Charity Sector Sustainability Call for Evidence
House of Lords Select Committee on Charities

Response from Alzheimer’s Research UK

5 September 2016

Key Points

  • The charity sector, separate from Government and other public entities and from private enterprise, holds a unique value in society but also adds value to the work of other sectors.
  • Charities are working in new ways to overcome negative public perceptions through ever greater governance measures and greater involvement of their trustees, which can be costly.
  • Working with fundraising agencies allows charities to raise necessary donationsin the most cost-effective way.
  • Trustees should not be restricted in their role by charities or regulators to being just auditors or interrogators, but should be fostered in a way that allows them to drive innovation and provide strategic direction.
  • The digital arena provides an enormous opportunity for charities to reach larger audiences and new supporters, but can be risky in a culture of demonstrating the responsible use of donations.
  • Government could demonstrate support for charities through improving the tax environment for charities. Mechanisms like the Research and Development Expenditure Credit (RDEC) for research charities, Gift Aid, and VAT should be addressed to better support charities and reduce their costs.

About Alzheimer’s Research UK

  1. Alzheimer’s Research UK is the UK’s leading dementia research charity, and the second largest charity funder of dementia research in the world. We are funding £33 million in world-class research at leading universities and research institutions across the UK and to date have funded £61 million in research projects. As research experts, we are committed to finding new ways to diagnose, prevent, treat and cure dementia.
  1. Our research strategy is targeted to deliver research that offers the most potential for health benefit. Increased and sustained investment in research is critical to help deliver the treatments and outcomes that will offer hope to people living with dementia and reduce the massive societal and economic burden.
  1. Our Defeat Dementia campaign to raise £100 million over five years will make a significant impact on the research landscape, adding capacity and expanding promising avenues of discovery. However, we will not defeat dementia on our own. Organisations and governments across the globe need to share a vision of a world free from dementia, and support policy and funding that fosters the best research environment. The UK has a unique combination of resources in leading scientists and research infrastructure, and in public support for dementia research. With growing support from government, the private sector and charities, this environment is fertile for progress against this devastating condition.

The Purpose and Impact of Charities

  1. Charities are changing the world for the better, whether that be protecting the environment, bringing about social justice or catalysing new medical treatments. The charity sector, separate from Government and other public entities and from private enterprise, holds a unique value in society but also adds value to the work of other sectors. Charities reflect the public will, offering the opportunity to invest in causesabout which people are passionate.
  2. Alzheimer’s Research UK’s contribution to the dementia research field in the past two decades in which it has funded grants and projects is unique and irreplaceable. We have channelled donations from the public into a total of 596 projects, equating to a combined total of 1,405 years of research. Over 200 new research collaborations have been established as a result of Alzheimer’s Research UK funding, with almost one in five of our grants leading to new partnerships. Almost half of our former PhD students, and almost three quarters of our Fellows, are still working on neurodegenerative diseases today and are quite literally shaping the dementia research field. We host the largest UK dementia research conference, and in 2015 distributed our dementia information leaflets to 9,298 GP surgeries, 13,458 care homes, 1,734 libraries and 139 memory clinics across the UK. Our Dementia Infoline team answered 2,422 enquiries from the public, and there has been an 18% increase in the charity’s media coverage over the past year.
  3. Alzheimer’s Research UK is not a tangential figure in the dementia research field, but a genuine driver of progress and innovation. Our grants have resulted in further funding worth £117.3m, meaning many projects we first supported over a decade ago still have a continuing legacy today. For every £1 Alzheimer’s Research UK has invested in research, a further £2.62 has been secured by our researchers from other funders to progress their work.
  4. Charities can be a persuasive voice in the UK, respected and authoritative, and should be recognised and supported as experts in combatting some of society’s greatest challenges. Charities may be held to a higher standard of practice in their corporate behaviour than the private sector, and be expected to maintain their independence from business or other influencing interests. However, charities like Alzheimer’s Research UK have a deep and lasting impact on the environment in which they operate, and should be recognised for the crucial role they play in society.

