, something essential in that reporting, that the sector needs to address. I think we have all acknowledged that nugget but I am not sure we all know quite how to describe that nugget is or how much clarity there is in the sector about what has actually gone wrong. So, what has gone wrong in fundraising? 199999/0127/001370910/Ver.01 1
  2. 2. • Some charities have contacted people by telephone when those people have registered with the Telephone Preference Service. Actually, some of those contacts will have been lawful and others not. In some cases it will not be entirely clear. • Charities have regarded consent given by individuals to use their data as being consent given for all time until revoked. That may or may not be right. • Some charities have been swapping data lists with each other. This has probably been lawful but has led to some people receiving vast numbers of contacts from charities. • Some charities have been cold calling people. Unless those people are registered on the Telephone Preference Service, this is completely within the law. So far, how shocked are you? • Finally, and genuinely shocking, undue pressure has been put on some people and, most outrageously, on vulnerable people, by professional fundraisers in fundraising call centres. It is worth noting here that: o This has been confused by many with a practice of non-charity scam-artists of deliberately targeting vulnerable and gullible people. There is no evidence that has been done by charities; and o This has not been done by charities themselves but by professional fundraisers in call centres. Whether or not anyone has broken the law, we have to ask ourselves whether everything we are doing is consistent with the values and culture of our charities and indeed of the voluntary and community sector as a whole. In some of the above cases, this is easy answer; in others - for example, whom can we contact about what and when? - it is not so simple. There is a balance to be struck on the one hand between charities' rights (indeed, need) to ask for money and, on the other, the individual's right to be left alone. According to research done by Ofcom, 12% of people find charity fundraising calls distressing and 53% find it annoying. 53%??! Is that not the most astonishing statistic? Surely, and especially given all we have heard recently, we should have expected 99% of people to find charity fundraising calls annoying. Perhaps the other 47% understands that charities exist in a distressing world, that they exist to deal with distressing issues, that it is not their function to prevent all annoyance, and that if we are not asked, we will probably not give that which we should give. 199999/0127/001370910/Ver.01 2
  3. 3. Asking the public directly for money is essential if we are to have the charities our society needs. Before looking in more depth at the lessons we can learn about regulation and governance, we need to understand something about the existing state of play. On the regulation front, we have a Code of Fundraising Practice that has been signed up to by all 5,000 plus members of the Institute of Fundraising, which requires all fundraising to be legal, open, honest and respectful. We have an adjudicatory body (the Fundraising Standards Board) with nearly 2000 members, including all the major fundraising charities, which adjudicates on compliance with that code. The members of the FRSB received approximately 50,000 complaints last year in the context of approximately 20 billion fundraising requests. Of those, 17 had to be dealt with by the FRSB because complainants were not happy with internal resolution and 3 complaints went to public adjudications. Of the 50,000 complaints received, just over 8000 were related to telephone fundraising but no detail is given as to the nature of the complaints. Most of the issues identified above relate to data protection. The Information Commissioner, responsible for data protection has said that his office: "…received relatively few complaints from the public about receiving nuisance course from the charity sector, even following extensive coverage in the media," and has identified the private sector, not charitable fundraising, as the main issue. The large charities for which there are millions of fundraising requests have complaint rates of approximately 1:100,000 relating to direct mail and about 1:1,500 in in relation to telephone fundraising. And we know that practically all of those have been successfully resolved within the charities themselves. Of course, those figures vary between charities. So where are the regulatory failures? It has been said that it is confusing having three regulatory bodies - the IoF, the FRSB and the Public Fundraising Regulatory Association. That is true and surely it would be better if we could join these together but let's not patronise the public too much; I think that most people can work their way around that. There is a system and it is being used. It has indeed been used in relation to some of the worst things that are now being complained about. For example, there was an adjudication against the professional fundraising agency GoGen. 199999/0127/001370910/Ver.01 3
  4. 4. I am not complacent, though. I think the problems of fundraising regulation have been: • It is not universal, although there is no evidence in the recent allegations that the organisations complained of where not members of the FRSB. • It is not funded adequately. This is squarely at the door of the charities that do most of the fundraising and stand to lose most from poor regulation. • As a result of underfunding (perhaps also for other reasons; I don’t know), the FRSB and IoF have not been conducting proactive investigations in the same way as the PFRA has. • That lack of investigation, coupled with the scarcity of unresolved complaints, has probably led to a complacent assumption that nothing was fundamentally wrong. • The system lacks the sanctions to deter the limited number of real rogues who stray just the wrong side of criminal and civil sanctions that can be imposed by the relevant statutory regulators. I do not buy the argument that the IoF’s code is inadequate and has been watered down by fundraisers more interested in raising money than protecting the public. And here I declare an interest: I sat on the IoF’s Standards Committee for 6 or 7 years and did so alongside observers over much of that period from the FRSB, the Charity Commission and the Cabinet Office. None of our decisions were ever taken in that light and I doubt they have been