It's time to change the rules to ensure all fundraisers working on behalf of charities can be effectively inspected and accredited, says David Ainsworth.

It doesn’t look good. A charity signs a deal with a fundraising agency that channels 80 per cent of the cash raised to the agency, and only 20 per cent to the charity. And not just one charity, either. It’s happened many times before.

In the case today of Afghan Heroes, the administrator is purportedly trying to claw back £2.9m from the fundraising agency in question. Previously Our Local Heroes, saw a substantial amount of money go to fundraisers.

I think it’s time for a change in the rules to stop this kind of deal happening. Charities should not be permitted to work with a fundraising supplier unless that supplier holds a proper licence and submits to – and pays for – inspection.

The current regime is far too laissez-faire, and despite the criticism of charities’ relationship with agencies over the last year, charities are still free to work with any agency they want, without scrutiny, and the agencies and their relationships with charities are likely to be subject to minimal scrutiny.

The Charity Commission looked into Our Local Heroes, but it didn’t open a statutory inquiry. This sent the wrong message. It indicated that the regulator is too willing to tolerate charities which sign questionable deals with commercial suppliers. Although the Commission has a difficult job. It says it is hamstrung here because the primacy of trustees is paramount, and it cannot intervene if they want to make such deals. It only regulates charities, not agencies.

I’ve previously looked into other charities’ relationship with fundraising agencies, and it’s obvious that it’s possible for small charities and big fundraising agencies to set up deals especially to rip off the public, at little risk of legal or regulatory sanction. In one case a fundraiser working with a large number of charities kept almost all the donations and the charities just got the Gift Aid.

It was still a good deal for the charities – they got big sums at no risk – but the donors lost out. And other charities lost out too because the reputation of the sector was being tarnished by shysters.

In another case, the charity set up an agency to fundraise on its behalf and then paid it huge sums out of the cash raised. There was eventually a lawsuit, but the people involved walked away rich.

Even when we leave aside the more questionable deals, there are still issues to be addressed. Charities’ relationship with fundraising agencies lay at the root of all last year’s criticism. The failure of many charities to monitor their relationship with commercial suppliers was the heart of the issues.

Surely, though, the new Fundraising Regulator will step in to clamp down on agencies which use the hard sell? After all, it was set up because of fundraising practice which happened in agencies.

No, it appears not. The regulator has been clear that suppliers will only come under its remit if they choose to do so, leaving the door open to a possible Wild West of unregulated high-pressure merchants.

Just recently, Dominic Will, managing director of Home Fundraising, set out some proposals for what he’d like to see:

What we need is an independently audited system that enables charities to work with approved agencies, with policies in place for all aspects of their work, ranging from employment practices and service level agreements to data security measures and quality assurance schemes.

This needs to be a robust accreditation system demanding rigorous standards from anyone in fundraising, setting the framework for recognisable compliance programmes. A system that stands up to scrutiny. If the sector fully commits and invests in this approach, that investment will bring about long-term positive returns.

I agree. There is little point in cracking down on charities when the worst and most worrying practices took place in agencies, when it is so easy for those agencies to spring up and shut down, and when – despite all the criticism – they are still subject to little scrutiny.

It seems hard, though, to impose much order on agencies directly. It will have to be done through charities.

We already require charities only to work with licensed investment professionals, and only with licensed financial practitioners. The majority of supplies to the sector need to be accredited and inspected in some way. But the fundraising regime is much laxer.

To protect the reputation of the sector, we essentially need to ensure that charities can only work with licensed and inspected agencies, who charge reasonable fees, who meet agreed quality standards, and who pay for their own inspection.