The Sunday Times has criticised charities for spending too much on fundraising, after a Charity Commission investigation found a small number of organisations had spent over 60 per cent of their income on direct mail.

The newspaper published two headlines which appeared to suggest the sector as a whole was spending too much on fundraising - Charities spend up to 90% of income on mailshots and Charities’ costs eat up 78% of donations - before making clear in the article that only a handful of charities were affected.

The story came after the newspaper was given exclusive access to Charity Commission research. The regulator identified ten registered charities that used direct mailing as their principal source of fundraising.

The data, from May 2015, showed that of the ten charities examined, the percentage of income raised (including by gift aid), and expended on directly raising those funds varied from 30 per cent to 90 per cent.

The accounts, the most recently available of the charities identified, also apportion some of the mailing costs to charitable activity.

The total cost of mailing as a percentage of income rises to a minimum of 63 per cent when this additional cost is added in.

The figures from the Charity Commission show that of these ten charities, an aggregate average of 78 per cent of total voluntary income was spent on direct mail campaigns.

The Commission’s analysis looked at charities including the Hungry Children’s Project, which spent 90 per cent of voluntary income on fundraising, and the Child Survival Fund, which spent 81 per cent of voluntary income on fundraising. The Hungry Children Project was shut down during the Commission probe.

The Sunday Times found that several of the charities owed hundreds of thousands of pounds to a Washington-based marketing company, the Market Development Group.

Speaking on Radio 4’s Today show at the weekend, David Holdsworth, chief operating officer of the Charity Commission, said that this practice “isn’t right” and that’s why the Commission took action in these cases, and engaged with the charities.

He said: “We’ve required a series of actions by the charities, such as reducing the cost of fundraising, ensuring they are more transparent with the public and donors, ensuring that the information available to choose to donate or not is very clear, and shows what percentage of the donation will end up with the end beneficiary of the charity.”

He said that there is an absolute requirement for a solicitation statement to appear in such publicity and mailings to show the percentage which is going to the cause.

When asked if the regulator should be banning this practice, he responded: “We’re not in a position to ban it, and regulation for fundraising is a self-regulation matter. It is why the new fundraising regulator is in the process of setting up at the moment.”

“What we can do as the Commission regulator is where we see issues around governance, and around public trust and confidence, we are very closely monitoring this and we will intervene.”

Charities 'not typical' 

Speaking alongside Holdsworth was Karl Wilding, director of public policy and volunteering at NCVO. Wilding agreed agreed with Holdsworth that these practices are not right.

He said: “These charities were not well run, but I don’t think they are typical and that is the point that is quite important.”
He said that the vast majority of charities that fundraise take it very seriously, and “don’t set out to spend money as these charities did on fundraising costs”.

Wilding said that a limit to how much charities can spend on fundraising is not the way forwards. But said: “First of all I would argue to you that in some cases there are legitimate reasons why charities would have high fundraising costs in any particular year”.

He added that he would be concerned if a charity had high fundraising costs like those identified by the Commission for a number of years, so rather than a ban, he would argue that charities are “absolutely transparent about their fundraising costs and donors should not be afraid of asking difficult questions”.

But, he said, the really important question is “not how low your overheads or your fundraising costs are”, but is “how big is your impact? And that is what donors should be asking all the time”.

 

A spokeswoman from NCVO told Civil Society News that the charities mentioned by the Commission were not typical of larger professionally run charities, nor of smaller local charities.

She said: “They are clearly charities which do very little actual work, it turns out, and it is absolutely right that the Commission is taking some action against them. They shouldn’t be put in the same camp as the charities that do lots of good work essentially. What is important to remember is that this is a really small proportion of some 160,000 charities in total. It is important that people aren’t unduly alarmed. It is very rare and nothing to do with the normal legitimate charities.”

Peter Lewis, chief executive of the Institute of Fundraising, responded to the article. He said where such practice is exposed, the IoF and its members "are clear that such practice is never acceptable and where it is exposed, action must always be taken to stop it".

He said: “It is right that charities will sometimes choose to partner with fundraising companies to work on their behalf.  A charity can benefit from a partner agency’s experience, expertise and economies of scale. It is essential that this is done with proper oversight with trustees ensuring that they are getting value for money for their investment and ensuring that any partner working on their behalf has fully embedded the values of the charity into their activities.

“Direct marketing for charities is generally undertaken to find long-term supporters for a charity. The initial cost of a campaign may be significant compared to the amount of donations in the first year, but many of those initial supporters will then stay with that charity for many years to come, continuing to donate, supporting the charity through events and campaigns, and in that way contributing much more to the charity over the course of several years all as a result  of the initial campaign, and at very little extra cost."