One of the most welcome aspects of the recent upheaval in fundraising regulation is that the Charity Commission is taking a tougher line on the potential exploitation of charities by certain types of fundraising agency.
There are some agencies that offer direct-mail services to charities, including lists of potential donors, and are paid out of donations rather than requiring payment up front.
The proposition has some attraction for small or fledgling charities that have few donors and are trying to establish themselves. What sometimes happens, however, is that so few donations arrive in the short term that the lion’s share goes to the agency and precious little to the charitable cause. This can go on for many years, and the agency sometimes also offers the charity loans against the time when it is hoped that income will exceed the agency’s expenses.
Such arrangements are rarely made properly clear to recipients of the mail, for the obvious reason that they would be much less likely to give if they knew the full facts. Fundraising agencies are required by law to disclose what they are being paid, but some agencies evade this requirement by describing themselves in contracts as consultants rather than fundraisers.
It is true that new charities sometimes need to spend most of their income, at least for a while, on setting up their fundraising arrangements. It is also arguable, as some of the agencies contend, that clamping down hard on their direct-mail, pay-from-proceeds model potentially denies society the chance to contribute to new and innovative charities that they help to foster.
It is therefore going to be a matter of judgement whether a charity’s decision to lock itself into one of these fundraising contracts amounts to poor governance and financial mismanagement, opening it to sanctions by the commission. But the commission is an experienced judge of when a charity and its donors are being taken for a ride. Its recent report on its inquiry into Hospice Aid UK is a case in point.
The regulator’s tougher approach comes late in the day: the general disillusion with fundraising and a sharper application of data-protection rules mean that the arrangements in question, after a couple of lucrative decades, are on the wane anyway. But the commission has identified more than 300 charities that rely heavily on such arrangements, and weeding out those that don’t stand up to scrutiny will be a valuable contribution to its mission of increasing public trust and confidence in charities.
Stephen Cook is contributing editor of Third Sector