Page last updated at 15:59 GMT, Thursday, 26 August 2010 16:59 UK

Charity millions 'go to fundraising companies'

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By Meirion Jones

Fees paid to fundraising companies by UK charities for recruiting new donors often effectively wipe out the amount a person gives, Newsnight has learned.

Charities pay tens of millions of pounds every year to subcontracted firms who sign people up to direct debits on the street or doorstep.

But in some cases, it would take the average donor more than a year to cover the fee - the equivalent of about £100.

The companies' watchdog says the firms provide a good return on investment.

The Disasters Emergency Committee (DEC) appeal for Pakistan is an example of a campaign where donors can be confident that almost all of their donation will go to those affected by the floods and not be swallowed up by marketing costs.

For every pound collected by DEC, 95p is spent on the ground.

'Chuggers'

But many charities use teams of professional fundraisers, who approach potential donors on the street or the doorstep and try to persuade them to sign up to a direct debit. They are sometimes called "chuggers" - a nickname meaning "charity muggers".

The recruiters often wear tabards prominently displaying the name of the charity - but these fundraisers are actually working for subcontracted companies.

It may look to the outsider - to the uninformed outsider - as if all of their first-year donation is going to go to a third party but that's not the only way of looking at it
Mick Aldridge
Professional Fundraising Regulatory Association

Last year, 750,000 people signed on the dotted line, giving an average contribution of £90 a year.

But a Newsnight investigation has found the charities are often paying the companies, in effect, £100 or more for each signature they collect, meaning in many cases the company is paid more than the charity will raise from that donor in the first year.

As part of our investigation, Newsnight contacted 20 leading charities.

The British Heart Foundation confirmed it paid the equivalent of £136 per signature. Cancer Research UK said it paid an average of £112 to recruit each donor and in total paid face-to-face fundraisers £3m a year. Guide Dogs said it paid out nearly £2m annually.

Christian Aid, Save the Children, Great Ormond Street, Amnesty and others also pay additional millions.

Newsnight also asked the 20 charities whether they believed they should be honest, open and transparent with their donors about the fundraising costs. They said "yes", but, with the exception of the British Heart Foundation and Cancer Research UK, they refused to say how much they paid to sign up each donor.

Many charities said they could not disclose these figures because of commercial confidentiality.

But according to the website of the Professional Fundraising Regulatory Association (PFRA) - set up by the charities to monitor face-to-face fundraising - the companies are getting between £80 and £160 per donor they sign up.

'Half pull out'

Mick Aldridge, the PFRA's chief executive, told Newsnight: "Some charities might be paying £50 or £60 per donor, some might be paying £100 or £120 or possibly even more."

The British Heart Foundation pays a company £161,000 to recruit 1,180 donors. That works out at £136 each. Given that the average direct debit donor pays £90 a year, it would take 18 months to cover the sign-up fee alone.

Worse still, many of those signed up by these subcontractors do not complete 12 months of donations.

Research by the PFRA seen by Newsnight shows that more than half the people who sign direct debits pull out before the end of the first year.

But Mr Aldridge said that although the costs of this sort of fundraising may be large, they are justified by the returns.

"It may look to the outsider - to the uninformed outsider - as if all of their first-year donation is going to go to a third party but that's not the only way of looking at it," he said.

"And in my view, and in the view of most charities, it is not the most transparent and constructive way of looking at it."

Engaging the public

Betty McBride of the British Heart Foundation defends use of companies

He added that overall the charities get £3-£4 back for every pound they pay the subcontractors, which he said was an excellent return on an investment.

In response to the Newsnight investigation, Cancer Research UK said face-to-face fundraising was just one of its fundraising activities and that the costs were outweighed by the money raised.

Guide Dogs and Save the Children said that door-to-door fundraising was their "most cost-effective" way to recruit regular givers, while Christian Aid said it found face-to-face fundraising was also one of the best ways "to engage members of the public" in its work.

The Great Ormond Street Hospital Children's Charity said the technique had "proved to be an effective channel at recruiting younger committed givers to the charity" and Amnesty said it conducted face-to-face fundraising because it gave "good value".

Watch Newsnight's report in full on Thursday 26 August 2010 at 2230 BST on BBC Two, then afterwards on the BBC iPlayer and Newsnight website.



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