Does your charity have appropriate fundraising practices?

In the current climate where funding of charities remains challenging, we have seen that many more charities are looking at their fundraising activity and considering how and what they can do to raise funds from the public. Therefore it is a good time to recap on the basics to consider and manage risks in your charity appropriately.

Annual Complaints Report

A good starting point is being aware of what the public complain about. In November 2023 the Fundraising Regulator issued the Annual Complaints Report 2022/23. This covers a summary of the complaints received for the year-end 31 March 2023. In the years leading up to 2022, the analysis showed that most charities had returned to in-person fundraising methods, such as door-to-door and in-person collections after this activity was restricted throughout the pandemic. It is not surprising therefore that in 2022/23 door-to-door fundraising generated more complaints than any other method; representing 20% of all the complaints received.

As many charities use agencies and sub-contractors, it is important that you are comfortable that you have appropriate oversight and control of the activities that they undertake in your name and follow the Code of Fundraising Practice. Does your board understand who your commercial participators, subcontractors and agencies are to ensure that these relationships are appropriate and pose no reputational risk to the charity from their behaviours?

Other common complaint areas relate to charity bags or clothing banks, addressed mail, digital and collections. These remaining complaint areas covered 30% of complaints received. Common themes often were centred around concerns about misleading information with online/digital fundraising complaints being the highest. Others related to communication including repeated contact, fundraiser behaviour, not respecting door signs, or a simple dislike of the method of fundraising.

It is important that the board are regularly updated on complaints received by the charity and how these have been addressed and actions taken; especially as the number of complaints received is disclosed in the statutory accounts each year.

Code of Fundraising Practice

Who in your organisation is responsible for ensuring compliance with the Code of Fundraising Practice? Do they have the relevant skills and experience and regularly report to the board on how ongoing compliance is maintained? It is worthwhile for the board to all watch the webinar on Trustee responsibilities.

In particular reviewing and understanding section 2 of the code which is aimed at Trustees duties and covers the following:

• General duties (section 2.1)
• Risk assessment (section 2.2) to manage risks posed in fundraising
• Accepting, refusing and returning donations (section 2.3)
• Complaints and concerns about fundraising (section 2.4)
• Paying fundraisers (section 2.5)
• Solicitation statements (section 2.6)
• Using funds (section 2.7)
• Accounting and reporting (section 2.8)

Ensuring that the board are aware of their responsibilities will ensure appropriate oversight and control over the fundraising practices of the charity. It is worth a detailed dive into the Fundraising Plan at the budget stage to ensure that the board not only are comfortable with the planned approach,  the generation methods adopted, and safeguard in place; but are also aware of the level of risk and stretch in the fundraising plan and therefore the budgets.

Keeping track on the income generation against the plan, the rate of return on that investment (ROI), and being able to ensure that planned interventions are timely is critical. Fundraisers tend to be optimistic in their outlook and the board need to be able to assess the risks in the forecast presented to them so that there is not a surprise variance at the end of the year when the fundraising target was not achieved and it is too late to take corrective action.

It is also important that the board has appropriate oversight of donations received to ensure that the policy in accepting or refusing donations remains robust and appropriate. This is in relation to not only where the funds have come from, but also on restrictions imposed and contract risk. Are you able to recognise the difference between a grant and a contract?  What resources does the charity need to deliver on these restricted grants or contracts and who will pay for these resources to cease once delivered? What are the performance conditions attached and are they under the control of the charity and achievable? If the funding means the charity is the principal and is managing funds distributed to third parties, are the board aware of the amounts involved and risks therein should things go wrong with these third parties?

In a new client we have seen a charity wipe out its unrestricted funds due to the contract risks not being effectively monitored and managed throughout the year.  It was eventually challenged by the auditors, who were aware that the costs and performance conditions were not being met, this meant little entitlement to income as opposed to the management accounts which showed full release of funds monthly. Other risks relate to corporates and the association with these organisations posing a potential reputational risk, or in relation to the commercial terms of the arrangement. It’s important that the board are appropriately updated on such arrangements and have policies and procedures in place to help guide the teams.

And finally VAT and tax. Fundraising activity can give rise to compliance issues for the charity, for instance, sponsorship can be trade if not part of an exempt fundraising event. Therefore is there appropriate oversight of these activities within the charity and appropriate training where necessary to ensure that the activities are directed into the correct entity (with the use of trading subsidiaries as appropriate).

Fundraising Preference Service (FPS)

The Fundraising Preference Service (FPS) allows the public to stop direct marketing communications from charities registered in England, Wales and Northern Ireland that they do not want to hear from. Charities should register with the Fundraising Regulator portal which then means that the charity will receive an email regarding any request from a member of the public to be removed off their database. Are you registered on the portal and are your contact details correct? Perhaps its time to check?

Failure to deal with FPS requests can lead to the charity being publicly named on the Fundraising Regulator website as breaching the Fundraising Code and may lead to an investigation from the Information Commissioner’s Office (ICO) for a GDPR breach or Charity Commission – so could result in investigations and penalties.

Next steps

Consider your key income sources and fundraising plans as a board to ensure that there is appropriate oversight in place. Do you receive the updates and information you need to fulfil your requirements under the Fundraising Code of Practice?

Should  you require assistance with any of the discussion covered in this article, use the form below to contact one of our experts.