Charities: Fundraising Regulations and Guidance
Posted: Wednesday 21 April 2010
Regulations came into force in Scotland on 1 July 2009 regarding the way in which benevolent fundraising is carried on in Scotland. OSCR has also published guidance on these rules. The rules and the guidance will be of interest to any benevolent body (this goes beyond just charities) and anyone who fundraises for them.
The rules set out:
- the required content of fundraising agreements between benevolent bodies and those who fundraise on their behalf;
- information which should be supplied when funds are sought on behalf of a benevolent body; and
- the circumstances under which a donor can request a refund/ cancellation of donations made or promised.
The rules don’t apply to cash collections or the collection of goods – both of which it is anticipated will be dealt with by the forthcoming Public Benevolent Regulations.
The rules contain some technical language which requires some explanation before we go on to explain what the new changes mean.
Benevolent body means any body, whether or not it is a charity, which has been set up for charitable, benevolent or philanthropic purposes.
Benevolent fundraiser means any benevolent body and any person associated with it, including employees and volunteers.
Commercial participator means any person who carries on a commercial business where some or all of its proceeds will be given to one or more benevolent bodies. Examples used in OSCR’s guidance include (i) a high street retailer who sells Christmas cards from which a proportion of the proceeds is donated to an agreed charity; and (ii) a bank which promotes an ‘affinity’ card.
Professional fundraiser means a person who carries on a fundraising business in return for financial reward e.g. a company which is paid to conduct face-to-face fundraising on behalf of a charity, or a celebrity who makes a fundraising appearance in return for a fee.
Fundraising Agreements
The 2005 Act requires a fundraising agreement to be entered into when:-
- a professional fundraiser seeks money or promises of money on behalf of a benevolent body; or
- a commercial participator states or indicates that some or all of the proceeds of promotional venture are to be given to the benevolent body.
The agreement should be in writing and show:
- the name and address of each party;
- the date the agreement was signed;
- the period the agreement covers;
- any conditions about the termination of or changes to the agreement prior to the agreed end date;
- the main objectives of the agreement and the fundraising methods which will be used;
- if the agreement relates to more than one benevolent body, details of how the parties will decide the proportion of fundraised monies each will receive;
- details of how the parties will determine the amount of remuneration or expenses the professional fundraiser or commercial participator is entitled to receive;
- if the agreement is between a benevolent body and a commercial participator, details of how the parties will determine:-
- the proportion of proceeds from the sale of goods/ services which will be given to the benevolent body; and
- the amount of donations the commercial participator will make to the benevolent body as a result of the sales of goods or services.
If the agreement doesn’t contain all of the required information, then the professional fundraiser or commercial participator cannot enforce it against the benevolent body except by order of the court, nor is it entitled to receive payment or expenses for any activity undertaken in relation to the agreement.
Other Issues addressed in the Regulations
- Information to be provided by fundraisers to donors – information must be given to donors, but the extent of the information to be so provided depends on the method of communication with the donor (oral or written), and whether the solicitation has been made by a benevolent fundraiser, a professional fundraiser or a commercial participator. The Guidance contains a useful flowchart which shows what information should be provided in each such scenario. The information requirements are quite specific – for instance, if a professional fundraiser is being paid, then they should disclose to the donor the actual amount of the remuneration. Note that benevolent fundraisers are not required to follow these rules on the provision of information, but OSCR recommends that they follow the rules anyway, as a matter of good practice.
- Books and records - those who have a fundraising agreement with a benevolent body must keep books and records in connection with the agreement and make these available on request to the benevolent body.
- Interdict - where there is no written agreement, the rules permit the benevolent body or OSCR to seek an interdict to stop the professional fundraiser or commercial participator from continuing to fundraise without an agreement.
- Right to refund - donors can now seek refunds of payments made or cancel agreements to make payments at a later date where these have been solicited by professional fundraisers or commercial participators, provided certain conditions are met. This right covers donations of £100 or more, but can depend on (i) by what method payment was made; and (ii) how the donation was ‘solicited’ in the first place. The right to request a refund must be exercised within 7 days of the solicitation, and must be in writing (but note this includes electronic communications). Interestingly, the 7 day period does not run from the date the donation is made (which, theoretically, could be after the solicitation). There are certain circumstances where the right to a refund does not apply – a couple of the most important exceptions are:-
- where the donation is made as a result of a face-to-face solicitation; or
- where the solicitation is made by the benevolent body itself.
Where a right of refund applies, then this must be made clear at the time of the solicitation.
- Transfer of money - any money raised should be transferred to the benevolent body as soon as possible and in any event within 28 days of receipt.
- Prevention of unauthorised fundraising – the Act allows a benevolent body to take steps to prevent unauthorised fundraising – the body must first notify the person to request they stop fundraising. If that fails, then the benevolent body can apply to the court for an interdict. OSCR also has powers to act in such situations.
Breach
Failure to comply with a number of the requirements in the Regulation can lead to a fine of up to £5,000 being imposed.
Our view
The intention of the rules is to provide benevolent organisations with greater certainty when entering into arrangements with professional fundraisers and commercial participators. There will however be a cost to charities and fundraisers alike in terms of ensuring their arrangements meet the requirements. It remains to be seen whether this cost will be outweighed by the benefits which the rules seek to bring.
Further Information
To access the Regulations and Guidance, go to www.oscr.org.uk/fundraising.stm
Morton Fraser’s Charities Team is led by Adrian Bell and has considerable experience in the formation of, and provision of ongoing advice to charities in Scotland including advising on incorporation, mergers and regulatory matters. The team adopts a cross-departmental approach drawing on both corporate/commercial experience and private client trust experience.
Contact Lauren Scott, Associate
