News story

Regulators issue joint alert about working with third-party fundraisers

Alert reminds charities that agreements must be in their best interests and comply with the legal requirements.

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The Charity Commission, the independent regulator of charities in England and Wales, and the Fundraising Regulator, are issuing a joint alert to charities that fundraise from the public. It reminds trustees that they must comply with their legal trustee duties when overseeing their charity’s fundraising, as set out in the in the Commission’s guidance – Charity fundraising: a guide to trustee duties (CC20).

Where a charity is working with a third party to raise funds, compliance with trustee duties means having effective systems in place to keep control of the fundraising, and taking steps to properly protect the charity’s interests, assets and reputation. It also means compliance with relevant legal rules, including those designed to make third party fundraising arrangements transparent to donors, supporters and the public.

Professional fundraisers and commercial participators are responsible for ensuring that the specific legal rules that apply to them and the arrangements they make with charities are followed. However, the Commission’s view is that, to comply with their charity law duties, trustees must also ensure that their arrangements with these fundraisers are in line with these rules. Failure to do this will generally amount to misconduct and mismanagement of the charity’s affairs.

The Commission and the Fundraising Regulator have significant concerns about a number of cases where trustees have entered into arrangements with third party fundraisers that are not transparent and are detrimental to the charity and its supporters.

Therefore, the Commission and the Fundraising Regulator are warning charities to avoid entering into fundraising arrangements that include 1 or more of the following characteristics:

  • 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 Commission and the Fundraising Regulator are reminding trustees that when working with a third party fundraiser trustees must:

  • comply with specific legal requirements which apply when the third party fundraiser meets the definition of a professional fundraiser or commercial participator; these rules promote transparency, protect potential donors, and give them a fair indication of the extent to which the charity (or charities) will benefit from the fundraising
  • ensure that the arrangement is set up and controlled in a way which is in the best interests of the charity, and which protects its assets and reputation; the Commission’s guidance – Charity fundraising: a guide to trustee duties (CC20) sets out the issues which trustees should consider to make sure that the potential benefits of working with the other organisation are appropriately balanced with proper attention to protecting their charity’s interests

Where a charity is entering fundraising arrangements with other third party fundraisers and these rules don’t apply - for example, because the arrangement is between the third party fundraiser and a charity’s subsidiary trading company or they have been appointed in a genuine advisory or consultancy capacity - the Commission will expect the charity to operate with the same principles in mind. This will allow it to have more effective control of the fundraising, and provide transparency to its supporters, donors and the public about the fundraising arrangements and the associated costs. Otherwise, the charity’s assets and reputation can be subject to unacceptable risk, amounting, at least to mismanagement of its affairs.

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.

Resources

There is more information about the legal requirements that apply to arrangements with a professional fundraiser or commercial participator in the Commission’s guidance Charity fundraising: a guide to trustee duties (CC20).

You can also view the information and advice provided by the Fundraising Regulator on its website (www.fundraisingregulator.org.uk), including information about the new requirements for contracts between charities and third party fundraising organisations which came into force on 1 November 2016.

The Institute of Fundraising also has advice and information on its website, including a guide on working with fundraising agencies.

Published 8 November 2016