ECNL publishes review of global fundraising self-regulation

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

The ECNL report on global self-regulation of fundraising is co-authored by Ian MacQuillin, director of fundraising think tank Rogare, Professor Adrian Sargeant and Harriet Day from the Philanthropy Centre. It considers academic models of accountability in non-profit self-regulation.

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

However, while this means self-regulation is often good at accountability to donors and governments: the stakeholders with the most power to affect the self-regulatory regime, it means that because beneficiaries lack similar power to make demands of NGOs, there is often a poor level of accountability to them.

The report concludes that beneficiaries are owed a high degree of moral accountability, and that it is their interests that should take precedence.

It states:

“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.”

Among its other recommendations, the report also suggests considering how the PFRA-model of self-regulating – a so-called ‘common pool resource’ in the context of face-to-face fundraising – could be adapted and applied to other methods of fundraising, and 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.

These are:

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

Lead author on the report, Rogare director Ian MacQuillin said:

“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 mix.

“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 ECNL report – Fundraising Self-Regulation: An Analysis and Review – can be downloaded from: http://ecnl.org/mapping-trends-and-principles-of-self-regulation-regimes-on-fundraising/