Submission by the Fundraising Institute of New Zealand (FINZ)
Below is the FINZ submission to the Fair Trading (Soliciting on Behalf of Charities) Amendment Bill for your information, we hope all FINZ members and their charities will put in supporting submissions.
We hope this bill will not proceed beyond the select committee stage, as it cuts across FINZ’s work in reviewing our codes of ethics and fundraising standards. These standards are being developed in partnership with the government.
The closing date for submissions is Friday 19th of March 2010. I look forward to your assistance.
Best wishes,
James Austin
CEO, FINZ
Submission by the Fundraising Institute of New Zealand (FINZ)
To the Commerce Select Committee
On the Fair Trading (Soliciting on Behalf of Charities) Amendment Bill
Introduction
1. This submission is from
James Austin
CEO, Fundraising Institute of New Zealand
PO Box 11203
Manners Street
Wellington 6142
Phone: 04 499 6223
Email: james@finz.org.nz
2. I wish to appear before the committee to speak to our submission.
3. The Fundraising Institute of New Zealand (FINZ) is the professional body for those employed in or involved with fundraising, sponsorship and events in the not-for-profit sector. Our aim is to promote and uphold professional and ethical fundraising and encourage the development of philanthropy in New Zealand. FINZ currently has over 400 members and is a growing organisation.
Summary
1. The Fundraising Institute of New Zealand welcomes the opportunity to make a submission on the Fair Trading (Soliciting on Behalf of Charities) Amendment Bill (the ‘Bill’).
2. The Fundraising Institute of New Zealand does not support the Bill and recommends that it does not proceed.
3. While FINZ agrees with the Bill’s aim to provide increased transparency and public accountability for professional third party collectors, we believe that this Bill is neither necessary to do so, nor is it likely to be effective.
4. FINZ is strongly of the opinion that the best way to increase transparency and public accountability in the charitable sector is self-regulation.
a. As the body representing fundraisers, FINZ is best placed to develop, promote and enforce good practice and professional standards in relation to fundraising.
b. All members of FINZ are required, as a condition of membership, to conform to a Code of Ethics and a Code of Conduct in relation to their work. These strict Codes ensure that our members (individuals and organisations) raise money from the public only in a manner that is ethical and honest.
c. FINZ is currently undertaking a review of these Codes. This is part of a larger programme of work in which we are developing a series of Standards of Practice for fundraising in New Zealand. These will be based on the Principles and Standards of Fundraising Practice: Ethical and best practice guideline for professional fundraisers of the Fundraising Institute of Australia. This work is being undertaken with funding from the Office of the Community and Voluntary Sector (OCVS). Once complete our memberships will be bound by them and FINZ will be actively promoting them to all charities in New Zealand.
d. They will include standards specifically for telemarketing and face-to-face fundraising and these will contain provisions relating to third party fundraising and outsourcing.
5. FINZ further believes that the Bill is unnecessary because we disagree with the Bill’s assessment that there is “potential for large scale rip-offs of unsuspecting consumers”. We think this is an uninformed overstatement.
a. While there is definitely room for improvement, FINZ contends that the spate of recent negative publicity over fundraising costs that prompted this Bill has actually involved only a handful of high profile cases. Most of which were news worthy because they were exceptional.
b. Some of these stories, because they drew directly from the first annual returns made to the Charities Commission, are actually a sign that transparency and public accountability in the charitable sector is already improving - and again were exceptional. About half of 24,000 registered charities have filed returns, yet only a few have raised questions.
c. FINZ is of the opinion that the majority of charities in New Zealand work hard to ensure that as much money as possible goes to their beneficiaries and that this regime will impose unnecessary costs on a whole sector where only a few are deficient.
6. The Government is planning a review of the Charities Act 2005 and the Charities Commission in 2010. While FINZ prefers self regulation, we believe that if new regulations governing disclosure and reporting by charities are deemed necessary, they should addressed during this review rather than an ad-hoc Amendment to the Fair Trading Act.
Comments
FINZ is opposed to the introduction of any mandatory disclosure regime, however it has particular concerns about the one proposed by the Bill. The following comments outline what we see as the main problems with the Bill.
1. The Bill applies only to a few methods of fundraising, particularly telemarketing and face-to-face fundraising. FINZ is opposed to the narrow focus of the Bill on these methods.
a. Telemarketing and face-to-face fundraising are legitimate and effective methods of raising funds, and particularly for acquiring new donors. Although expensive, done properly they can be an important part of a charity’s fundraising strategy. The Bill is likely to close off this option for a number of charities.
