Regulator Warns Charities About Arrangements With Fundraising Agencies

The Charity Commission and the Fundraising Regulator are warning charities about their arrangements with third party fundraising agencies amid concern that a growing number are seeking to avoid the statutory requirements in this area.

The two regulators have issued a joint alert to charities that fundraise from the public highlighting ‘significant concerns’ that some charities are not sufficiently transparent about the fees and arrangements they make with third party fundraisers. They advised against entering into contracts with third party fundraisers in certain circumstances and cautioned that a failure to address this issue will generally amount to misconduct and mismanagement of the charity’s affairs.

Cited concerns included where fees received would “damage public trust and confidence” and where a charity benefited from an arrangement only at the very end of the contract term or where it was possible that it would not benefit at all.

The regulators also called on charities to avoid medium or long-term contracts that had very limited termination or adjustment provisions. Contracts that were structured to avoid legal rules, for instance, where a professional fundraiser was described as an “adviser” or “consultant” in a contract even though they were in fact in charge of soliciting donations on the charity’s behalf, were also to be avoided, said the regulators.

The regulators underscored that such arrangements can mean that it is not clear to the donor that the fundraising is being delivered by, or with the substantive involvement of, a third party, at a significant cost to the charity.

Trustees are reminded that when partnering with a third party fundraiser they must comply with specific legal requirements which come into force when the third party fundraiser meets the definition of a professional fundraiser or commercial participator. Trustees must also ensure that the arrangement is established and controlled in a way that is in the charity’s best interests, and which protects its assets and reputation.

The regulators state that where a charity is entering into fundraising arrangements with a third party fundraiser and these rules do not apply – because, for example, the arrangement involves the charity’s subsidiary trading company or the third party fundraiser has been appointed in a genuinely advisory or consultancy capacity – the Commission will expect the charity to operate with the same principles in mind.

David Holdsworth, chief operating officer at the Charity Commission, said:”We are aware of and concerned about a growing number of cases where arrangements are in place that appear to be set up in ways that deliberately avoid the statutory regulations . . . These protections were put in place for the benefit of the public to ensure that fundraising is carried out in a way that is fair, open and transparent. These principles are ones we would reasonably expect any charity to agree with and try to meet in order to uphold the standards that the public, who give so generously to charity, expect.”

Charities

IBB Solicitors’ specialist Charities team has over 50 years’ combined experience in delivering practical commercial advice to charities and not for profit organisations and those who work with them. For advice, contact a member of the team, call us on 03456 381381or email enquiries@ibblaw.co.uk