Subcontracts for fundraising: how to ensure compliance
The Fundraising Regulator (FR) regulates charity fundraising in England and Wales. On 3 October 2023, the FR published a blog advising charity trustees to ask their fundraising teams to review their fundraising arrangements.
Jessie Melroy, trainee solicitor in our charities team, gives an overview of the FR’s guidance and how this will affect your charity.
This advice has been issued due to worries that some third-party fundraising organisations are using subcontractors who are not necessarily complying with the code of fundraising practice (the Code).
Concerns include subcontractors using commission-based payments which can encourage high-pressure sales tactics and insufficient training of staff to understand the rules that apply to fundraising for charities.
What is the code of fundraising practice?
The Code sets the standard that applies to fundraising carried out by charities and third-party fundraisers in the UK.
If a charity has a contract in place with a third-party fundraising agency and that agency is subcontracting, there is a risk that the standard of the Code may not be imposed on those subcontractors unless the charity requires it from their agency.
What can a charity do to ensure they are Code compliant?
When a charity is using a third party to carry out fundraising, they should ensure a contract is in place. Within this contract there should be a provision that requires the Code to be complied with both by the fundraiser and any sub-contractor it may use.
Trustees need to know who is carrying out fundraising on behalf of the charity and what they are doing to comply with the Code.
This compliance should be regularly monitored by the charity and the method that is to be used to monitor Code compliance should be included in the contract.
What does this mean for charity trustees?
The trustees are responsible for directing a charity’s affairs, this includes having oversight of fundraising arrangements and ensuring any fundraising is carried out in an effective, legal and responsible way.
The Charity Commission sets out 6 principles that trustees should follow in relation to fundraising:
- Planning effectively
- Supervising fundraisers
- Protecting the charity’s reputation, money and other assets
- Ensuring compliance with laws and regulations
- Following the recognised standards that apply to your charity’s fundraising
- Being open and accountable
It is necessary for trustees to consider the Code when governing their charity. Trustees have the overall responsibility for the fundraising activities of the charity even when this has been delegated to a third party.
So, this means that if the charity is using a third-party fundraising organisation to conduct fundraising for the charity, the trustees will still need to oversee that fundraising is being done in the best interests of that charity and in accordance with the Code. It is not enough to delegate this to someone else.
What steps should trustees take?
Selection process: When selecting a third-party fundraiser, trustees need to consider the reputation of the charity. Controversial fundraising campaigns could have an effect on the charity’s reputation and this, in turn, could affect the support the charity receives.
Having the charity’s best interests at the forefront of fundraising campaigns will help trustees to select third-party fundraisers that will further the objectives of the charity and are aligned with its values.
Receipt of funds raised: Trustees need to ensure that the charity receives all the money that has been raised.
When selecting a fundraising organisation, trustees will need to pay special attention to any contractual provisions that permit commission-based payments and should consider whether other fee structures can be negotiated.
Commission-based payments should only be used if all other options have been explored and cannot be used. If a commission is going to be paid, measures must be in place to prevent excessive payments.
Monitoring and oversight: It is important that all the fundraising arrangements are clearly set out in contracts and are routinely monitored by a specified method.
Self-report: If a trustee thinks their charity has breached the Code, the board should self-report concerns about their fundraising practices or those within their supply chain.
What happens next?
The FR has plans to produce further guidance and is considering whether the Code needs to be amended. The new Code is anticipated to be published by early 2025.