The Bill acknowledges that as a consequence of the compliance costs imposed by the Bill ‘some telemarketers may not be prepared to continue to do this work for charities’.
FINZ does not believe that the benefits proposed by the Bill out weigh this cost. In an environment where charities are being called upon to provide more and more services at the same time as traditional sources of funding such as the Government and the Community and Gaming Trusts are reducing their contributions, charities need more, not fewer options for fundraising.
b. The focus on these methods also overlooks the fact that much of the recent negative publicity about the percentage of money actually going to charities has had nothing to do with either telemarketing or face-to-face fundraising. Much has related to events fundraising and/or very high administrative costs. Neither of which are addressed by this Bill.
FINZ feels that a clear sector-wide solution, one that takes in all methods of fundraising, is preferable.
2. The Bill only applies to professional third party fundraisers. FINZ is opposed to the narrow focus of the Bill in this regard.
a. Charities generally make the decision to employ the services of professional third party collector because it is more efficient and cost-effective than doing it in-house, or is the only way they can run such a programme.
As well as potentially denying charities the option of using telemarketing or face to face fundraising (by forcing providers out of the sector), this Bill may have the perverse effect of encouraging charities to run internal programmes that are more costly than they need be.
b. FINZ also questions why the outsourcing of professional services by charities is considered undesirable, at least when it comes to telemarketing and face-to-face fundraising. FINZ suspects that the Bill has confused the issue of contracting third parties to undertake certain aspects of an organisation’s fundraising, which FINZ considers an acceptable practice, with paying those third parties on a commission or percentage basis, which FINZ opposes.
c. A key feature of the FINZ Code of Ethics (one that will also feature in our new Standards) prohibits members taking part in fundraising activity where remuneration is based in part or in whole on a percentage of the financial results of the solicitation; they are also prohibited from engaging and remunerating any third party to solicit financial gifts on such a basis; and further, members are required to use their best endeavours to dissuade any employing organisation from remunerating fundraising staff or third party individuals or organisations on such a basis.
It is FINZ’s view that the sector must work to eliminate the practice of commission-based fundraising altogether. All this Bill would do is make some organisations, in some situations and on some occasions, disclose that they do so. Again FINZ feels that a clear sector-wide solution, one that takes in all methods of fundraising, is preferable.
3. FINZ is opposed to the Bill’s attempt to legislate an ‘appropriate’ level of costs for fundraising. Quite apart from the belief that such a level should be set by sector standards and guidelines, we believe that setting certain numbers ‘in stone’ is inadvisable.
a. It is inadvisable because the costs of fundraising differ. It can depend on your cause, the profile of your charity and it will depend on the method of fundraising you use. There is no single number that is correct of all charities.
b. Reducing what is appropriate to a single number or a percentage, also fails to appreciate that fundraising is not just about getting cash, it is about establishing a relationship with a donor. A donor may take a bit of convincing to make their first small donation, but could then go on to give again and again. Their true ‘cost’ to an organisation can be very hard to determine.
c. FINZ also has concerns about the particular numbers set out 26B (2), particularly two levels of disclosure, 20-50% must disclose that some is being retained; over 50% must give a percentage, which will only cause confusion among the public, and the 20% threshold.
4. There is a mandatory disclosure regime for professional fundraisers in England and Wales (Part 2 of the 1992 Act as amended by the Charities Act 2006). This requires all professional fundraisers (not just telemarketers and face to face fundraisers) to make solicitation statements.
a. The solicitation statement must indicate:
• how their remuneration in connection with the appeal is to be calculated; and
• the “notifiable amount” of that remuneration.
b. Note that unlike the Bill
• There is no thresholds - everyone must disclose
• There are no percentages - actual numbers (either known amounts or best estimates) and explanations of how these numbers are calculated must be provided.
5. FINZ contends that this is regime, which was developed in consultation with the sector rather than imposed and is based on a better understanding of how fundraising actually works, provides the public with more meaningful information than one outlined by the Bill would.
However even this better thought out scheme, which comes with extensive guidelines and examples, has been described as too complicated and has caused uncertainty and considerable cost to the sector. Yet anecdotal evidence from the UK, suggests that since it became mandatory in 2008 it has had little or no impact on the public.
Recommendations
The Fundraising Institute of New Zealand recommends that this Bill does not proceed.
It recommends that Government continues to support sector self-regulation, particularly to the Fundraising Institute of New Zealand as it develops its Fundraising Standards.