The Charity Commission has warned trustees to review their commercial relationships, in light of recent media scrutiny of commercial arrangements adopted by some charities, including Age UK.
Age UK faced widespread criticism over a number of arrangements – including a deal with E-On in which the charity encouraged beneficiaries to sign up to energy packages in return for an annual lump sum from the energy company.
A statement by the regulator today said: “Charities have many legitimate commercial arrangements raising funds for good works, however trustees need to protect the reputation of their charity and ensure their actions reflect the values of their charity as well as meeting legal requirements.”
The alert, sent to 1,700 charities with commercial arrangements, sets out expectations for trustees, including that they “check for conflicts of interest; ensure arrangements are properly documented and reviewed regularly; and, that the commercial benefits to the charity are made clear”.
The waning has prompted critical headlines by a number of national newspapers – including the Sunday Times which yesterday published an editorial headlined “We’ve been charitable to charities for too long”.
“Some people are happy to use a credit card costing more if a charity is benefiting. Many are not," the newspaper said. "Elderly folk who took up Age UK’s E.ON energy offer thought they were getting the cheapest deal. They were not. Charities need to heed the warning. Without the trust of the public they will perish.”
William Shawcross, chair of the Charity Commission, said the alert “should prompt trustees to check their ties to commercial operations”.
“These bring in important income for charities and fund valuable work for beneficiaries,” he said. “It is essential, however, that any arrangements are transparent and that they do not jeopardise the reputation of the charity. The public expects charities to abide by the values they claim to represent.”
The alert comes as Shawcross delivered a speech this morning urging charities to stop “hounding vulnerable donors” and reiterating previous warnings that charities could soon be forced to pay for their regulator, after cuts to its funding by half.
However Andrew O'Brien, head of policy and engagement at the Charity Finance Group, said that charities had been pushed to adopt more commercial approaches, but now they were doing so they risked criticism. He said the Commission's approach could lead charities to "throw the baby out with the bathwater".
"Over the past decade or so we have seen a movement towards charities trying to build more secure income streams," he said. "This has become more important in the midst of a challenging financial environment. Part of that process has been working more closely with commercial organisations in order to support beneficiaries.
"Of course charities need to think carefully about their partnerships with other entities, but we also need to make sure that we have a balanced conversation.
"Commercial partnerships have their place in the financial sustainability of charities and successive governments have called on the sector to be more entrepreneurial. We must not throw out the baby with the bathwater."