since I left. However, clearly we must accept that something was wrong, that the political and public mood is turning against us and that something must now be done about it, not least because the political climate will accept nothing less. Sir Stuart Etherington and his commission have set out their recommended way forward and that path, or one very close to it, is what the sector will now need to follow. I recommend, however, that the things that need fixing are fixed carefully and we do not get carried along too quickly to do it well enough. What about governance? The Chairs and Chief Executives of Oxfam, Safety Children, NSPCC and RSPCA all gave evidence to the Public Administration and Constitutional Affairs Committee recently. I believe all those charities had used fundraising agencies in the spotlight and all appear to have been exceptionally well governed. All of them have appear to have experienced boards that meet regularly, agree on fundraising strategy, hear about complaints and are imbued with all the values one would hope for. 199999/0127/001370910/Ver.01 4
  5. 5. They have donor promises and charters and clear complaints handling systems. How could anything possibly go wrong? What went wrong seems to me to be a failure of leadership; a failure in some charities to stand back and take a long enough view of the impact of all their actions. And I would add a fairly small but vital thing - one that applies not just to charities but every successful business: building culture and values into the due diligence assessment of suppliers and monitoring them for delivery on those factors. I was very struck by the evidence of Peter Wanless, NSPCC's Chief Executive, who said: "I think there has been an imbalance between the desire to raise money and the importance of valuing the relationship with the donor." And also by the evidence of Mark Wood, NSPCC’s Chair, who said: "We need to be guided more by the style and culture of the organisation then simply the bargain that we strike." That has to be right. If fundraising is simply the business of raising money and we allow our staff and our agents to behave as if that is the case, we will surely be in trouble. Sir Stuart’s report talks of recognising the donor relationship and not treating donors as opportunities to exploit The best charities regard their fundraisers as ambassadors. For many, they are the main face of the organisation. The chairmen of our charities need to expect, and probably actually get, from our fundraisers the same spirit that President Kennedy allegedly found in the NASA janitor when he visited Cape Canaveral. The story is probably apocryphal but he is said, on a tour of the space centre, to have asked a man in blue overalls what his job was and to have been told, "My job is to help put a man on the moon." Without such values running right through everything that charities do, it is easy to see that trust and confidence can be eroded. Without trust and confidence we will not have support, financial or otherwise, and without support what can charities achieve? That trust and confidence, which can take so long to build and which can be destroyed in an instant is what charities thrive on and without which they will wither and die. Luckily, for the sector as a whole, we have a large store of it and our particular brand is extremely resilient but, unlike human stupidity, it is not infinite. 199999/0127/001370910/Ver.01 5
  6. 6. What is trust and confidence in our charities based on? Populus recently conducted the Charity Commission's annual survey into this issue and identified 4 key qualities that are necessary for charities to retain trust and confidence. These were: • Good governance • Transparency and accountability • Being shown to make a difference • Being seen as independent How are we to achieve all of that? I would like to try answering that question in relation to governance after considering my next theme. I am going to describe a charity to you and ask how you would rate it in terms of its governance: • The board is small enough to reach decisions effectively and large enough to have a range of appropriate skills. • The board is well qualified. • The board meets six or seven times per year. • There are regular meetings of the risk committee and monthly meetings of the finance committee. • Detailed minutes are kept. • Trustees regularly visit the premises and see services for themselves. • The management includes a CEO, FD, Head of HR and an Operations Manager. • Overall, there are governance systems that are appropriate for the size and complexity of the organisation, with comprehensive policies and procedures. How many of you would say that was a fairly ideal description? How many of you would say that your charity was at least equal to that description? 199999/0127/001370910/Ver.01 6
  7. 7. That description is derived from the Kids Company evidence to the Public Administration and Constitutional Affairs Committee. I am a little nervous about commenting on this. The issues are evidently quite complex and anyone who comments without all the relevant facts runs the risk of simply contributing to the already voluminous gossip of the incogniscenti. But here goes. Apart from the above, what do we know? • For a start, they were jolly good at fundraising. • Second, we know that they overtraded. Alan Yentob said in his evidence to the PACAC: "We perhaps tried to look after too many children and we tried to do too much." And we are told that they failed to build adequate reserves. • Third, government funders lost confidence in what they were doing or in the value for money they provided. • Fourth, they went bust. Is it a scandal that a charity goes bust? It is not the first and it will not be the last. Why should we be surprised? No charity has a right to exist and no charity that relies on external funding can exist much beyond the point at which its funders cease to find it worth funding. Is it a scandal that it did not manage to build up reserves? What would those reserves really have achieved? Another 3 to 6 months? A more orderly wind down is probably all. But it's not scandal that I want to talk about. I want to talk about confidence. Certainly, the charity inspired confidence once. Camilla Batmangelidjh and Kids Co received plenty of awards and accolades over the years. What was that confidence based on? Surely, on something solid at least at the start. But the unedifying spectacle of the charity's unravelling suggests that latterly the confidence of funders and the confidence of the funded diverged, apparently over evidence of impact (one of the key qualities for trust and confidence). And I would think that a somewhat manipulative approach to fundraising and a tendency to hyperbole are not obvious pillars on which to build the confidence of civil servants. So, with both of these examples I have used, we are dealing with loss, or potential loss, of confidence and surely trustees must have a role in protecting and nurturing this vital asset of charities. What elements of good governance can we turn to? 199999/0127/001370910/Ver.01 7
