Institute of Fundraising — Written evidence (CHA0119)

ABOUT US

The Institute of Fundraising is the professional membership body for UK fundraising. Our mission is to support fundraisers, through leadership, representation, standards-setting and education, and we champion and promote fundraising as a career choice. We have over 450 Organisational members who bring in more than £9 billion in income, and over 5,500 Individual members.

ENSURING THE SUSTAINABILITY OF THE CHARITY SECTOR

1.              The charity sector makes a huge contribution to society and the economy.

1.1.              Voluntary sector organisations make a huge contribution to the UK economy and wider society. They employ 821,000 people and attract 13.8 million regular volunteers.[1] This is worth an estimated £39 billion (a similar amount to the UK revenue of Tesco), and adds £12.4 billion in Gross Value Added to the UK economy each year.[2] As a result, charities have an enormous impact on the communities and beneficiaries they serve. For example, charities account for 60% of the cancer research spend in the UK, outweighing government funding, while charities also spend £1.3 billion on medical research, 42% of all medical research in the UK.[3] Research from CAF shows that 98% of households report to have used at least one charitable service at some point.[4] The contribution of the voluntary sector is understood and appreciated by the public - when asked, 66% of respondents believed that the charity sector “improves peoples” lives and is socially useful”.[5]

2.              Fundraising is the key to a stronger, more sustainable sector, that can contribute even more.

2.1.              The Institute of Fundraising’s vision is of a future where charity sector organisations have the leadership, skills, experience and resources to deliver their services and meet the needs of their beneficiaries. For this to be achieved, and the sector to be sustainable and successful, excellent fundraising is absolutely fundamental.

2.2.              The charity sector is founded on the philanthropy and generosity of people who freely give donations to causes they care about. Fundraising is the key that unlocks that individual’s generosity and passion, making the link to a charity that delivers the change in the world that they want to see. As Rob Wilson MP, the Minister for Civil Society, has said, “without fundraisers, charities as we know them would not exist”.[6] Through their work, fundraisers bring in over £19 billion per year for good causes.[7]

2.3.              Fundraising activities and events are also a positive and engaging way to bring people together, sharing in an organisation’s message, cause or values. This is clear from the high levels of giving in the UK – when asked, 67% had given to charity in the last year, while 42% had given in the last month.[8] The Charities Aid Foundation’s (CAF) World Giving Index 2015 found that the UK is now the most generous nation in Europe, and the sixth most generous country in the world, up from seventh in 2014. 75% of people had donated to charity in the previous year, one of the highest rates anywhere in the world. The international average was 31.5%.[9]

2.4.              An investment in fundraising skills and capacity is often the best strategic decision an organisation can make. Research consistently shows that, across the charity sector, for every £1 invested in fundraising, many times that return is then brought in through voluntary income. The IoF’s Organisational members have a return on investment (ROI) ratio of around 5:1 and in the case of International Development charities, for example, £1 of fundraising brought in nearly £6 of additional donations.[10] There is also a ‘spillover effect of fundraising’ which suggests that the efforts of one charity may increase contributions made to other charities with a similar cause or mission.[11]

2.5.              Charities want to be able to play a greater role, but they will only be able to do so if they have a sound and sustainable basis on which they can develop. The only thing that can deliver the scale of the resources needed is fundraising, which will lead to more giving, enhanced opportunities for volunteering and civil engagement, and the delivery of more charitable activities.

3.              Fundraising can only be successful, effective and sustainable when it is conducted in the best possible way.

3.1.              However, fundraising can only be successful, effective and sustainable when it is conducted in a way and manner that builds trust with supporters and results in positive relationships between a charity and its supporters to develop. The vast majority of people who give to charity do so regularly and throughout their lives. Good fundraising is founded on positive engagement and relationships with supporters, not on one off transactions. A strategic and long-term approach is essential to achieve this that puts the supporter at the heart of the activity.

3.2.              The events of summer 2015 demonstrated just how important this is. Fundraising was on the front pages, and in the public’s mind, following some cases of bad practice and a wider debate about fundraising techniques and regulation. Opinion polls and surveys showed an impact on the public’s feelings of trust towards charities. While the loyalty of donors has continued, this can and must not be taken for granted. The steps taken to improve the regulation of fundraising, strengthen the Code of Fundraising Practice, re-focus on the role of leadership and governance, are all welcome and needed to continue to drive forward further improvements in fundraising. We have seen the consequences where this goes wrong and see the commitment from charities to ensure it does not do so again.

