Former Head of Policy at the Fundraising Regulator
The UK public is extremely generous – in 2021 they donated £10.7 billion to charities (1) – but there are many different causes donors could support. Sometimes a charitable fundraising appeal catches the public imagination, and your appeal far exceeds the amount you were hoping to raise. At other times, your appeal might not reach its target despite your best efforts.
The law on ‘failed appeals’
When charities make an appeal for a specific purpose, they must use the donations given to that appeal for that purpose. But what should you do if you raise more than you need, or if you don’t raise enough, or if circumstances change and you cannot achieve your original purpose?
The new Charities Act 2022 is introducing greater flexibility for charities in England and Wales about how to deal with these situations (sometimes called ‘failed appeals’). Even so, you will need to follow a legal process and cannot simply spend the funds on something else straight away. Administering the funds that you can’t spend on the intended purpose takes time and resource. To avoid being in this situation, start by making sure you include a ‘secondary purpose’ when you launch your appeal.
Including a secondary purpose
A secondary purpose is wording in your appeal which says how you will use donations if you, for example, exceed or don’t reach your target. Standard 2.7.5 of the Code of Fundraising Practice states that:
‘If you are fundraising for a particular purpose, you must include a statement saying what will happen to funds you receive if the total amount raised is not enough to reach (or is more than) the target.’
This could be as simple as stating that funds will be used for your charity’s other projects. Including this information in your appeal wording means that if you cannot achieve the intended purpose, or the amount you raise is not enough or too much, you will be able to use the donations straightaway for the secondary purpose.
Legal requirements if you have a ‘failed appeal’
If you haven’t included a secondary purpose and you cannot achieve the intended purpose, don’t raise enough, or you raise more than you need – legal requirements kick in.
Where you cannot achieve the intended purpose of your appeal and/or have not raised enough, these requirements may include setting out a plan on how you propose to contact donors to offer them a return of their donation, which needs to be sent to the Charity Commission for England and Wales for their agreement before you action it. This is just one requirement.
Where you have exceeded your target and have leftover funds, the legal requirements are less onerous, but you must still follow them before you can spend the funds on a different purpose.
The code includes standards that reflect the law, but it is not designed to be a legal handbook. I encourage you to refer to guidance on information about the changes being introduced by the Charities Act 2022 and charity fundraising appeals for specific purposes from the Charity Commission for more information.
The cost of living crisis means that there will be increased pressure on charities in the coming months and that donors may have to make difficult decisions about how they support charities. Including a secondary purpose in your appeal means that you can feel confident about how you will use your donations for charitable purposes if you cannot achieve the intended purpose, you don’t raise enough or you raise too much, rather than worrying about needing to refund donations.
The Fundraising Regulator thanks the Charity Commission for England and Wales for its input to this information.