Governance and leadership

  1. Increasingly, good leadership within charities is achieved by people whose skillsets mirror those at the top of other sectors – the ability to outline the world that the charity looks to create, the confidence and competency to make this a reality and the communications skills to engage potential supporters and beneficiaries with this vision. These leaders are supported and guided by trustees, who holdthe leadership to account, but can also advise on key decisions and help steer the charity going forward.
  2. Alzheimer’s Research UK trustees reference the Charity Commission’s general guidance on public benefit when reviewing our aims and objectives and in planning our future activities. In particular, the trustees consider how planned activities will contribute to the aims and objectives they have set. The public benefits from our work, through our world-class research and through our educational materials, website and campaigning to improve the outcomes of dementia research.
  3. Trustees should not be restricted in their role by charities or regulators to being just auditors or interrogators, but should be fostered in a way that allows them to drive innovation and provide strategic direction. The contribution of trustees is improved by a diversity of experience as well as diversity in general. Better representation of different sectors and interests among charity trustees can be achieved by better public understanding of what it means to be a trustee, to encourage a broader range of people seeking opportunities.
  4. Good governance support within charities is critical to enabling trustees and reassuring the public. Trustees need to be given clear terms of reference by charities with guidance from the Charity Commission for their roles and be empowered to receive training, resources, timely updates and support to meet their responsibilities. As scrutiny and regulatory changes place greater pressure on charities, it must be realised by government and the public that this comes at a cost to the charity. At the same time, it reflects a positive move by charities to operate professionally and in accordance with charity commission and other regulatory guidance. This will be especially relevant in light of recent changes to charity regulation from the new Fundraising Regulator (FR), which has emphasised that trustees are ultimately responsible. The sector is at risk of losing out on trustee candidates with important skills based on uncertainty around whether they are sufficiently qualified to fulfil the role.

Accountability

  1. Charities are held accountable by multiple entities: by their boards, charity regulators, supporters and the wider public. Charities such as Alzheimer’s Research UK fulfil functions that are either complimentary or supplemental to Government services or initiatives, but do so with only public donations and thus remain independent in our decision-making and strategy.
  2. Through our Supporter Charter, we promise to make the best use of every donation we receive, to keep our supporters informed about our work and to treat their information with respect. In order to report back to our supporters on the progress in defeating dementia that they have enabled, we carefully track the development and outcomes of our research projects to ensure that our supporters’ donations are being put to good use. Our grant-holders report to us with regular updates, allowing us to gain a wealth of information about our research portfolio.
  1. Communicating the responsible use of donations occurs through a variety of channels - transparent communications that clearly outline what the charity aims to do, regular updates to trustees including access to vendors and operational oversight, annual reports and financial auditing, and regular reviews of practices and impact. Additional steps can include evaluating trustee performance and diversity to ensure the best possible strategic guidance as well as integrating public input at multiple points in charity activities. These practices are common throughout the sector, and are a rigorous way to genuinely gauge and manage charities.
  2. In fundraising practice at Alzheimer’s Research UK, it is important to keep supporters at the heart of everything we do. Our highly successful value exchange programme stems from asking what people need and want from us as dementia research experts; then building on that interaction to fund our work. This approach reaches into our legacy marketing as well – people need and want advice on writing a Will if their partner or parents have dementia – so we offer assistance that is also starting a conversation and deepening our supporter relationship. However, we must also rely on other fundraising approaches, such as direct marketing, calls, and community outreach in order to fund research at our current scale.
  3. Working with fundraising agencies allows charities to raise necessary donationsin the most cost-effective way. At Alzheimer’s Research UK, bothstaff and trustees closely manage their work on our behalf to ensure that our supporters have the best possible experience and that vulnerable people are protected. Charities successfully managing vendor relationships are operating with sound business practices and in recognition of the competitive environment in which charities exist.

