The Commission launched its inquiry in 2014 following concerns raised by members of the public and other charities about Hospice Aid UK’s fundraising practices and its direct charitable expenditure.
The inquiry found evidence of poor governance and poor financial management of the charity and its affairs by its trustees. An examination of the agreement that the charity entered into with a fundraising agency in 2012 for seven years established that the terms of the agreement substantially favoured the fundraising agency rather than the charity’s best interests.
It also found that mailing material sent to the public did not contain a solicitation statement which explained how a donation would be used, the percentage of those funds that would be received by the charity or how much would be taken up by the costs and fees of the agreement. The direct mailing material therefore lacked transparency and did not enable the donating public to make an informed decision when donating to the charity, the inquiry found.
In addition, in the three reporting years since the charity entered into the agreement (2013 – 2015), the inquiry found that the charity’s gross income was £1,448,258, while direct donations to hospices amounted to £78,925: meaning that just 5.5% of donations went to the end cause.
However, the charity’s current trustees have already taken steps to rectify some of the issues identified and the charity has also published a response to the inquiry on its site. The Commission approved the form and content of a new solicitation statement and verified the financial figures referred to in the statement, which the charity has agreed will be displayed on all new fundraising material. The charity has also negotiated a reduction in the costs from the agency.
The Commission has said that it will continue to monitor the charity’s compliance with these action plans. The Commission has also reported its findings regarding the fundraising agency to the Fundraising Regulator.
Michelle Russell, director of investigations, monitoring and enforcement at the Charity Commission, said:
“This case is a clear reminder to all charities of the importance of their legal responsibilities when fundraising. This is a case where we believe poor financial oversight and a failure to adequately control costs and overheads was an instrumental factor in the deteriorating financial position and where a fundraising arrangement was not only not in the charity’s best interests, mean that the public believed more money was going to charitable causes than was the case.
“We have made clear we expect charities to comply with relevant legal rules, including those designed to make third party fundraising arrangements transparent to donors, supporters and the public. The public expect and deserve to know how their donations will be spent and to what extent the charity is benefitting.”
Advice for charities
The Charity Commission has recently issued advice for charities on how to avoid entering into fundraising arrangements such as this one.
Charities are particularly warned to look out for the following:
- arrangements with a third party fundraiser which bear all the hallmarks of a professional fundraiser arrangement, but which are structured to avoid the legal rules; the fundraiser may be described as an adviser or consultant in the contract even though in reality they are really controlling the solicitation of funds on the charity’s behalf – these arrangements can also mean that it is not clear to the donor that the fundraising is being delivered by, or with the significant involvement of, a third party at a significant cost to the charity
- medium or long term contracts that have very limited termination or adjustment provisions
- arrangements in which the charity only benefits from the arrangement at the very end of the contract term, and where there is the possibility that the charity will not benefit at all
- arrangements where the fees received by, or payments made to third party fundraisers damage public trust and confidence in that charity.
The full report is available on GOV.UK and the Commission has also drawn attention to its guidance on the subject Charity fundraising: a guide to trustee duties (CC20).