Report on commission-based fundraising in the charity sector

27 November 2017

Today the ACCC released an independent research report on commission-based fundraising in the charity sector, Research into the Commission-based Charity Fundraising Industry in Australia, as part of its 2017 compliance and enforcement focus on consumer issues arising from commission-based sales.

The report, by Frost & Sullivan, is 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. More than 500 individual donors who had recently been solicited and made a donation took part in a survey.

“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.”

There are over 50,000 registered charities in Australia. Donations remain a significant source of income with 26% (in 2015) relying on donations and bequests for more than 50% of their total annual income.

The report found that some charities operated on a model in which third-party marketing firms earn fees for each donor that signs up from face-to-face or telemarketing approaches. The fee is commonly calculated by a multiple (typically eight to 17 times) of the monthly donation to which the donor commits.

“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,” Mr Sims 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.”

Under this model, some contracts between charities and agencies include a ‘claw-back’ feature so that fees are refunded to the charity should donors cancel within a certain time period (most commonly three months). Approximately 50% of donors cancel within the first 12 months.

The ACCC does not regulate the charity sector but has a role to play in ensuring commercial fundraising agencies used by charities are meeting their obligations under the 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,” Mr Sims said.

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

“It’s important to note that this report does not explore other forms of fundraising a charity may utilise, such as postal mail outs, online campaigns, lotteries or fundraising activities carried out by the charity itself.”

If consumers are contacted or approached by someone representing a charity, these are the type of questions they might want to ask:

  • Do you work directly for the charity or do you work for a fundraising agency?
  • Are commissions paid on my donation?
  • If I sign up to a monthly donation, how are commissions or fees paid on my donation?

Background

Work is also underway with state and territory fair trading agencies to provide guidance to the sector. During the recent review of the Australian Consumer Law, a number of stakeholders submitted that they wanted more information about how the consumer law applies to the activities of charities, not-for-profit entities and fundraisers. This guidance will set out general principles, supported by examples, to assist the sector in understanding its consumer law obligations. Having undertaken consultation with the sector it is expected that guidance will be published before the end of 2017.

Information on the ACCC’s Compliance and Enforcement Policy can be found on the ACCC website.

Release number: 
MR 218/17
ACCC Infocentre: 

Use this form to make a general enquiry.

Media enquiries: 
Media team - 1300 138 917

Tags

Audience