(25 June 2010)

Thank-you Mark,

I’m delighted to be here again and to have been granted such a broad remit for my talk to you today. 

Being invited to look back and look forward has provided a rare and welcome opportunity for reflection. 

Like I’m sure most of you, I don’t get many chances to sit back and contemplate.

But in recent weeks, I have found myself, sometimes unconsciously, taking stock.

Not only in preparation for coming here; and not only because, as you know, I’ll be moving on from the Charity Commission later this year.

But also because I believe the sector is living through a period of genuine reform and upheaval. As well, of course, of opportunity.

Charities are not alone.  You can’t have helped but notice that times are tough for the public and private sectors, too.

But I think charities are faced with particular challenges and I will get on to them in a moment.

First though, I’d like to take you on a little journey in time, back about twenty-five years to when I was a young accountant.

If you can’t remember the mid 80s, they shouldn’t be too difficult to imagine:

The 80s were marked by government spending cuts; by protracted conflict in Afghanistan, by youths in denim jackets and oversized shoulder pads …

It all sounds quite familiar, doesn’t it? 

But not everything was the same.

In 1986, my decision to leave a job in the private sector to go and work for a charity was met with almost universal incomprehension.

Recruitment consultants and colleagues confronted me with questions such as: why are you sacrificing your career? Why are you wasting your potential on a charity?

I doubt any young professional today – whether they’re trained in accountancy, the law, or PR – would face that kind of response.

Today, opting for a career in the sector isn’t considered a worthy sacrifice. It’s not even just a prudent choice.

Nowadays, a career in the charity sector is considered highly desirable and entry to the sector is competitive.

It’s now recognised that the sector presents managers with a set of challenges that’s at least as exciting as anything the private and public sectors have to offer.

There’s the high profile of charities – many of which are global brands – there’s the challenge of maintaining relationships with donors, as well as beneficiaries, volunteers, government – and, often, customers.

And then there’s the extra challenge of working with a social agenda, with public benefit – which I will get on to later.

I think that change of attitude towards working in the sector is reflected in the professionalism evident in many charities today.

I’d like, now, to bring you back to the 21st century, and to talk about how the sector and the Commission have evolved since we last met, when I came to speak at your conference in 2005.

First to the Commission: what’s changed over the past five years? 
 
From the moment I joined, I realised the Commission had already begun changing – people who went before me, notably Richard Fries and John Stoker, had kicked off a vital process of modernisation.

But there was still plenty to be done.

At that time, the Commission did a good job; and it looked back on a proud and long history.

But it didn’t quite embody the ethos, or the working practises, of a modern regulator.

I knew that had to change; I wanted to bring the Commission up to the standard that the sector deserved.

Where to start?

Well, there were some useful external pointers guiding the journey of reform the Commission’s been on over the past five or six years.

We had some regulatory maps, if you like.

These included the Hampton Review of Regulation, which was published in 2005 and which set out key principles applicable to all regulators in all sectors.

One of the most important principles was proportionality.

The review identified that regulators should focus their efforts and resources on high risk cases. 

And that they should reduce the burden of regulation for the majority of organisations which posed little risk.

The Charity Commission took that message to heart. 

I won’t go into too much detail but I would like to give an example that demonstrates what proportionality has meant for us:

As you know, when we receive complaints, or where we become aware of concerns, the Commission can carry out formal investigations into charities.

What happens initially is that we make an assessment to decide how serious the allegations or concerns are, and what the evidence is.

If they’re serious and there’s evidence for that, we carry out a Statutory Inquiry.

These are pretty heavy legal affairs – and often they result in the Commission applying serious regulatory muscle – such as seizing a charity’s funds or removing its trustees.

Here are some figures to help you see what’s changed at the Commission over the past few years:

Back the early 2000s, we were carrying out around 200 inquiries every year.

By last year, we’d reduced that number to around 15.

That’s quite a difference isn’t it? And it represents a huge change in organisational culture. 

I won’t pretend it was easy to achieve.

But when we started taking proportionality as our watchword, we realised that not all the cases we were dealing with required a full-blown inquiry.

This doesn’t mean we’ve started ignoring 185 cases a year. We’ve just changed the way we deal with them.

The bulk of the cases in which charities show signs of concern are now dealt with on a more informal basis, by engaging with charities and guiding them back on track.

