The Charity Commission has referred a case to the Fundraising Regulator for the first time after carrying out a statutory inquiry that found an agency contract meant only 6 per cent of donations to the charity Hospice Aid UK went to the end cause.
In a report on its inquiry, published today, the commission says concerns were raised in 2014 about Hospice Aid UK’s fundraising practices and limited expenditure on the cause. It says the commission identified serious regulatory concerns about the charity’s management and administration.
"There was poor governance and poor financial management of the charity and its affairs by the trustees," the report says.
It adds that an agency working on the charity’s behalf – confirmed by a commission spokesman to be the London-based direct marketing and fundraising agency Euro DM Ltd – lacked transparency and was misleading to the public.
The inquiry found that a seven-year agreement signed in 2012 by Hospice Aid UK and Euro DM substantially favoured the agency. "It was difficult to see how the decision to enter into this agreement was in the charity’s best interests," the report says.
The inquiry also found that mailing material sent out by the agency did not contain a solicitation statement and therefore "lacked transparency and did not enable the donating public to make an informed decision when donating to the charity".
The inquiry found that in the three reporting years since the charity entered into the agreement (2013 to 2015), the charity’s gross income was £1.4m, with direct donations to hospices amounting to £78,925. This meant that only about 5.5 per cent of the total income raised went to the cause.
The commission concluded that the charity’s trustees had ultimately failed to adequately manage risk and comply with their legal duties.
The report says the trustees were ordered – under Section 84 of the Charities Act 2011 – to complete a governance and management action plan and a fundraising action plan that reviewed the charity’s expenditure, overheads and fundraising.
It says the commission will continue to monitor the charity’s compliance with these action plans and has reported its findings to the Fundraising Regulator.
In a statement published on its website today, Hospice Aid UK said it was forced to enter the agreement with Euro DM as a way of surviving after the charity Hospice UK made a series of allegations about the charity to the Charity Commission. This, it said, led to Hospice Aid UK losing a major commercial sponsor.
"The choice was simple: enter into a fundraising agreement or close the charity," the statement said.
The charity said it knew from experience that direct mail campaigns could be successful and hoped the arrangement would provide income to keep the charity going while it developed other income streams. The contract with Euro DM has several years left to run, it said, and projections suggested the agreement could offer very positive returns after year seven.
The agency was now including solicitation statements in its mailings "in the interest of avoiding any further Charity Commission concerns", the charity said.
Hospice Aid UK also blamed Hospice UK for changing its name from Help the Hospices to one very similar to its own in 2014, saying this resulted in donations being sent to the wrong charity. It said the case was now the subject of a judicial review application.
Kim Way, director of Euro DM, said: "Unfortunately, soon after the charity asked us to help it build a database of supporters, a larger competitor organisation began a campaign to diminish the brand of our client, even changing its own name to be confusingly similar to that of our client.
"That and the overall tactics by the competitor put our client in an increasingly negative position with the public and the charity’s ability to raise funds at a reasonable cost. I understand that even before the Charity Commission inquiry began, the client brought this problem to the attention of the commission but no relief was received."
Way said Euro DM was confused that although it had worked for 24 years as a consultant for a limited number of charities, the commission decided to consider the company as a professional fundraising organisation.
Hospice UK was unable to respond to a request for comment before publication of this story.