Deal that saw agency take 80 per cent cut 'unacceptable', says regulator

Charity Commission's report on a deal struck by Our Local Heroes Foundation and Targeted Management Ltd says there are 'serious regulatory concerns'

The Charity Commission has criticised a deal between a veterans charity and an agency that forced the charity to give up 80 per cent of the money raised.

The commission opened a regulatory case on Our Local Heroes Foundation, a Lancashire-based charity that provides grants to veterans all over the UK, after receiving complaints that the public were not being told that only 20 per cent of their donations were making it to the charity’s beneficiaries.

After meeting trustees and examining the charity’s books, the commission discovered the charity had signed a five-year fundraising agreement with Targeted Management Ltd, an agency that provides telemarketing and other services to businesses and charities. The deal stipulated that the charity would be invoiced for 80 per cent of the funds raised by the agency – £20,000 a week at the time of the commission’s visit in April 2015.

The case report, published today, says the commission told the charity that the deal was not acceptable and there was likely to be "justifiable public concern" and damage to the charity’s reputation if the ratio of income to charitable expenditure remained so low.

The report says the commission identified "serious regulatory concerns", which included "a very low level of charitable expenditure, substantial spending outside the charity’s objects, poor governance, conflicts of interest and an insufficient focus on providing grants to beneficiaries".

It says the charity, which had an income of £500,000 and spent £320,000 in the year to February 2015, had entered into contracts and agreements without due diligence or proper records and there were poor financial controls.

According to the report, the commission has continuing concerns about the contract with TML and has told the charity to keep the arrangement under review.

Lisa Pickering, office manager at Our Local Heroes, acknowledged that the charity had suffered from "mission drift" by offering services such as counselling, employability training and welfare services to veterans directly, rather than simply offering grants to veterans in need, as set out the charity’s objects.

She said: "Unfortunately, we’re 18 months into a five-year contract with TML so it’s quite hard to get out of, but we are absolutely working with it to increase the amount of funds that come into the charity and to change the way TML fundraises to reduce its operating costs."

The charity has also slimmed down its workforce from eight to two, she said.

The report says there was no evidence of fraud or theft at the charity and the commission decided not to open a full statutory inquiry in view of the trustees’ "open and responsible approach" to the investigation.

Instead, the report says, the commission outlined an action plan for the charity to ensure money was spent in line with its objects, to maximise the amount given to beneficiaries and to ensure fundraising was conducted in an open and transparent way.

Targeted Management Limited said in a statement that it was not a fundraising company but provides recruitment and logistics support to organisations. It said: "We do not collect any money for any of the charities we work for as 100 per cent of all funds received are paid directly to the charity. The 80 per cent figure mentioned by the commission is the maximum cost the charity should expect to spend running an activity of this type. All staffing and running costs are paid for by the charity and make up the majority of the costs incurred by the charity as all of the staff work directly for the charity." 

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