And this is where another of the Hampton Principles comes in.

It’s the principle that regulators should be a source of advice. It’s no good just cracking the whip where things go wrong, you have to be able to paint a picture of what right looks like.

And that’s why I’ve been keen to make sure we enable as well as regulate. We have overhauled the services we provide to all charities.

For instance, we set up Charity Commission Direct – a singe contact point for all incoming calls, emails and post.

This has not just made it easier for charities to contact us; it’s about more than that.

Charity Commission Direct has been one of the most important products of a transformation organisational culture at the Commission.

We now think of charities as our customers, as the people we’re here to help.

Yes – a tiny minority of charities experience problems. And yes, in an even smaller percentage of cases, that’s linked to deliberate misconduct on the part of trustees.

But this does not mean that, as we, as the regulator, approach all charities with an attitude of distrust.

I think, to an extent, we were guilty of a slightly high-handed approach in the past.

But that’s now in the past.

Our change of attitude has also seen us invest in providing tailored advice to charities. Especially to smaller charities like the ones you work with.

A recent example is the Big Board Talk, which sets out the key questions we think all boards should be asking themselves during the economic downturn.

Many of you, I hope, will be familiar with it.

Looking back, then, I am very pleased with the progress the Commission has made.

We’ve put the right systems and processes in place. And what’s more important: we’ve got the regulatory attitude right:

The Commission is now clearer that we can’t regulate effectively in isolation from the public interest or from the context in which charities are working.

But we’re a confident regulator, unafraid to intervene when we see things going wrong.

That’s not just my opinion. The Commission draws real confidence from the feedback we receive from the people we have dealings with – from our stakeholders.

You’re all telling us that we’re moving in the right direction, that we’ve got the right idea.

So much for the Commission. Now to charities themselves.
 
I mentioned earlier that I felt the sector is facing contrary times. Let me explain. 

Unless you’ve been living in media seclusion for the past few months, you’ll be aware that, in political terms, this sector has arrived.

All the main parties now recognise that the civil ties between us – those that form beyond state structures and the market – are vital to social cohesion.

And we have a government that has placed civic involvement, the concept of ‘the big society’ at the centre of their programme for reform.

The government has pledged to devolve power to communities, to incentivise charitable giving, to promote volunteering.

This reflects the confidence the British people have in charities.

The Commission will soon be publish a new Public Trust and Confidence survey. As the name suggests, it measures people’s faith in the benefit and probity of charities.

The survey shows that public trust in charities is high, and that it’s holding up.

And in May, YouGov carried out a poll which shows that three out of five people in the UK expect charities to play a more important role in coming years.

That’s the good news.

The bad news is: there isn’t any money left.  

I’m not here to spread gloom and doom, but as experts in the field, you’ll appreciate some financial home truths.

Government cuts are coming quick, and we know they are going to go deep.

The Prime Minister himself has said that they will ‘affect our whole way of life’.

The Commission’s been warning for a while that the way of life for charities will have to change too.

The sector is beginning to recognise this.
 
As many of you know, the Commission surveys charities regularly to find out how the downturn is affecting their organisations.

We publish the results in our Economic Survey of Charities.

In September 2008, just under forty percent of charities told us they were affected by what was then the ‘credit crunch’.

By the time we carried out the fourth survey in March this year that number had risen to nearly sixty percent.

Recent research by NCVO is equally worrying.

Their Civil Society Almanac, published in April, reveals that twenty-three thousand voluntary organisations rely on local government funding for more than half their income.

Many of the charities that depend on public grants are also seeing greater than ever demands on their services – they’re facing a double-squeeze.

How can charities weather the storm? What advice do I have for getting through the next five years?

One place to start is collaboration.

Coalitions are proving popular among political parties nowadays.

And I believe that charities, too, should make more of an effort to work together, to collaborate, to consolidate their impact.

Charities should be more proactive in recognising where they have common objects, common beneficiaries and common goals.

And where they’ve made that recognition – working together to meet shared aims.

In November last year, the Commission published guidance for charities on collaborative working.

It sets out how charities can work together to improve outcomes and cut costs. The guidance stresses that collaboration doesn’t have to mean merger.

Often it can be about working together on specific projects, sharing back office functions, launching joint-fundraising campaigns.

So that’s my first prediction stroke recommendation: more charities are going to look for friends and partners in the sector.

