Charities and honesty

Headings on this page :

The good news
The bad news
'Pretend' (bogus) charities
Genuine charities
An example
Safeguards - charity law and the Charity Commission
Related pages

This page deals with the sensitive issue of charities and honesty.

As well as dealing with honesty and dishonesty per se, we've included other (less serious) problems such as inefficiency and the unintentional breaking of rules. In other words, we deal here with anything that hasn't been done 'properly'.

Much of the information below applies equally well to other organisations - in the public sector and the private sector. Things can go wrong in any type of organisation and there's always a need for some ongoing scrutiny.

Charities are unusual in bringing out the best and worst in people :

The "best" includes innumerable cases of generosity - of money, goods and time (volunteers).
The "worst" includes callous people who exploit this generosity - for example stealing charity collection tins, or bags of clothes destined for charity shops.

The good news

We aren't intending to put people off charities. Cases of charity fraud are comparatively rare. Nevertheless, it pays to be aware of the problems. For example see the page on scams, cons etc.

Credit cards (courtesy of freeimages.co.uk) Reducing fraud: Thankfully, there are various ways of reducing the chance of fraud, for example :

With cash donations, if you switch from giving notes/coins to donating by a more secure method, the risk of fraud is negligible. For example make your donation by cheque, card or direct debit. Better still, set up a direct debit with 'Gift Aid', so that the charity can reclaim the tax on your behalf.
With clothing (etc) donations, if you take your unwanted goods personally to a charity shop (when it's open), you can virtually guarantee that the revenue from the clothes goes to the good cause. Furthermore, you maximise the proceeds raised - compared with using house-to-house collections.

The bad news

Alas, a few charities do act improperly and there have been cases of fraud.

Misleading clothing collection leaflet If we were dealing with charities in general, we might not devote a whole page to the question of honesty - because fraud (and related problems) aren't common.

However, we deal primarily with 'charitable' clothing collections. This relatively minor aspect of charity fundraising is unique - it's riddled with misleading and/or fraudulent activities. Surveys have shown that around half of 'charitable' clothing collections are misleading or bogus. For example see headington.org.uk.

We've split the issue of 'problems with charities' into two categories :

'pretend' (ie bogus) charities
genuine charities.

'Pretend' (bogus) charities

These are individuals or organisations which are not registered as charities. They're potentially bogus, pretending to be charities (or similar good causes). They range from :

one individual in a shopping centre carrying out a 'street collection' - asking passers-by to donate a few pence for a specified 'good cause', to
sophisticated, organised scams - for example doing direct-marketing postal appeals or using a website.

With these scams, the proceeds appear to go to a genuine good cause, but most or all of them disappear into the pockets of the people concerned. Often it's criminal deception/fraud, plain-and-simple.

This is a particular problem with clothing collections - some commercial clothing collectors distribute collection leaflets/bags which give the misleading impression that they're helping a charitable cause. Some even use the name of a charity.

Genuine charities

By 'genuine' we mean an organisation which has been vetted by the Charity Commission, formally registered by them as a charity, and given a 'registered charity number'.

Thankfully, most registered charities behave properly.

Nevertheless, there have been problems with some registered charities.

We've divided the problems into the following four categories, in increasing order of seriousness :

Inefficiency :
This can be due to inexperience, poor management/administration, or receiving poor advice. For example with fundraising there are sometimes concerns over the pence-in-the-pound raised - in other words the ratio of (a) the net proceeds going to the good cause, versus (b) the gross income. In these cases, they may not be breaking any 'rules', and there may not be any dishonesty involved. However, action is still needed to deal with the problem.
Breaking the rules unintentionally :
The rules concerning charity law and finance are complex. It's easy to fall foul of the rules unintentionally. This is a particular problem for small, fledgling charities. For example, we've encountered a number of small but well-intentioned charities which carry out clothing collections and haven't realised they needed a licence. Strictly speaking they're committing a criminal offence under the 1939 Act. However, in these cases what's needed is help and advice for them on licensing (rather than prosecution). We've helped several charities in this way.
Breaking the rules intentionally, but 'honestly' :
Example: Some honest charities which do clothing collections without a licence have admitted that they know they ought to have a licence. But they say they find the licensing system too bureaucratic. Unfortunately their well-intentioned but maverick approach undermines the licensing system and makes it more difficult to stop bogus collectors.
Dishonesty :
In this final (worst) category are cases of people in charities who knowingly taking money they're not entitled to - in other words fraud, theft and the like. Clearly these are criminal acts and are inexcusable.

An example

It can be crucial to understand the differences between the four categories of "problems" outlined in the bullets above.

The following is an example of this. A small registered charity had an informal arrangement with a self-employed commercial clothing collector. Under this arrangement, the collector used the charity's name, logo etc on his leaflets, and in return he undertook to donate an agreed sum to them every month. However, the clothes were being collected without a licence - a criminal offence.

The Charity Commission investigated and came to two conclusions :

Firstly they accepted that there had been no dishonesty by the charity.
However, their second conclusion was that the charity had acted improperly by
(a) not having an enforceable, written agreement with the collector, and
(b) not having a collection licence.

After this, the charity maintained that they had "done nothing wrong" and had been "cleared" by the Charity Commission. The charity said that the investigation had been unnecessary and a waste of time. In this case it all depends on the semantics of what you mean by "doing something wrong". The charity had broken the law in several ways, albeit unintentionally. Sadly, in the end it emerged that, although the collector had been using the charity's name for several months, he never paid any money to the charity.

Safeguards - charity law and the Charity Commission

Notes and coins (courtesy of freeimages.co.uk) There are various safeguards built into charity law designed to reduce or eliminate fraud - eg rules on trustees, conflict of interest, the keeping of accounts and annual auditing.

Furthermore, the Charity Commission has compiled codes of practice to encourage integrity. For instance one simple recommendation they make is that charities should try to ensure that at least two people are present whenever incoming post is opened (bearing in mind that envelopes sometimes contain cash donations).

The Charity Commission has strong powers to deal with any improper behaviour by a charity. Sometimes the Commission intervenes pro-actively. On other occasions they act because of concerns brought to their attention by third parties, such as other regulators, the media or members of the public. The Commission then conducts an inquiry and produces a report. The charity may be cleared of any wrongdoing, or may be advised/instructed to take certain actions. In extreme cases, the assets of a charity can be frozen and the charity can even be wound up.

Question mark symbol You can check whether a charity is genuine by looking it up on the Charity Commission website (or by telephoning the Commission).