Pressures and opportunities

  1. Charities are increasingly under pressure to demonstrate that they are responsible stewards of public donations and worthy of the public’s trust, and also to do so with fewer resources and a decreased ability to reach new supporters.’ Two thirds of people cite media coverage as the cause of their distrust of charities.[1] The loss of public faith in the sector has had a negative effect on income from all areas, and the unethical behaviour of a few charities and fundraising businesses, combined with national press attention, has threatened to completely overshadow the admirable work of the sector and the invaluable service it provides for the public good.
  2. Pressure to rebuild public trust is magnified because of the current period of economic uncertainty following the EU referendum, increased competition with other charities, and generational changes in attitudes toward giving. Many charities that previously benefitted from government funding have had this income reduced or withdrawn. In order to maintain services, more are seeking income from other fundraising disciplines which in turn has increased competition in the sector as a whole. Trends in modes of giving like legacies (gifts in wills) have shifted away from large gifts for a variety of reasons from more years living in retirement to added health and social care costs. Charity fundraisers have adapted strategies to reflect these shifts, but an economy that is not growing can negatively impact philanthropy across all funding streams.
  3. Charities are working in new ways to overcome negative perceptions through ever greater governance measures and greater involvement of their trustees, and potentially even changes to fundraising practices. New regulation around fundraising may improve the experience of the public in interacting with charities, but also make it more difficult for charities that are striving to enact good practices to contact people who may be interested in their work.
  4. Charities place themselves under continual pressure to ensure the maximum investment is made into the cause, but in the current competitive market Brand and Marketing are essential components to recruiting donors. For example, introducing and increasing digital capability to engage with online supporters requires investment. The cost of raising funds and improving governance adds to charities’ administrative costs, leaving a smaller percentage of funding available to apply to the cause. Charities will also need to invest in responding to the differences between the new regulator and the previous FRSB as well as implementing compliance with the Fundraising Preference Service (FPS) in 2017. Once in effect, the FPS will negatively affect direct marketing in particular, making it difficult to reach new supporters though this channel.
  5. Engaging with the Committee, Government and the new Fundraising Regulator (FR) presents an opportunity to demonstrate to the public that charities possess a culture of responsibility, and more importantly recognise that they are an integral part of society and add value across all sectors. It is also an opportunity to shift public perceptions and expectations of charities to one that balances efforts to reach new supporters with a positive experience for the individual.

Financial Sustainability

  1. Alzheimer’s Research UKwas not envisioned to exist in perpetuity, but to meet a need that was not being otherwise addressed – namely, the lack of effective treatments for the diseases that cause dementia. It is an ambitious undertaking, but one that we are committed to, as the charity seeks to accelerate drug development and ultimately make itself irrelevant. In 2014/15 the strength of public support for dementia research was demonstrated with a 22% increase in donations, our strongest ever fundraising year, and we were named Fundraising Charity of the Year at the National Fundraising Awards. This significant growth reflects public will to advance research in the dementia field, but we recognise the competitive environment of the sector and the many worthwhile pursuits of charities in the UK and globally. Thus our investments in research are targeted to achieve the greatest impact and improve the lives of people with dementia. This includes response-mode grant funding, as well as commitments to fund major initiatives like our £50 million pledge to the Dementia Research Institute led by the Department of Health and coordinated by the Medical Research Council.
  2. Our trustees have examined the major strategic, business and operational risks which the charity faces and systems have been established to enable regular reports to be produced so that the necessary steps can be taken to reduce those risks. The board is updated by a consultancy to help with forecast modelling figures and to display monthly accounts to enable expenditure on research at the highest rate, without putting Alzheimer’s Research UK at an inappropriate financial risk. These robust measures are in place because our research strategy promotes the pursuit of breakthroughs, which must be insulated against shifts in giving trends and economic uncertainty.

