On 31 March the Charity Commission published an Inquiry report into a charity, Hospice Aid UK.
The inquiry followed a series of warnings from the Commission about poor quality accounts and reports and extremely high fundraising costs. Between 2014 and 2018 less than 1% of the charity’s recorded income was spent on its charitable purposes.
The inquiry found that there had been serious misconduct and mismanagement in the administration of the charity by the trustees. It investigated the following concerns:
• The charity had entered into a disadvantageous fundraising agreement that put it at risk of unlimited liability.
• The fundraising agreements generated substantial funds: £3,231,962 but involved costs of £3,041,821 leaving only £190,141 for the charity’s overheads and charitable purposes.
• The charity had not complied with rules about professional fundraisers and misled the public that 100% of donations would be used for charitable purposes.
• Charity trustees had failed both to follow Commission directions going back several years, and to comply with general charitable trustee duties to act in the best interests of charity.
So how is a charity to know what is reasonable to spend when fundraising?
There are no set rules in legislation – trustees are instead bound by general duties of charity trustees to act in the best interests of the charity, and more specific duties in the Professional Fundraising rules.
In its guidance CC20 the Charity Commission sets out considerations and sums it up nicely “You and your co-trustees must be satisfied that your fundraising costs are in your charity’s best interests. You should be able to explain your costs and be transparent about how money is spent and how your charity benefits.” The guidance emphasises that any costs of fundraising must be proportional and justified as being in the best interests of the charity.
If this case has raised any questions, our nationwide team of charity solicitors would be happy to help.
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