ACCC Raises Concerns With Charities’ Transparency Around Third-Party Fundraising

New research has raised concerns about the level of transparency by some charities around third-party fundraising, and the disclosure of the size and structure of fees paid to these agencies.

The independent research report was released on Monday by The Australian Competition and Consumer Commission (ACCC), as part of its recent focus on consumer issues arising from commission-based sales.

Consulting firm Frost & Sullivan prepared the report based on interviews with “three fundraising agencies, one industry association, 14 charities and 13 individuals who currently or have recently worked in commission-based fundraising”.

Frost & Sullivan also utilised data from an online survey of 504 individual donors, who were recently solicited to donate to a charity.

“This year we have looked closely at misleading behaviour driven by sales commissions, including those paid to third-party marketing firms, particularly in industries that enjoy a high level of trust and where commissions may not be expected,” ACCC chairman Rod Sims said.

“The charity sector plays an important role in delivering services and funds often to vulnerable members of our community. However, like all Australian businesses, charities need to ensure that consumers are well informed, and there is transparency to consumers when third parties or commissions are involved.”

The report found that for some charities which were outsourcing their fundraising, third-party marketing firms were earning fees for each donor that signed up from their face-to-face or telemarketing approach.

“The multiple of monthly donations paid to the agency can range from eight to 17 times, depending on the agency and the channel through which the donor was acquired,” the report said.

“This multiple of monthly donations that is agreed on between charity and fundraising agency has increased in recent years, as fundraising agencies move away from using independent contractors as individual fundraisers, who are compensated only on a success basis, towards a casual/full employment model in engaging individual.”

Sims said the increased level of money given to these agencies raised some concerns.

“Not all charities use third-party fundraising agencies, but this research raises some concerns about the level of transparency by some charitable organisations around these relationships and disclosure regarding the size and structure of fees paid to these agencies,” he said.

“We found it surprising just how many multiples of the monthly donations some charities were paying third party fundraisers for face-to-face or telemarketing services.”

While the ACCC does not regulate the charity sector, Sims said the commission had a role to play in ensuring charities obeyed Australian Consumer Law (ACL).

“The ACCC will continue to engage with the sector and is urging charities to increase transparency to consumers when utilising the services of commercial fundraising agencies,” he said.

“Consumers who want to donate are advised to contact the charity and ask how they can donate directly.”

The report concluded that charities needed to utilise third-party fundraising to obtain enough money to survive, but were also working towards greater transparency in the process.

“Regular giving enables charities to plan long-term and ensure stability of operations. In this context, outsourced face-to-face fundraising is acknowledged by the Australian charity sector as the most cost-efficient way to obtain large volumes of new donors,” the report said.

“Most industry stakeholders agree that there can be some negative perceptions of members of the public towards being pressured by individual [commission-based] fundraisers. This may stem in part… to high-pressure ‘sales’ tactics [used]. However, the actual incidence of complaints from members of the public to charities or agencies appears to be relatively low.

“[But] based on Frost & Sullivan’s interviews, many charities are taking a more proactive approach to overseeing the recruitment, remuneration and training practices of fundraising agencies that they engage.”

The Public Fundraising Regulatory Association (PFRA) said this report highlighted areas that were already identified and being addressed by the sector.

PFRA CEO Peter Hills-Jones, said delivering even greater transparency and trust across face-to-face fundraising was the key priority for the peak regulatory body.

“Building trust, whether with donors in the street or with regulatory agencies such as the ACCC, is the central mission of the PFRA,” Hills-Jones said.

“We were created three years ago by a partnership of charities and fundraising agencies to ensure the public have confidence in face-to-face fundraising, which is absolutely vital… We are pleased to see that research included in the report shows that 87 per cent of donors viewed their last interaction with an individual fundraiser to be a positive one.”

Hills-Jones said now that PFRA had been provided with these findings, it would “carefully consider its conclusions”.

“We have actively engaged with the ACCC over the past few months, and they’ve acknowledged the positive approach the PFRA has taken throughout this entire process. We’ll now be moving forward to the next stage of the discussions, where we anticipate building a strong partnership that can deliver real improvements,” he said.

“The PFRA remains confident that self-regulation can deliver higher standards without requiring the direct intervention of state regulators, with the inevitable cost to taxpayers that can bring.”