3.3.              We - along with our members - share the Committee’s desire to ensure that this attention on recent bad practice should not undermine the good work done by specific organisations, and the charity sector as a whole. Nor should it stymie the necessary plans and initiatives that are needed for the sector to raise income in the future. If, in some specific cases, poor fundraising was the cause of a problem in public trust, the solution is not for the sector to just stop fundraising, but to improve practice and get high quality fundraising across every single charity – from the very biggest UK-wide and international charities, through to the small and local community groups.

3.4.              To achieve this ambition some organisations will need to embrace change, whether in leadership and mindset, investment and diversification, or in practice and activity. We recognise that there will always be a need to support and assist those most affected by change – most likely to be smaller charities with fewer resources and staff - helping them adapt to new practices, to be fully compliant with all regulatory requirements, and also to plan strategically for long-term growth. There is also a need for increased awareness of high standards of fundraising and reassurance of effective regulation of fundraising.

4.              Charities are operating in a challenging environment.

4.1.              The timing of this call for evidence is particularly appropriate given the pressures that the charity sector is facing; from trying to cope with rising levels of demand following the economic downturn and then through a period of austerity, to looking specifically at the top priorities for a new, reshuffled government, and the future uncertainty of Brexit. However, it is important to recognise that the diversity of the sector means that these pressures or challenges will impact upon charities differently - the varying sizes of organisations and sub-sectors will invariably have different pressure points or view external factors in their own context.

4.2.              The future direction of the economy leads to uncertainty, making it hard for charities to plan for the long-term with confidence. For example, the amount of money received through legacies could be impacted if there any significant changes in house prices, while decisions to make efficiency savings or relocate may lead to a drop in corporate charitable donations. In addition, charities in the UK receive an estimated £200 million from EU funds every year – while this only represents 0.5% of the sector’s income, it will leave a significant gap if it is not replaced. [12] As a result, the need for charities to fundraise may be greater if these existing funding opportunities from current sources are no longer available.

4.3.              The past several years have presented considerable financial challenges, particularly for small and medium-sized organisations, which tend to be impacted most from public spending cuts. A Financial Sustainability Review of the Voluntary Sector, carried out in 2015, showed that while the economy has grown since 2012, there will be a projected £4.6 billion annual shortfall in overall sector income by 2018/19.[13] The review also found that smaller charities specifically have not particularly benefited from any recent economic recovery, and have been the worst affected by government spending reductions. This is, for the most part, a consequence of local authorities bearing the brunt of major spending reductions at the beginning of 2010/2011, meaning that those organisations traditionally more reliant on grants and  local government funding saw bigger losses of income - in 2015, charities under £1 million had lost around 34-38% of their income from government sources.[14] Research also shows that the impact of this income loss has been uneven across geographic regions and sectors – small and medium-sized organisations in the North East, North West and West Midlands, for example, lost the highest proportion of overall income, and by sector, health, social services and law and advocacy were forced to reduce their spending the most.[15] These organisations need to diversify and grow, and we believe that an increase in financial support for smaller charities to start publicly fundraising would be hugely beneficial to the sector.

5.              Many charities lack the resources to meet a continued rise in demand for their services, and are having to reassess how they can be sustainable.

5.1.              Spending cuts over recent years have inevitably led to communities across the UK directly feeling the impact - as a result we have seen an increased number of people accessing services from charities for support.[16] In the 2016 instalment of our annual research - Managing in the New Normal - 65% of respondents said that they had experienced an increase in demand for their services.[17] One quarter of those said they did not have the resources to meet that rising demand.

5.2.              Charities are working hard to meet this demand, despite the challenging environment outlined above. However, unless these organisations can work sustainably they will not be able to continue to meet these needs in the future, and if they are less able to deliver services then more pressure will be put on public services and other organisations. The sustainability of one organisation can have a domino effect on others - the multiplier effects of increased challenges and demand across the sector need to be avoided.