And here’s another prediction:

Charities will need to improve their systems of evaluation; they’ll need to invest in demonstrating why they provide the best outcomes.

Commissioners certainly won’t be taking their word for it.

We know this can be especially hard for smaller charities. For many, investing in evaluation at times like this may seem imprudent.

But if you’re competing to provide services, you really can’t afford not to evaluate your outcomes. 

Now to prediction number three:

Technology will carry us through.

Ok, perhaps that’s an exaggeration. But I believe that technology offers us opportunities to improve efficiency significantly.

I’ll use the Commission an example here -   

We haven’t been immune from spending cuts. By March of next year, we’ll have lost 178 members of staff – a 30 percent reduction in six years.

We’ve been keen to ensure these cuts don’t lessen the quality of service we provide.

So we’ve focused on making more of our core functions available online.

• You can now register online.
• All our guidance is available online.
• And we’re about to launch a new section of our website dedicated to the needs of the smallest charities.

I didn’t come here to boast, but I’m proud that, by investing in technology, we’ve managed to improve our services despite the cuts in funding.

I think we’ve managed that partly because we’ve seen moving online as more than just a cost-cutting exercise.

It’s been a mission of conviction for me.

Social networking, the 24-hour news agenda, instant access to information – they’ve changed the power-balance between providers and users of services.

I think that’s a good thing, I believe the digital age requires us to be more open, more democratic, and more accountable to our customers and to the public.

I urge you, and the charities you work with, to think digital too.

To think about the ways you can cut costs and improve your services through technology.

So I’ve made some predictions as to what I think will change over coming years.

But I also want to stress that there are some things that shouldn’t change in the sector as we look ahead to the next five, the next ten years

Some things I think we have to hold on to.

Public benefit’s the big one for me. In fact it’s the number one.

Quite simply, it means that a charity’s purpose, the reason for its existence, must bring clear benefit, and must be accessible to the public. Charities aren’t exclusive clubs.

This is fundamental. It encapsulates what makes charities distinctive; what makes the sector unique.

And it’s the reason why this country takes the idea of charity so seriously. It’s why the concept is so precious to us.

And if we blur the boundaries we risk losing the public trust I spoke about earlier.

And while many charities rely, at least in part, on public grants, far more depend on the generosity of the public.

That’s especially the case for many of smaller charities.

So I would urge every single trustee on every board of every charity to ask themselves three simple questions:

• Who are we? 
• Who are we trying to help? 
• And how does that benefit the public?

Answering those questions can be a vital tool in motivating people and prioritising resources.

What else do I think the sector should hold on to over the next decade?

Supporting and encouraging trustees and volunteers is absolutely vital.

There are 800,000 trustees in England and Wales and last year, over 70 per cent of adults in England volunteered at least once a month.

These are figures we can be proud of.

And the contribution trustees and volunteers make is going to become especially vital in light of the cuts I mentioned earlier.

That’s especially true for the smaller charities, and the very smallest, many of which rely on volunteers.

I’d like to reassure you that, for the Charity Commission, these charities remain priority.

One way in which we look after them is by trying to keep bureaucracy to a minimum for them. 

As you know, we’ve scaled back reporting requirements for smaller charities:

Now, only charities with incomes over £25,000 have to send us their Trustees’ Annual Report and their accounts.

And the threshold for charities able to prepare simpler receipts and payments accounts has also increased – now charities with incomes of up to £250,000 can opt for that less cumbersome approach.

Of course, the Commission can do only so much.

The rest will be up to those, like you, working to further the causes you espouse.

You will need to be even better at persuading people to share their time and part with their money.

And while the coming years will be tough, I am convinced that they will also help the sector become leaner, keener and more flexible.

And as financial advisers to charities, you’ll be at the forefront of that.

You carry particular responsibility for helping charities weather the coming storms, helping them tighten their belts where they can, and prioritising their spending on the things that really matter.

And I hope my career to date demonstrates that accountants and financial advisers can add wider value than that –

You can and should be at the heart of the charities you work with, asking the big questions I mentioned earlier – the ‘who are we’ questions.

Because the answers you provide will be informed by a logical, grounded, reasoned approach to solving problems –

As well as by your commitment to promoting and protecting charities –

Something I know we all have in common. 

Thank-you

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