The Charity Commission in its inquiry into the Needy Children International Foundation, a charity set up to rehabilitate young offenders and relieve poverty and sickness abroad, found against the charity, citing that only 21% of the charity’s income was spent on charitable activities.

The charity, which has since been wound-up, was connected to a number of individuals previously involved in improper fundraising activities.

The Commission found that it was spending only a small proportion of its funds on charitable activity and was misleading potential donors about how their money would be spent.

The trustees had not taken sufficient steps to protect the charity’s funds or its reputation.

Concerns were first raised with the Charity Commission in 2007 that the charity was carrying out street collections without authorisation.

The Commission established that between May and August 2007 the charity’s fundraising was carried out by a fundraising company, the director of which had been convicted in June 2007 of a number of offences relating to tax fraud in connection with fundraising.

After August 2007 the charity’s fundraising was then carried out by its own trading subsidiary, Fundraising and Marketing Services Limited.

The Inquiry examined the following issues:

The charity’s fundraising methods and activities and the use of the charity’s funds;

The charity’s activities and how they were publicised to prospective donors including on the charity’s website;

The general administration, governance and management of the charity by its trustees and of the trading subsidiary it controlled.

The inquiry found that the trustees did not have sufficient control over the charity’s affairs and had delegated their responsibilities to an employee.

They had not taken appropriate steps to ensure the individuals employed by both the charity and its trading subsidiary were fit and proper persons to take responsibility of the charity’s funds.

The trustees also failed to ensure the trading subsidiary observed its legal requirements when fundraising on behalf of the charity.

The Commission found that in 2007/2008 only 21% of the charity’s income was spent on charitable activities, and over 63% of that figure was spent on sending clothing overseas.

Less than 8% of the charity’s income for that year was spent on helping young offenders.

In 2008/2009 and 2009/2010 the charity spent just 15% and 13% of its funds on charitable activity, with the rest spent on fundraising and administrative costs.

The Commission also received a number of complaints during the course of its inquiry from businesses that had made donations to the charity.

Donations were made under the impression these would be used to help young children in the local area, when in fact the charity was established to help young offenders.

The inquiry found that the charity’s websites were misleading and presented an inaccurate picture of the charity’s activities.

As a result of the Commission’s intervention, the charity terminated its relationship with two individuals previously involved in its fundraising operation.

The charity also discontinued its clothing collections and made changes to its website.

On closure of the inquiry the Commission issued the trustees with an action plan, which required them to review their governance, structure and fundraising operations.

However, as a result of its intervention the Commission had also referred its concerns regarding the charity’s fundraising activities to the Insolvency Service.

The Insolvency Service then opened its own investigation into the charity which resulted in a winding up petition being presented against the charity in the High Court.

The charity was wound up on 23 May 2011.

Brief details of the Insolvency Service’s investigation are set out in the Charity Commission’s full report.

The report highlights a number of issues for the wider sector, particularly the need for trustees to manage and control fundraising effectively, efficiently and economically.

Although charities using professional fundraisers are legally required to enter into a fundraising agreement, this requirement does not extend to fundraising by another charity or a company connected to a charity.

Nevertheless, the Charity Commission recommends as a matter of good practice that charities in this position do enter into an agreement and adopt these requirements.

Charities are established to provide benefit to the public, not for the benefit of a fundraising company.

Charities, noted the Commission, have a responsibility to ensure their own reputation, and that of charity in general, is not brought into disrepute by the inappropriate appointment of a fundraising company.

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