UPDATED: Charity complains after probe finds it spent 6% of income on end cause

31 Mar 2023 News

An investigation by the Charity Commission has found that a hospice charity spent 6% of the money it raised on its end cause.

The regulator found “serious misconduct and/or mismanagement” at Hospice Aid UK in its second statutory inquiry into the charity, which concluded today.

Its latest investigation looked at the charity’s direct mailing agreement with specialist fundraising agency Euro DM.

It found that the funds generated “were consumed almost entirely by the direct costs and fees of running the fundraising activity”.

“Between March 2013 and July 2020, the charity raised over £3.2m but the direct costs and fees of this fundraising came to just over £3m leaving less than 6% for charitable activities,” the Commission reported.

The charity said it was challenging the findings from the inquiry.

‘Woefully small proportion’ spend on charitable activities

The Commission previously investigated Hospice Aid UK and reported in 2016 that the Kent-based charity had spent most of its income on a seven-year agreement with London-based fundraising agency Euro DM.

It opened a second inquiry after a review of the charity’s 2018 accounts showed that the trustees had renewed its “costly direct mailing agreement” with Euro DM.

The regulator’s second inquiry found that the trustees did not undertake due diligence and review the fundraising agency’s past performance before renewing the agreement.

It also found “an ongoing lack of transparency in the charity’s accounts about the fundraising agreement, the terms of which were not in the charity’s best interests”, which it said amounts to misconduct and/or mismanagement by the trustees.

The Commission also reported “poor financial management, including trustees’ failure to submit accurate sets of accounts or a staff appraisal policy”.

Amy Spiller, head of investigations at the Commission, said: “In this case, a woefully small proportion of funds generously donated by the public in support of hospices reached the intended cause. This was a direct result of the trustees’ misconduct and mismanagement.

“Cases like this risk seriously undermining public trust and confidence as well as people’s willingness to donate to the thousands of well-run charities doing great work across the country.

“This is not the first time the trustees of Hospice Aid UK have let their charity down. We will monitor their activities closely and will not hesitate to take firm action should there be any further failing.”

Charity challenging outcome

Hospice Aid UK said it was challenging the grounds for the Commission’s inquiry through its legal representatives at Keystone Law. It previously said it would do so when the investigation opened.

Jo Gratze, founder and chief executive at the charity, said they had complained to the Commission about “factual inadequacies in the inquiry report”. They also said the charity was challenging the inquiry’s due process and its outcome.

“The inquiry was opened due to an accounting error which fails to properly record its charitable expenditure which in the 2021 accounts amounted to 82% of its income going to support patients in hospices and not 6% as quoted in the Charity Commission’s press release. During the inquiry, and despite two years of Covid, the charity still managed to make over £250,000 of grants to hospice[s].

“Whilst we have always worked to the highest standards, Hospice Aid UK is a small charity with limited resources and lay trusteeship which relies on professional advice. We believe the findings in the inquiry are factually incorrect and based on historical accounting errors which have long been corrected. The inquiry does not take into consideration our size nor performance based on limited staffing and funds and directly compares us to large well-resourced charities.

“We will continue to prove to the Commission that Hospice Aid UK works to the highest standards of charity best practice and focus on overcoming the reputational and financial damage caused by this inquiry over the last 3.5 years so we can provide grants and emergency funding to hospices who are desperately in need of support.”

CIoF: Trustees should ‘ensure that fundraising spend is appropriate’

The Chartered Institute of Fundraising (CIoF), of which Euro DM is a corporate member, told Civil Society News it is important for trustees to have sufficient oversight of fundraising spend.

“For thousands of charities across the country fundraising is the most reliable and effective way of generating income, delivering a healthy return on investment so that charities can make the biggest difference to their cause,” said Daniel Fluskey, director of policy and communications.

“The levels of return on fundraising spend will differ between charities and types of fundraising so while there can’t be a one-size fits all approach it’s important that trustees have sufficient oversight to ensure that fundraising spend is appropriate and supported to deliver the most for their charity.”

Civil Society News also asked Euro DM to comment, but it has yet to respond.

Editor's note: This article has been updated to include a comment from Hospice Aid UK.

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