Charity fundraising supply chains and ESG

What matters

What matters next

“Who steals my purse steals trash; ’tis something, nothing; ’twas mine, ’tis his, and has been slave to thousands; But he that filches from me my good name Robs me of that which not enriches him, And makes me poor indeed.” Shakespeare, Othello Act 3, Scene 3

The primary duty of any board of trustees is to ensure it advances the charity’s purposes, but without maintaining a good reputation which is hard-earned over time it’s unlikely any charity will enjoy the trust and support of the public and other funders that is required to enable it to continue its work.

Fundraising malpractice 

Investigative journalism has recently uncovered disturbing hard-sell tactics to raise funds used by third party companies in the name of charities (but of which the charities were unaware), which included lies and pressure-selling on doorsteps to get people to sign up to direct debit payments, and new recruits being told to “trick” people in doorstep pitches for charity sign-ups.

This echoes the unacceptable fundraising practices highlighted by the press back in 2015 when vulnerable people were targeted and which led to an inquiry into fundraising in the charitable sector, to legislative change and to the creation of the Fundraising Regulator, which exhorts charities to follow four key principles – fundraising which is legal, open, honest and respectful.

In the most recent incident of malpractice, two charities had contracted with a professional fundraising company which is registered with the Fundraising Regulator - but that company had sub-contracted delivery of the fundraising services to another company, which in turn had sub-contracted to the two companies at the centre of the allegations, none of which were registered with the Regulator. 

Fundraising regulation in England, Wales and Northern Ireland

The Regulator is charged with upholding and reviewing the Code of Fundraising Practice which sets the standards that apply to fundraising carried out by all charitable institutions and third party fundraisers in the UK, albeit the Regulator does not have statutory powers to sanction fundraising organisations if they are found to be non-compliant. 

The code requires charities to make sure that any paid third-party fundraisers or commercial partners they work with keep to the code, and to make all reasonable efforts to monitor whether paid third-party fundraisers (or commercial partners) are keeping to the agreement made with them (including the conditions of the contract which relate to keeping to the code).

For the purpose of the code, “making all reasonable efforts” means that charities must carry out effective and proportionate monitoring. This may include:

  • making sure the charity’s values are reflected in: 
    • the policies, performance objectives and indicators of the paid third-party fundraiser or commercial partner; and
    • the incentives of the paid third-party fundraiser or commercial partner, where these apply;
  • developing clear reporting requirements with the other organisation and regularly reviewing their progress against agreed targets relating to performance, quality assurance and their responsibilities under the law and the code; 
  • defining how monitoring will be carried out, including how often, based on an assessment of the risk posed by the fundraising activity; 
  • approving and regularly reviewing training on keeping to the code, including frequently watching this training being delivered;
  • authorising content and materials for training; 
  • regularly carrying out (and recording the results of) call monitoring, mystery shopping, site visits or shadowing with the other organisation’s fundraisers;
  • setting out a clear policy for handling complaints and feedback, including the time frames, the procedure for making a complaint internally and taking a complaint further, and the procedure for transferring information between your charitable institution and the other organisation; 
  • setting out a clear internal procedure for members of staff and volunteers to report any concerns they have about their organisation’s fundraising practice; and
  • agreeing an action plan with the other organisation to deal with any concerns that are identified.  

Charity Commission guidance 

All charity boards should be familiar with Charity Commission guidance CC20 Charity Fundraising: a guide to trustee duties Charity fundraising: a guide to trustee duties - GOV.UK (www.gov.uk) updated in 2022, and with the helpful accompanying checklist, “Taking responsibility for our charity’s fundraising: a checklist for trustees” CC20_Checklist.odt (live.com)

Legislative requirements

The commission’s guidance reminds charities that where they use a professional fundraiser to raise funds on their behalf, specific legal rules apply which require:

  • written agreements between charities and professional fundraisers which comply with specific requirements
  • professional fundraisers to make a solicitation statement satisfying certain requirements – charity staff paid to fundraise in public places are also required to make a solicitation statement

And all charities whose annual accounts must be audited, essentially those whose annual income exceeds £1 million, must ensure their annual report contains prescribed statements, which include:

  • the approach taken by the charity to activities by the charity or by any person on behalf of the charity for the purpose of fundraising, and in particular whether a professional fund-raiser or commercial participator carried on any of those activities;
  • any failure to comply with any voluntary scheme for regulating fund-raising, or any voluntary standard of fundraising;
  • whether the charity monitored activities carried on by any person on behalf of the charity for the purpose of fundraising, and, if so, how it did so;
  • the number of complaints received by the charity or a person acting on its behalf about activities by the charity or by a person on behalf of the charity for the purpose of fundraising;
  • in the course of, or in connection with, such activities, what the charity has done to protect vulnerable people and other members of the public from unreasonable intrusion on a person's privacy; unreasonably persistent approaches to solicit money on behalf of the charity, or placing undue pressure on a person to give money.

Supply chain scrutiny 

The requirement to provide these statements is a “nudge” towards good fundraising practice, and candour in acknowledging and addressing shortcomings.  

But this latest example of fundraising malpractice highlights the importance of charities ensuring that contractual arrangements with external fundraisers cover those entities with which those fundraisers in turn sub-contract to carry out part or all of the services, perhaps with contractual provision requiring those organisations also to be registered with the Regulator. 

And perhaps a liquidated damages clause or an indemnity provision would help to focus the mind of a contracted fundraiser, to ensure quality throughout the supply chain.

ESG

Some commentators are beginning to question whether ESG is a passing fad, asking for example, whether companies will backtrack or fortify their climate commitments. But do charities have a choice? 

One of the charities for whom funds were being raised helps orphans, vulnerable children and children at risk of abandonment to lead a full life, as well as education and medical care and emergency relief.  

In the name of that charity sub-contracted fundraisers were going door to door, opening conversations with pitches to "make sure no child grows up alone" but ending them by asking the person their name, then at the next door using that name to give a false impression. "I'm sure, just like Elton and all the rest of your neighbours, we can count on your support," said the fundraiser, despite having had no sign-ups, and saying, incorrectly, that a woman's neighbours had chosen to join a "higher" payment plan of £5 a week, and between door-knocks, excitedly describing the names gathered after each conversation as "ammo" to use later.

Surely the end cannot justify the means.  

Shoosmiths has developed a free-of-charge audit compliance tool to help all organisations, including charities, to understand how they appear to measure up against standards imposed by legislation, industry conventions, and increasingly, stakeholder expectations, including in relation to supply chain management ESG 360 | Shoosmiths lawyers.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2024.

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