The Fundraising Regulator has found that humanitarian charity Penny Appeal committed five breaches of the fundraising code of practice, resulting in a series of recommendations.
Here, Imogen Trafford from our charities, not-for-profit and social enterprises team examines the consequences of failing to adhere to the Fundraising Code, what happened specifically in the case of Penny Appeal and the lessons to be learned by other charities.
Fundraising investigation
In June, the Fundraising Regulator published its summary decision after investigating Penny Appeal’s fundraising methods.
The investigation began after a series of complaints were made over a 12-month period, including:
- Concerns that donations for child sponsorship and water well programs weren’t used as intended.
- Inaccurate recording of donors' intentions.
- Reallocation of funds without donor consent.
- Misleading information about monthly Direct Debit commitments.
- Poor complaints handling.
Regulator’s findings
The investigation found that Penny Appeal’s fundraising literature could mislead donors into believing that their donations were exclusively for a particular child, specific project or preferred location for building a well, when funds were actually distributed to communities and projects more generally. The failure to sufficiently communicate this distinction to donors was treated as a breach of the Code’s sections on misleading donors, treating them fairly and making sure that fundraising doesn’t suggest money is for a restricted purpose, such as exclusively helping a particular child.
In addition, although the Penny Appeal had referred to the ongoing nature of regular monthly donations in its general terms and conditions, the link to this was in very small print in the footer of the website pages. The Regulator found that it was unreasonable to assume that donors would read these terms and conditions before donating. As a result, the Regulator found that the Penny Appeal had failed to clarify in sufficient detail that monthly Direct Debits continued unless cancelled by the donor. This was a breach of the Fundraising Code in treating donors fairly and misleading donors by omitting essential information.
The Regulator also noted that the charity had inadequate record-keeping which prevented donations from being used as intended by their donors.
The Fundraising Regulator ensures public trust and accountability in charitable fundraising in the UK and updates the Code of Fundraising Practice, which all charities must follow. A revised Code is expected in early 2024, with final updates in 2025.
Charities must adhere to the Code of Fundraising Practice and clearly explain how funds will be used. Failure to consistently meet these standards may trigger regulatory actions from the Fundraising Regulator, including:
- Publicly naming the organisation on the Fundraising Regulator’s website as non-compliant.
- Informing the Information Commissioner's Office (ICO) of a potential breach of the Data Protection Act 2018.
- Notifying the Charity Commission of repeated non-compliance, which may be regarded as a serious governance issue.
Lessons to be learned
In the case of Penny Appeal, the Regulator’s recommendations highlight the need to ensure that fundraising material clearly reflects and informs donors that their donations may not be used exclusively for the benefit of a specific individual or project where charities pool money raised through appeals.
The Regulator’s recommendations also emphasise the need to ensure that any administration fees should be transparently outlined in such appeals.
Moreover, where direct debit donations will be taken on a recurring basis indefinitely, it’s insufficient to outline this fact in the general terms and conditions on a charity’s website. This must be made clear to donors at the point at which they donate.
Compliance with the Code is legally required, avoids investigations and allows the use of the fundraising badge to enhance fundraising opportunities.
In the case of Penny Appeal, the several complaints issued also led to additional interventions on the parts of the ICO and Charity Commission, which we’ve briefly touched on below.
Data protection issues
Separately but in addition to the above, the ICO issued an enforcement notice to Penny Appeal in April for breaching Data Protection legislation.
The charity sent daily texts over ten days to 52,179 customers without consent, violating the Data Protection Act 2018 and the Privacy and Electronic Communications Regulations 2003.
Regulatory compliance failings
Again, separate to the issues raised by the Fundraising Regulator but in addition to the above, the Charity Commission also concluded its regulatory compliance case against Penny Appeal after issuing an Official Warning in September 2023.
Through its intervention, the Commission says that it has “secured several improvements to the charity’s governance. This includes advising the trustees to appoint a minute-taker and to record conflicts of interest, which they have evidenced. The trustees have set dates to review third-party contracts and have appointed an external consultant to review the charity’s existing contracts and advise it on best practice. The charity will also terminate its contract with the major supplier that caused a perceived conflict of interest”.
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Given that 98.4% of charities are led by volunteer trustees, it’s easy to see how the Code of Fundraising Practice can be overlooked. However, it’s vital for trustees to comply with their duties and responsibilities.
Our dedicated charity law experts offer tailored guidance on fundraising compliance for trustees who need assistance. We can also support with data protection and regulatory issues.
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