How are charities responding to the new fundraising environment? Charity Finance gathered some of the people who are tasked with meeting this challenge, and Ian Allsop took notes.

Fundraising has taken a pasting over the last couple of years. Countless negative press stories – not all unfair or inaccurate – have led, via the Etherington Review, to a new regulatory framework. Most notably, the Fundraising Regulator has been established to restore public trust.

As well as setting and promoting codes of practice, and investigating and adjudicating on public complaints, the Regulator will operate the Fundraising Preference Service to enable individuals to manage their contact with charities. This comes after concerns that individuals were being swamped with requests for donations. Additionally, new European regulations around data protection could lead to charities having to adopt an “opt-in” approach to managing donor information. It has all been controversial, and blaming large charities or weak governance does not change the fact that charities face the reality of raising funds in a new environment.

Esther Jackson, group marketing and fundraising director at Age UK, has been at the organisation since its merger and identifies a changing landscape, not just over the last couple of years, but since 2009. “The public’s perception of charities and how they engage with them has changed significantly, with a huge variety now in the way funds are raised and increasing sophistication in techniques.”

Mark Astarita, director of fundraising, has been at the British Red Cross for 13 years, and as someone who “lives fundraising night and day”, has been in the thick of recent developments. “It is about coming to terms with a new normal, moving on and adjusting.”

Rohan Hewavisenti, group director of resources at RNIB, says that while his charity refused to stump up the £15,000 set-up costs for the new regulator as it thought this was a poor use of donor funds, RNIB will be paying the ongoing subscription fee.

Mark Flannagan, chief executive at Beating Bowel Cancer, says that as his charity has an annual income of around £2m, he is coming from the perspective of small and medium-sized charities. “Like it or not, the attention has been on the big players, some of whom have acted like corporates and defended themselves but not explained or apologised. It’s not just a fundraising problem but a charity issue. The whole sector and trustees have to take responsibility and deal with rather than deny it. But there are still some naysayers out there.”

Anne-Marie Piper, partner in Farrer’s charity team, has a long record of involvement with fundraising law and is struck by how little has been learnt over the years. “The same scenarios keep repeating themselves in a different guise.” She thinks part of the problem is communication. “I use the ‘how would I explain this to my sister’ rule when considering how to make an argument. Charities can get sucked into their sector viewpoint, but fundraising needs to be seen from a general-public point of view. And the public has no context for the current problems.”

What is clear is that for many reasons, charities face some difficult dilemmas and new ways of working. So what are the financial implications? And what knock-on effects will there be?

Eye-watering costs

There have been some worrying predictions over the cost of the new regime. Astarita believes it will cost the British Red Cross at least £20m over five years, for various reasons including the end of cold mail and cold calling, and new consent rules. “Our individual giving is down by between a third and half. This was our only source of growth other than legacies. To soften the blow, we are changing the way we build reserves, and moving them to a higher level.”

He thinks that while the big charities will ultimately survive by innovating, it is those in the middle that could be destroyed. He estimates a total cost to the sector of £1bn.

However, this is challenged by Flannagan. “Predictions of doom and gloom can be overstated. We have to change the narrative or else we’re going to depress those working in fundraising, and it will become a self-fulfilling prophecy. Yes, a small number of organisations will lose millions, which is unfortunate, but we can’t let that dictate legislation and have the tail wagging the dog.”

Jackson concurs: “If we continue without regulation, we risk destroying public trust and so will see a decline in income anyway. We need to reassure the public to underpin the foundations of fundraising.” Flannagan continues: “The numbers are one thing, but it is about how we present charity. What would happen if we weren’t here?

No one else would provide the information charities do on bowel cancer, for example, so lives would be more difficult. Why do we exist? The case for support needs to be made. We need to hit the refresh button. It will be tough but vital.”

Hewavisenti argues that charities should be asking themselves why they are fundraising, citing the example of funding care homes. “These should be self-sustaining, financed by contracts at a commercial rate, so we shouldn’t need to fundraise for those.”

Flannagan points out that fundraising ethics aren’t an entirely new concern. In 1880, The Times remarked that “when a name has once been printed on a subscription list, its owner becomes a marked man”. He states: “You cannot deny there is deep public dissatisfaction. I don’t like being asked for money the way I have been.