Innovation

  1. The digital arena provides an enormous opportunity for charities to reach larger audiences and new supporters. A successful overhaul of our digital donation process led to Alzheimer’s Research UK winning the 2015 Insight in Fundraising Award for Most Powerful Insight from Digital Analysis and we wereable to add over 20,000 new supporters through social media channels in the same year. However, when considering innovation, charities are at times in conflict between implementing new ways of working and careful spending of public donations.
  2. In the future additional pressure on charities will invariably result in a greater aversion to risk, and investment in innovation can be perilous. Online donations are generally increasing, particularly for small charities, and social media outlets have the potential to connect charities with large communities of potential supporters. Greater learning from the private sector could support charity innovation, given the right culture of support for charitable risk-taking. However, the current climate presents a barrier because of the possibility of failure, particularly that an organisation is notusing donations efficiently on proven methods.

The Relationship with Government

  1. The relationship of Government to the charity sector should be a positive one – as a result of the Etherington review and Ministerial support for its recommendations, charities are ever more transparent with how they protect vulnerable donors and what activities they undertake when fundraising. Many charities fulfil functions that are either complimentary or supplemental to Government services or initiatives and are an important mechanism to meet gaps or add additional value to Government investment. The Government and Charity Commission are positioned topromote the work of charities and use policy measures to safeguard donors as well as volunteers, fundraising staff and the sector.Emphasis on policing through the Charity Commission and broad powers to act in cases of suspect mismanagement or abuse could be balanced with consistent guidance on how costs associated with governance and accountability can be presented to the public with recognition that administration of good practice can be costly. However, Government is not perceived to be championing the sector by highlighting its vital contribution to society or providing measures of support.
  2. It is important to recognise the considerable efforts of charities to raise funds for causes, and the vast majority of the sector does so responsibly and with great attention to good practice. Government could demonstrate support for charities by allowing the greatest possible investment of those funds into their intended purpose and reduce tax and compliance costs whenever possible. While the charity sector operates to meet higher expectations than those for the private sector, at times it is not provided with the same advantages in the tax environment. Issues such as how Gift-Aid is presented to the public and irrecoverable VAT for many charity expenditures have long been raised as areas of concern for the sector. For Alzheimer’s Research UK, the Research and Development Expenditure Credit (RDEC)recovered a significant amount of funding to reinvest in research, but charities have now been excluded from the scheme. The range of type and size of charities requires also that the sector be considered in the broadest possible terms, and that policy decisions do not serve to advantage one model or scale of operation over another.
  3. Government can also accelerate the work of charities through bridging relationships. For example, the National Institute of Health Research brought together Alzheimer’s Research UK, Alzheimer’s Society and Alzheimer Scotland to create Join Dementia Research – a nationwide clinical trial matching service. This partnership has contributed to a 60% increase in the number of people taking part in dementia research in the UK, with 11,309 new volunteers signing up through the service in 2014/15. Support for the program through the Department of Health has further developed the initiative, which would not have been possible without a culture of support for partnering with charities for greater impact.
  4. Charities possess a wealth of expertise that is a valuable resource to Government policy making, and the sector’s views should be considered with the status of that given to the private sector. Restrictions on the ability of charities to provide input to Government decision-making discounts the unique perspective of the sector. Instead, efforts should be made to engage the sector through channels of communication that support the value of charity expertise. During the lead up to the EU referendum, guidance from the Charity Commission governing England and Wales discouraged charities from publicising evidence of the impacts of leaving the EU on their particular interest area. Conversely, guidance from the Office of the Scottish Charity Regulator (OSCR) was broadly supportive of charity campaigning and engagement as charities have a “recognised and important role in our society.”[2] Leaving the EU could have a significant negative impact on dementia research if important policy areas are not favourably addressed in the negotiation, but Alzheimer’s Research UK was largely restricted from sharing important information with supporters. If the value of charities can instead be recognised, Government is well positioned to explore the ways to better support charities that are demonstrating good practice in their management as well as thought leadership for their cause.

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