5.3.              Charities have taken steps to adapt to this environment, and reassess how they can be sustainable. More charities intend to diversify their income over the next 12 months than last year – primarily through fundraising in new areas and increasing income from existing areas. While there is no one ‘silver bullet’ to address the challenges there is a clear strategic decision that is more likely than any other to deliver the long-term results needed: an investment in excellent fundraising. Continuing to nurture positive relationships with loyal supporters, while reaching new donors, diversifying fundraising activity, making the most of digital opportunities and innovating will all be vital for individual charities – and the sector as a whole – to succeed in meeting the demand for charity services now and in the future. However, many charities, most in need of financial support and resilience are often the least well equipped to be able to benefit from starting and expanding their public fundraising activity. We would like to see greater financial support to these charities to help them learn from best practice, and reach out to the public to support their cause.

6.              Longer term social changes require innovation, particularly in the digital arena.

6.1.              Against this political and economic backdrop, longer term social changes are bound to test and shift the basic assumptions on which the charity sector works.[18] The Commission on the Voluntary Sector and Ageing described the demographic change of an ageing population in the UK as a ‘seismic shift’ – by 2033, nearly a quarter of the UK population will be 65 or over.[19] On top of this, we live in a rapidly evolving world, where technological advances are changing the way we communicate, make payments and deliver services. Digital is now a part of everything, and that presents new and different challenges for charities.

6.2.              That said, technology - until now - has played a somewhat limited role in fundraising and the wider charity sector compared to other industries. The Lloyds Bank UK Business Digital Index measures the use of, and attitudes towards, digital technology among small businesses and charities. This year’s report (2015) found that the charity sector in particular is being left behind in the adoption of digital, and that 58% of charities are without basic digital skills compared to 23% of small and medium-sized enterprises (SMEs).[20] There is certainly more that can be done. The majority of organisations lack the resources to reap the full opportunities presented by changes in technology: they have small budgets and are without the required expertise and equipment.

6.3.              While it may be difficult for some charities, the opportunities of innovating and embracing new technology are apparent: there are new and different ways to communicate with both supporters and beneficiaries, whether that is providing information about access to services or making it easier for the public to connect with, and freely donate to, the causes they care about. It is clear there is real scope to support charities in developing their digital capabilities. Charities are also, naturally, more risk averse. There is also a lack of strategic approach from funders, investors, the tech sector, and Government.[21] A concentrated effort to support charities to innovate and embed new technology and digital activity is needed.

7.              How can the sector meet the challenges faced and continue to make a valued impact?

7.1.              The voluntary sector is remarkable in its flexibility and resilience. Organisations have adapted, innovations are found in service delivery and ways of working, and the dedication, commitment, and passion of staff and volunteers is extraordinary. However, doing ‘more for less’ can only be a short-term strategy to cope with immediate challenges, not a strategy for sustainable long term growth.

7.2.              There is a shared responsibility help create the environment that will enable and support the full range of the charity sector to succeed. Infrastructure bodies, including the Institute of Fundraising, have a key role to play and we will continue to support charities and fundraisers to reach high standards and deliver excellent fundraising activities.

7.3.              We believe the time is right to look at strategic interventions and a targeted programme of support which can help charities across the voluntary and community sector to do more. Specifically, an investment in fundraising skills and development is the most likely intervention to bring sustainability and long-term growth to the sector, supporting the whole sector but particularly targeted to those organisations most in need will build and embed changes that will enable charities to do more year on year. This can include:

-              More support for best practice and better regulation through:

o              Increasing awareness of high standards of fundraising to the public and reassurance of effective regulation of fundraising;

o              Promoting and funding additional support for trustees, especially smaller charities, to understand and act on their duties around fundraising;

o              Promoting and supporting training and resources for fundraisers and professional standards in the fundraising sector.

-              It made easier for the public to freely donate to the charities they support, and maximise the value of those gifts by:

o              Improving and expanding legacy giving by encouraging people to leave a charitable gift in their Will;

o              Improving the gift aid system, especially for smaller charities, by making sure that gift aid is able to apply to all forms of donations and reviewing corporate gift aid to ensure benefits to charities are maximised;

o              Helping charities to make the most of digital opportunities and technological development to reach new supporters and continue to nurture relationships with current ones.

-              An increase in financial support for smaller charities to start publicly fundraising

o              Increase financial support for smaller charities to access fundraising training as a means of strengthening and diversifying their revenues;

o              Set up a ‘how to fundraise hotline’ to support smaller charities with advice on how to start fundraising

5 September 2016