NEWS: Major review of global fundraising self-regulation published

  • Rethink systems of accountability to be more accountable to beneficiaries
  • Adhere to the five principles of good regulation
  • Explore how models of regulating a common pool resource could be more widely applied beyond just face-to-face fundraising.

Organisations involved in the self-regulation of fundraising ought to “rethink” what kinds of accountability they owe their stakeholders to become more accountable to charity beneficiaries, a new report on global self-regulation of fundraising from the European Center for Not-for-profit Law has recommended.

The report – co-authored by Rogare’s director Ian MacQuillin (with Adrian Sargeant and Harriet Day of the Institute of Sustainable Philanthropy) – considers academic models of accountability in non-profit self-regulation.

It finds many of these are based on ‘Principal-Agent’ theory, in which the regulatory body acts as the ‘agent’ of the ‘principal’ to ensure the principal’s intentions are adhered to. In the case of fundraising self-regulation, the principal is the donor.

As such, many components of self-regulatory regimes will set standards that protect (what they perceive as) the interests of donors, such as limiting the amount of a donation that can be put towards overhead costs.

Self-regulation is often good at ‘upward’ accountability to donors and governments, the stakeholders who have the most power to affect the self-regulatory regime. But as beneficiaries lack similar power to make demands of NGOs, there is often a poor level of ‘downward’ accountability to beneficiaries.

The report cites on piece of scholarship that describes three levels of accountability: moral, legal and prudential (can the stakeholder impost high costs). The ECNL report concludes:

“The view of many scholars is that beneficiaries are owed a high degree of moral accountability, and that it is their interests that should take precedence.”

And the report recommends: 

“We recommend that all involved in fundraising regulation should review their accountability processes, but more than this, rethink what kinds of accountability they owe their various stakeholders, based on the theory and scholarship we have described in this report. We particularly recommend devising a model for beneficiary accountability in fundraising self-regulation.”

Rogare’s director Ian MacQuillin – who was lead author on the ECNL report – says:

“Self-regulation is not just a matter of a professional body writing a code of practice. These days, the government is never far from the mix and is often a driving force in the background. We now have systems of co-regulation where all sorts of actors – such as ratings agencies and information services – are part of the regulatory regime.

“But those actors are often most focused on protecting donors’ interest. We see this so often with the arbitrary upper limit on admin costs that are – or have been – part of many countries’ standards.

“And while there may be many ‘prudential’ reasons why self-regulatory bodies think their primary accountability is upwards to donors and the public, there is plenty of scholarship that argues for a downward moral accountability to beneficiaries, to ensure they are not harmed by unnecessarily restrictive regulation.”

The report also recommends considering how the PFRA-model of self-regulating a so-called ‘common pool resource’, in the context of face-to-face fundraising on the street and door, could be adapted and applied to other methods of fundraising.

The PFRA model – in the UK, New Zealand and Australia – has drawn on established principles of self-regulating to avoid a ‘tragedy of the commons’ situation, but has generally been considered confusing and marginal to mainstream regulation of fundraising:

“Further work would be helpful to establish whether the PFRA model might have wider applications. Far from being a confusing add-on for a marginal form of fundraising, self-regulation of F2F has been the engine room for innovation (such as proactive compliance, controlling the volume of fundraising) in fundraising self-regulation in many countries. Yet both scholarship and practice have so far failed to recognise this.”

And a third recommendation is that all self-regulation of fundraising should comply with the five principles of good regulation as set out by the UK Government’s Better Regulation Task Force:

Proportionality – regulators should intervene only when necessary. Remedies should be appropriate to the risk posed, and costs identified and minimised

Accountability – regulators should be able to justify decisions and be subject to public scrutiny

Consistency – government rules and standards must be joined up and implemented fairly

Transparency – regulators should be open, and keep regulations simple and user-friendly

Targeted – regulation should be focused on type problem and minimise side effects

The report argues that many self-regulatory initiatives would fail some of these tests. 

The ECNL report – Fundraising Self-Regulation: An Analysis and Review – can be downloaded from here.

Or direct download here.

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