Name and type of organisation: Penny Appeal (registered charity no 1128341)
Fundraising method: Child sponsorship and regular gifts made towards the construction of water wells.
Code themes examined: Treating donors fairly, restricted donations, misleading information, and complaints handling.
Code breach? Yes
The complaint
The Fundraising Regulator received three complaints about the Penny Appeal Charity (the charity) over a 12-month period from long-term supporters. During our investigation, we received a fourth complaint which we also investigated. We were concerned by the number of complaints received within a relatively short period and the similarities of the issues raised, including:
- Concerns that donations made to the charity through its child sponsorship appeals and its water and sanitation well-building programme were not being utilised for the purposes intended by the donor.
- Inaccurate recording of donors' intentions.
- Reallocating of funds raised for a specific appeal to other areas without the notification or consent of the donors.
- Providing misleading information about the length of commitment when setting up a monthly Direct Debit.
- Poor complaints handling.
What happened
We considered the following appeals as part of our investigation:
- Thirst Relief Appeal
- OrphanKind Appeal
- Hifz Orphan Appeal
- 100% Zakat Appeal
We examined the charity’s website and website archives to investigate how it delivered these appeals to potential donors. We reviewed the language used, as well as the details provided on each appeal’s web page, and the supporting ‘Frequently Asked Questions’ (FAQs).
Our decision
Treating donors fairly, using funds and the use of restricted donations:
The charity told us that it restricts donations to the specific appeals they were given for, such as OrphanKind, Hifz and Thirst Relief. However, it does not allocate restricted donations exclusively to a sponsored child, a specific project they were given for, or to the donor’s preferred location for building a well. We consider that this distinction has not been sufficiently communicated to donors either historically or currently. We have found some breaches of the code, but we have seen no evidence to suggest the money donated by the complainants was not used for the appeal they originally selected.
OrphanKind and Hifz Appeals:
We found that the language used in these two appeals has the potential to lead donors to believe that they are sponsoring a particular child and that their donations will be used exclusively for the benefit of that child. The charity has acknowledged that its fundraising material may not have always been sufficiently clear to convey its intentions.
We understand that the named children may benefit directly from donations to these appeals as they personally receive things like school uniforms and school meals. However, from what we have seen, it is not sufficiently clear to donors that children primarily benefit indirectly as the result of the accumulated sponsorship funds from these appeals being distributed to the communities or projects that the children are part of, rather than directly from their individual donations.
We accept there may be times when a child enrolled on a project may leave or when the charity must withdraw its support. However, we found that the donors who complained to us were not explicitly informed that circumstances could arise where they might be allocated a different child to sponsor.
On this basis, we have found that the charity breached the sections of the code that relate to misleading donors, treating donors fairly and making sure that its fundraising does not suggest that money is for a restricted purpose, such as exclusively helping a particular child.
We found that historically, the charity did not have a robust record-keeping system in place, which resulted in one of the complainants’ donations for a sponsored child not being recorded correctly as Zakat, and administration fees were deducted. The administration fees were eventually refunded and applied to the charity’s 100% Zakat appeal. However, this did not guarantee they would be used for the child sponsorship appeal to which the complainant had originally donated. We found that the charity breached the section of the code that relates to using donations in line with the conditions attached to them.
Thirst Relief Appeal:
We do not consider that the charity misled donors on this appeal by failing to highlight the potential for reallocation of funds donated for a specific well. It would not be reasonable to expect charities to tell donors of all potential but unlikely problems that could affect the project they are donating to. However, we would expect that as soon as a problem arose, the charity would notify the donor to allow them to make an informed decision about what to do with their donations and to seek their consent regarding reallocation, if necessary.
We found no evidence to suggest that donations have not been spent on building wells in the countries selected. On this basis, we do not consider that the charity has breached the sections of the code that related to using the donations in line with the conditions and restrictions attached to them.
The use of Direct Debits to donate towards building a well as part of the Thirst Relief Appeal:
We consider that it is reasonable for a donor to assume that if they are presented with the option to pay either a lump sum of £300 or a regular monthly donation of £25 towards the construction of a well, the monthly donation of £25 would only be for a duration of 12 months. However, we found that the FAQs supporting the campaign are ambiguous and do not make it clear that a monthly Direct Debit would continue after 12 months until the donor cancels it.
Although the general terms and conditions of the charity’s website do refer to the ongoing nature of regular monthly donations, donors are not directed to read them before agreeing to donate. The link to these terms is on very small print in the footer of the website pages. Therefore, it is not reasonable to assume that donors would read these terms and conditions before donating. We have found that the charity breached the sections of the code that relate to treating donors fairly and misleading donors by omitting essential information.
In October 2023, Penny Appeal confirmed that it had updated its website and payment platform so that once a donor has completed the Direct Debit form, they are now presented with a message that reads ‘All Direct Debit payments are continuous until requested to cancel by the donor’. The charity said that whilst this information was not showing on its website payment platform until October, it has been on its donation forms handed out at events since February 2023.
