26/02/10

By Andrew Holt

The Charity Commission has published a report on its Inquiries into Dedicate and Raise A Smile finding that an unacceptably low amount of money actually reached the charities.

The Inquiries were carried out concurrently because of close links between the personnel of both charities.

The Inquiries were opened as a result of concerns relating to the way in which the charities' trading subsidiaries, Dedicate (DTL) and Raise A Smile Campaign (RASCL), were operating.

DTL and RASCL engaged in fundraising activity on behalf of their respective charities, and also on behalf of other charities, mainly through the sale of advertisements in their charitable publications.

The Commission's Inquiries looked at a number of issues, including the limited charitable activity, the trustees' apparent failure to carry out their legal duties effectively in the best interests of the charity whilst managing a fundraising business through DTL and RASCL, and the extent to which money raised from them was passed to the charities.

The Inquiries also looked at whether there were conflicts of interest between personnel involved in the charities, their trading subsidiaries and their various suppliers.

The Inquiries found that the structure of the charities and their trading subsidiaries was such that charitable activity represented an average of only 0.19% of the funds raised.

An unacceptably low amount of money actually reached the charities from the trading subsidiaries' activities (0.16% of the trading subsidiaries' total expenditure). It was difficult to see how the fundraising arrangements were in the interests of the charities.

The Inquiries also found that the charities were dominated by a network of people who held different positions in both charities and their trading subsidiaries.

Some of these individuals owned and/or had involvement in a number of companies which supplied goods and services to the charities and their trading subsidiaries.

The Inquiries found that substantial amounts of funds raised by the trading subsidiaries were spent on goods and services supplied by organisations connected with people who held various positions in the charities.

The Commission's actions protected the public by preventing further fundraising activity by the charities. The Commission would have considered taking further regulatory action had not the charities and their trading companies been dissolved.

The Commission liaised extensively with the Companies Investigation Branch of the Department for Business, Innovation and Skills (BIS) and with Her Majesty's Revenue and Customs (HMRC).

One of the trustees has subsequently been disqualified from acting as a Director of a company or as a charity trustee for 11 years. HMRC has appointed a liquidator to recover money owed to the public in relation to gift aid and VAT.

Andrew Hind, chief executive of the Charity Commission, said: "The report on this investigation highlights for charities the importance of scrutinising and understanding any fundraising arrangements they enter into, knowing exactly how much the charity will be getting and ensuring the arrangement is in the charity's best interests.

"The main lesson for the public is to make sure they understand how much of their donation is going to charity. No one should ever feel pressured to give, and we'd recommend you ask questions if you're at all unsure."

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