  8. 8. Well, as the title of the talk says, let's put that in context. What is the function of trustees and how do they operate? I am thinking here of charities that have staff: • Nearly all of us are volunteers. • Many of us will have other jobs and more than one trusteeship • We meet perhaps four to six times per year and might sit on a committee that meets another four times per year. So, less than once per month we will have formal engagement with the charity. • Many of us may have been in post for three years or less. • Most of us will be chosen not for particular skills and experience but because we want to do some good. • Many of us will not have much time for training or to engage deeply in the day-to-day activities of the charity. That is the real context of trusteeship in the UK for those charities that have staff. And in that context what is asked of us? • That we set the tone, culture and values of the charity. • That we approve the strategy, budget and policies. • That we oversee the implementation of the strategy and hold our executive (who are capable of running rings around us) to account. • That we are, ultimately, responsible for everything the charity does. And that we can ourselves be held to account. Is that fair and reasonable? Is it reasonable to expect us to have enough time and knowledge to do all that and really be responsible for what goes on? No, of course it is not fair and reasonable. The best we can do is to take a ‘helicopter view’, try to get the right systems in place and to try to do our best. The courts understand that and give volunteer trustees a great deal of latitude. The Charity Commission appears also understand it. Most of the public do not. Most of the press do not. There is one answer to the these demands of the public and the press who look at the trustees of Kids Co and our fundraising charities and demand answers: professionalisation. To have entirely paid, 199999/0127/001370910/Ver.01 8
  9. 9. mostly executive boards and to run charities like for-profit business. But it's not an answer that the public will want. Most people, and the press particularly, expect charities to be run by volunteers. Are there other structural answers? If so, why haven't they worked in relation to fundraising and Kids Company? I don’t think the answers are structural. If we think it is just about structures, then we run the risk of learning so well from our mistakes that we can be pretty sure of repeating them perfectly next time. No, I think it is about the qualities that we as trustees should be bringing to the role and it is about learning to bring those qualities more effectively to the role. So what are the qualities that we should seek in ourselves as trustees? Not the skills and experience but the personal qualities. Well, I’m glad you asked me that question. It happens that I recently asked the same question of a group of governance experts and they came up immediately, off the tops of their heads, with a pretty good list: • Conscientiousness • Inquisitiveness • Courage • Judgement I like ‘courage’. Apt in the current circumstances, I think. Do you agree those qualities are important? Do you look for them? How? I think that is worth some further thought. The other vital point that this group made is that trustees need to be able to challenge effectively. That is actually very difficult, not something that necessarily comes naturally; it is learned. But for an effective charity trustee it needs to be learned quickly. Effective (which includes appropriate) challenge, sitting alongside the helicopter view is, I think, at the heart of good trusteeship. It is something on which probably most of us need training. Is there enough training for trustees and will they and their charities engage with it properly? We recognise that the role carries huge responsibilities and is vital to the success of our charities, but how much do we invest in it? Why don’t we invest as much in our trustee development as in our staff development? 199999/0127/001370910/Ver.01 9
  10. 10. Perhaps we need a new industry standard: Investors in Trustees. I would certainly like to see ‘effectiveness of challenge’ as a key component in trustee training. Here are the messages that I would like to finish on: • It has been well said that in times like these it is helpful to recall that there have always been times like these. • Most fundraising is good fundraising and some of it is excellent. • Incidents of egregious behaviour by a few commercial companies on behalf of charities are not representative of the sector’s fundraising engagement with the public, nor do they express the values and soul of the sector. • The sector does hold its values dear and largely expresses them in what it does. • Trust and confidence are our lifeblood. If we don’t express our values in all we do, we will erode the trust and confidence on which our charities and our sector rely for their good work to flourish. • The effect of loss of trust and confidence in Kids Company is a salutary lesson but Kids Company is not representative of the sector. In its heyday it was described in glowing reports as "unique" and "extraordinary". Why should anyone think that on its collapse it is any less unique and extraordinary? • Trustees have an important but difficult role in ensuring that trust and confidence is maintained. • The sector should be investing more in us to ensure we can fulfil our roles better. • Let’s not panic. These issues, which do not in fact point to a general malaise in the sector, have certainly given us reason to pause for thought. Let’s take time to reflect, learn the necessary lessons properly and implement effective rather than immediate change. • And in stopping to think, let's be mindful of the caution hidden away in Winnie the Pooh's question to Piglet: "Did you ever stop to think… and forget to start again?" Philip Kirkpatrick Bates Wells Braithwaite 199999/0127/001370910/Ver.01 10
  11. 11. 1 November 2015 199999/0127/001370910/Ver.01 11