It’s no secret that charities are subject to a wide range of rules and regulations. It’s vital to understand these, so that your charity operates within the law. One of the most important sets of rules is the Code of Fundraising Practice.
Of course, every charity and nonprofit raises funds in one way or another. After all, without funding, it would be impossible to keep the lights on, let alone deliver effective services.
However, charities are required to follow certain rules when it comes to securing funding. This is for the benefit of charities and donors alike. To better understand these rules, we’re going to cover everything you need to know about the Fundraising Code of Practice.
Let’s start with the basics.
What is the Fundraising Code of Practice?
Maintained by the UK’s Fundraising Regulator, the Fundraising Code of Practice is a set of rules which determine how funds should be raised for charitable purposes. It applies to:
Charitable organisations,
Third parties conducting fundraising on behalf of charities.
Essentially, the Code regulates how charities should secure funding.
It is based on five principles. These are:
Legality - All fundraising activities should be legal,
Openness - Fundraisers should be open with the public about their processes and activities,
Honesty - Fundraisers should not mislead the public,
Respectful - Fundraisers should be respectful in their interactions with the public.
The Fundraising Code of Practice applies to all fundraising activities, but it also contains more specific rules for different fundraising methods, as well as working with external parties, including volunteers and children.
With that overview in mind, let’s take a look at the five most important takeaways from the Fundraising Code of Practice.
1. Truth and Clarity
One of the most fundamental elements of the Code is its concern for truth and clarity. In the first instance, this means that the fundraiser must be explicit about the organisation that they are working for.
It’s also best to be as clear as possible about the impact that donations will have.
This means that the more information you can provide about how donations will be used, the better. In the interest of truth and clarity, it is also vital that this information is not exaggerated or mis-sold in any way.
One way to do this is to have firm processes in place to track the impact of your investments and projects. We’ll touch on this in more detail a little bit later, when we talk about building accountability into your fundraising.
2. Purpose Limitation
Purpose limitation essentially means that you can only use your donations for what you said you’d use them for. So for example, if a sports club has a fundraising drive to buy a new team bus, they shouldn’t use this money to buy new uniforms.
After all, without purpose limitation, it would be difficult to be transparent about your fundraising.
There are a number of steps you must take to reflect this element of the Fundraising Code of Practice.
The first is setting realistic fundraising targets. In other words, you should have a clear picture of how much or how little money you’re likely to secure. One way to do this is to work with an experienced fundraising consultant.
Beyond this, you should have contingency plans in place, in case your fundraising doesn’t play out the way you expected. That is, you might not raise the funds you first expected, or you might equally exceed your fundraising goal.
You should plan for both of these contingencies, and clearly communicate to the donor your plan for what to do with their money in both cases.
3. Treating Donors Fairly
All charitable donations should be made voluntarily. It’s no good to pressure or coerce. Members of the public to contribute to your fundraising drive. Consider that some members of the public are vulnerable, while others are simply not in a position to give to charity.
It’s also not acceptable to use emotional manipulation to secure donations. It’s fine to explain to people all the good that their money can do in their local community, but this doesn’t mean that they’re a bad person for choosing not to contribute to your charity.
Focus on the great work that your charity does. Not only does this ensure compliance with the Fundraising Code of Practice, it’s also a much more effective fundraising approach.
4. Managing Finances
The Fundraising Code of Practice also touches on how you should manage your finances, where these have been secured through donations. This is to maximise transparency around your activities, and to ensure that funds are not misused.
In particular, as part of your fundraising processes, you should take steps to prevent:
Theft,
Fraud,
Embezzlement.
This is to protect your own organisation, as much as it is for the benefit of donors.
There are a number of steps you can take to protect your finances from misappropriation. These include vetting fundraisers thoroughly, as well as using proper bookkeeping processes to ensure that money is used to provide maximum impact.
You can prove this by conducting thorough impact assessments both before and after you deliver your services and projects.
5. Accountability
The Fundraising Code of Practice also includes stipulations on accountability within charities. Essentially, this means that there has to be a clear structure of responsibility for all of your decisions, particularly when dealing with funds raised through public donations.
This still applies if you delegate your fundraising activities to a third party, so it’s crucial to thoroughly vet your partners, as you’ll ultimately be responsible for their behaviour.
Additionally, the Code stipulates that you should have a clear and publicly available complaints procedure, relating to your fundraising activities. These must be thoroughly and effectively followed, in order to resolve complaints.
Where this is not done satisfactorily, you may be investigated by the Fundraising Regulator.
If you’d like to learn more about building an effective fundraising strategy, which complies with the Code of Fundraising Practice, contact S3 Solutions today.