If you speak to the public, people have found themselves saturated “If you speak to the public, people have found themselves saturated. Yes, you can request to be taken off lists, but it is difficult to deal with, especially if you are old and vulnerable.”

Piper muses that it is sad when people have to proactively act to stop fundraisers contacting them, but Astarita argues that large charities have done a good job of being responsive and there has been a “mythology around poor customer service”. He does admit, however, that his biggest regret from his time as chair of the Institute of Fundraising is that it didn’t end the sharing of donor data far earlier. “I wanted to but didn’t push it as there was a fear of the effect on medium-sized charities which really depended on it for growth.”

Law and regulation

One of the key debates has been about how fundraising is legislated and regulated. Piper argues that fundraising is hard to draft good law for. “The 2006 Act strengthened the regime around fundraising, but there was no Parliamentary debate. The provisions were not as strong as they might have been.

“There are lots of cries for statutory regulation, but statute law is inflexible and hard to change. In contrast, fundraisers are always innovating, making it hard for the law to keep up.

“Meanwhile, there is a huge distrust of self-regulation. We need a hybrid of external and internal focus to create trust and understanding. The Fundraising Regulator could be the body that does that.”

Astarita says that on balance he would prefer statutory legislation, to create a level playing field. “It’s an important space, not owned by charities per se but society as a whole. I have no fear about fundraising being additionally regulated.”

Trustee engagement

The panellists then thought about whether the problems of the last two years had led to a change in the attitudes of trustees towards fundraising. Jackson suggests that they can’t have failed to recognise they need to ask more questions of their executive team, although Piper argues that some still have their heads in the sand. “Fundraising is not always debated at board level.”

Astarita believes most trustees are taking more interest. “For example, we have set up an ethics and fundraising assurance committee. It is a steep learning curve, but they can hold us to account. It involves a lot of documentation and procedures.

“However,” he adds, “while we can add that layer of quality assurance, not all can afford it.”

He also finds it unsavoury, as a trustee himself, to see the “easy charges made by Parliament and select committees that trustees were asleep on the job”, when realistically they delegate authority to management. “We ask a lot of trustees, and there is a danger that such attitudes will put people off.” While not his instinctive preference, he wonders whether boards with a mix of executive and non-executive are now the best way forward.

Hewavisenti agrees that it is a challenge for trustees to know the details of everything. “It is usually only post-event that people say how it should have been done. Trustees are reliant on the executive to do their jobs.”

While a fan of unitary boards, Piper disagrees that they are the only way to deal with the issue or that there is too much detail for the trustees to be able to oversee fundraising. “Trustees need to set out the rules they expect their fundraisers (both internal and external) to follow and to monitor their application.”

Flannagan adds that ultimately the CEO has to take responsibility to tie it all together. “The buck stops with them. It’s not good enough to blame the fundraising director. The exec/ non-exec board argument is a red herring. SMT can attend board meetings if they want.”

He also urges the sector to stop modelling CEOs as characters and personalities. “There are lots of unsung CEOs not wanting to be heroes, who show they care by running their organisation well. Yet we tend to celebrate colourful characters with passion rather than competence.”

Jackson, who is also a trustee of a local Age UK, says that ultimately trustees need to understand their charity’s fundraising better. “They need to see fundraising as integral to the services provided, not as a separate and independent process.”

Filling the gap

As Astarita states, charities can put in place the improvements suggested, but money raised will still go down. However, Jackson emphasises that while this may be the case in the short-term, it will fix the long-term. “It will set foundations for a brighter future. Is efficiency what we want in fundraising? Isn’t this what drove the use of external agencies in the first place? Shouldn’t we be setting better standards? The end cannot justify the means.”

Astarita says that boards need to think of present and future beneficiaries. “Their voice got lost during the recent debates as we were thinking more about the donors and the charities. I am not as worried about income dropping as I am that with less asking there will be less opportunity for engagement, which can lead people to be more generous with not only money but time.”

Piper suggests that social enterprise and trading might increase as an alternative to the traditional methods of fundraising. However, Flannagan argues that not all charities can monetise their services. “There is no silver bullet.”

Overall, Astarita is optimistic.

“There will be greater collaboration and richer conversations.” If so, then having a conversation about these vital fundraising issues for the sector, such as that which our panellists took part in, is a good start.

With thanks to Farrer & Co for its support with this feature

Ian Allsop is a freelance editor and journalist, and regular contributor to Charity Finance