100% Zakat Appeal:
We recognise that Zakat giving is pivotal to the Islamic faith and Muslim religious observance. It is not within our regulatory remit to comment on the theology behind such donations or the possible religious motivations of donors. However, irrespective of whether the donation is driven by a person’s faith, we consider that a Zakat payment meets the definition of a freely given charitable donation and, therefore, falls within our regulatory remit to consider.
We have concerns about some of the language that the charity uses on this appeal. For example, its statement that “Every single penny from your Zakat donation will go directly to those who need it most 100% of the time”. The charity has explained that the statement means that Penny Appeal UK does not deduct any administrative fees from the donations. However, its partners who implement the projects may take administration fees from the funds donated and that this practice is in accordance with the teachings of the Qur’an. The charity considers that donors who choose to make a Zakat donation will be aware that their donations will be used in line with Quranic interpretations.
We have not received any complaints about this issue. Therefore, despite our concerns, we have not found that the charity breached the code by misleading the donors about how this appeal will use the money donated.
Complaints handling:
We found that two of the complainants initially contacted the charity by telephone but neither complainant received a call back which was promised.
We have also seen that once the complaints were escalated within the charity’s complaints process, it did provide each of the complainants with a substantive response, but those replies did not always acknowledge or apologise for the poor complaint handling.
Whilst we recognise the positive steps that the charity has already taken or will be taking, including the implementation of a new CRM system and the streamlining of its complaints policy, we found that when handling the complaints that formed part of this investigation, the charity breached the section of the code that relates to complaints handling.
Code sections considered
Code of Fundraising Practice, version effective 1 October 2019 (last updated 4 June 2021)
Section 1.3 Informing donors and treating people fairly:
- Standard 1.3.1: breach identified (OrphanKind and Hifz and Thirst Relief in relation to Direct Debits only)
- Standard 1.3.6: Breach identified (OrphanKind, Hifz and Thirst Relief in relation to Direct Debits only)
Section 2.7. Using funds:
- Standard 2.7.4: breach identified (OrphanKind and Hifz)
- Standard 2.7.2: breach identified
Section 2.4. Complaints and concerns about fundraising:
- Standard 2.4.3: breach identified.
No breaches were identified on the Thirst Relief Appeal in respect of standards 1.3.1, 1.3.6. 2.7.1 and 2.7.2.
Recommendations
We asked Penny Appeal to:
- Review and amend the language it uses within all its fundraising material to make sure that it is clear from the outset who benefits from donations. If the charity’s model remains unchanged (i.e. it advertises the sponsorship of individual children to provide a focus for people’s giving), the charity must provide donors with clear and prominently displayed information before the point of donation. This should explain that the sponsored child will be helped via funds allocated to the community or project they are part of and that funds are restricted only to the wider sponsorship appeal.
- Review welcome packs and any subsequent update material sent to donors to make sure it remains clear how their donations are being used. Reiterate that the child will be helped via funds allocated to the community or project they are part of and that funds are restricted only to the wider sponsorship appeal.
- Give greater prominence to its statement explaining what it means by ‘where most needed’ in relation to how it will use donations if it is unable to use them in line with the donor’s original request.
- Make clear to donors that due to the nature of charitable work within international development, there may come a time when either the charity removes itself from a sponsorship project or the child leaves.
- Recognise that even with clear and sufficient information provided up front, donors are likely to have an emotional investment in the progress of their sponsored child or the location of the well (if they have specified a preferred one at the point of donating). For this reason, we consider it is helpful for the charity to provide clear information in reallocation letters. These should explain that their donation will continue to be distributed within the same appeal and the donor has been allocated a new sponsored child or a well in a different location. They will receive regular updates, and that they can cancel their future donations should they want to.
- Review and amend the language it uses when describing Zakat donations to make sure that it is clear that administration fees of up to 12.5% may be deducted by its implementation partners.
- Reassure itself that existing and future donors’ intentions have been and are being recorded correctly. As part of its considerations, we suggested that the charity reviews the way it captures intentions made via its website as well as over the telephone and by mail.
- Review the way it promotes its Thirst Relief Appeal so that it is clear from the outset what it means if a donor chooses to pay for the well via Direct Debit.
- Consider the findings of the British Muslim Charitable Giving Report – Observing trends and behaviours 2021-2022 when considering the future promotion of its 100% Zakat donation policy. Particular attention should be given to its detailed findings that relate to Zakat and the results of its public survey in relation to charities who have a 100% donation policy (page 17) which indicates how members of the public often consider this statement “unachievable” and in need of further qualification.
- Review all its current fundraising material for each of its appeals to ensure how donors' money can or will be used is prominent and clear.
- Three of the complainants involved in this investigation had asked the charity for refunds of their donation, which the charity had previously refused. We recommended that the charity’s trustees consider whether to refund any of their donations and explain their considerations and decision to each complainant. When reaching their decision trustees should consider that we found breaches of the code in relation to the way the charity fundraised from these complainants. The charity may wish to seek professional advice to assist them in reaching their decision. If the trustees decide to make any payments to the complainants, depending on the rationale for their decision, they may need authorisation from the Charity Commission for England and Wales.
Outcome
Penny Appeal has agreed to comply with our recommendations.