Five fundraising best practice considerations when working with others

By Catherine Orr, Head of Casework at the Fundraising Regulator

Many charities will have seen the recent statement of the results of an inquiry into Hospice Aid UK carried out by the Charity Commission for England and Wales. The Charity Commission has issued an Official Warning after finding misconduct and/or mismanagement by the trustees. We acknowledge that Hospice Aid UK says it challenges the grounds on which the Charity Commission opened the inquiry and the way it was handled.

We have followed this inquiry closely and have serious concerns about the agreement described between the charity and third-party agency. Now that the statutory inquiry has concluded, we will consider any appropriate action for the Fundraising Regulator to take. 

The Charity Commission’s findings

Following previous engagement with the charity, the Charity Commission opened a statutory inquiry after a review of its accounts raised concerns. The charity had renewed a costly direct mailing agreement with a third-party agency, despite earlier findings that this was not an effective use of charitable funds. Amongst other issues, the inquiry found that:

• the substantial funds generated were consumed almost entirely by the direct costs and fees of running the fundraising activity – £3.2 million was raised but costs came to just over £3 million, leaving less than 6% for charitable activities
• the inquiry was not provided with evidence or records to show that the trustees carried out due diligence and reviewed the agency’s past performance before renewing the agreement; and
• there was an ongoing lack of transparency in the charity’s accounts about the agreement.

I don’t think that what happened in this case would align with the reasonable expectations of donors giving to the cause. This case highlights important issues for the wider sector to consider when working with third parties to fundraise. 

Act in your charity’s best interest

Trustees are ultimately responsible for their charity’s fundraising activities and must act in the charity’s best interest, including when making agreements with third parties. Trustees must also take reasonable steps to assess and manage any risks. If donors are not given a fair indication of the costs involved in fundraising, this may pose a reputational risk and impact more widely on public trust and confidence. 

As a regulator, we would generally expect that the greater portion of money raised through these arrangements is transferred to the charity, with the understanding that a third-party can cover legitimate costs and generate reasonable profit.

Understand the standards that apply

Developing an agreement or contract can be challenging, so refer to the code before beginning and seek legal advice if required. Especially consider section two, which covers trustee responsibilities, and section seven which covers charity responsibilities when working with third parties, such as due diligence. 

Commercial businesses that fundraise on behalf of charities can register with us. So, you can search our directory to check if the party you intend to work with has committed to fundraise in line with the code. If it has not, ask why this is the case and what assurances it can give that it will follow the code.

Make sure third parties are monitored effectively

Charities must make all reasonable efforts to monitor those fundraising on their behalf. If you don’t, you won’t be able to effectively understand if third-party activity and behavior is in line with the code when fundraising for your charity. You can do this in a variety of ways and should also consider how best to share reports on performance, learnings and improvements with your senior leadership and board.

Consider the donor perspective

We expect charities and third-party fundraisers to take all reasonable steps so donors can make an informed decision to donate. Some of these steps will be informed by the law, and some by best practice. Charities should be open and honest about how fundraising by third parties will be of benefit to them. This could include sharing relevant information in annual reports or checking solicitation statements are used appropriately and are designed to protect donors through being sufficiently transparent.

Engage with us for help and support

Though we can’t offer legal advice, we can provide help and support to charities working with third parties. We share learning through our Annual Complaints Report (our recent report specifically focuses on issues arising from working with third parties) and our investigation summaries. We also offer a code advice service so you can contact our Policy colleagues directly for guidance, if needed.

Finally, if you have concerns that a third-party agreement or relationship is not code compliant, you can use our self-reporting pathway. Whilst there’s no formal obligation to self-report, telling us shows a willingness to put things right. My team will provide support or signpost you to further advice or guidance.