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Fundraising Appeals

Proceeds of Fundraising Appeals

Some charity fundraising appeals raise too much, or too little, money to achieve the appeals' aims. Some appeals state their purposes too broadly or too narrowly. In any such cases, charity trustees can be faced with legal problems when considering what they may do with the proceeds under charity law.

These topics are covered by the Guidance Note: Fundraising Appeals By Charities - Suitable Wording for Appeals. It has been updated to cover the changes relevant to these topics which were made by the Charities Act 2022. The relevant provisions of that Act amend the Charities Act 2011 and are effective from 31 October 2022.  

Before those provisions were implemented charity law required charities to contact donors to offer to return their donation if a fundraising appeal for a specific purpose (e.g. to buy a particular piece of equipment) did not achieve its target. (Contrast this with the case where there is no target and the stated purpose is not specific but is instead, say, an appeal for funds for the charity’s general purposes.) 

Where the stated purpose is specific, and the sums raised are insufficient for that purpose, those sums were hitherto not permitted to be legally devoted to another purpose because the donors would not have expressed a “general charitable intention” when donating but would only have intended to donate for the stated purpose. Therefore, the Act creates rules (as follows), effective from 31 October 2022, permitting use of the funds concerned in four circumstances (see below) for another purpose which is “cy-près” (a legal term meaning “as near as possible”) to the stated specific purpose of the appeal.

Firstly, the Act provides that, if the court or Charity Commission decides that it would be unreasonable to incur expense in taking steps to return the donation, or it would be unreasonable for the donors to expect the donation to be returned, the charity may now use the funds for a “cy-près” purpose.

Secondly, the Act establishes a threshold below which, a charity now does not have to contact a donor. Unless, when making the payment, the donor stated that the donation must be returned if the specific charitable purpose fails, where the donor has not given more than £120 in total in a year to the particular appeal, the charity does not have to contact that donor but may use all of the sum concerned “cy-près”. (Note that if a donor’s total gift exceeds £120 in the year, no part of the total gift may be used.) In each case the charity’s trustees have an obligation under the Act to “take reasonable steps” to ascertain whether the donor’s total gifts to the appeal in the year exceeded £120.

Thirdly, the Act provides that a charity may now agree with the Charity Commission the particular steps that it should take to attempt to identify and find donors to a failed fundraising appeal (to ask them if they require their donation to be returned) where the Act still requires a charity to do so. Where it takes those steps but fails to contact a donor, it may use the funds “cy-près” donated by that donor. This process is more flexible than the previous specific and onerous rules on the action that charities had to take to contact donors.

Fourthly, the Act now allows donations from unidentifiable donors to be applied "cy-près". As an example, donors would be unidentifiable where there is a charity bucket collection of cash in the street from unknown donors.

In any of these circumstances, a charity may, under the provisions of the Act, decide to use the funds concerned (without having to ask the Charity Commission to make a “cy-près” scheme) by resolving that they should be used for different charitable purposes. They must have regard to (a) the desirability of securing that the purposes are, so far as reasonably practicable, similar to (“cy-près”) the specific charitable purposes for which the appeal was made; and (b) the need for the purposes to be suitable and effective in the light of current social and economic circumstances. However, where the total proceeds of an appeal exceed £1,000, the charity’s resolution will not take effect unless and until it receives consent to it from the Charity Commission.

In contrast to the situation where funds raised are insufficient for the stated purpose, where excess funds result from an appeal, the Act now provides that the excess amount may be applied by the charity for a “cy-près” purpose without the Charity Commission having to be involved except where the appeal raises more than £1,000 in which case its consent must be obtained.

These various changes have simplified the process that a charity has to follow where it is permitted by law to use funds for a purpose other than the specific stated purpose of a fundraising appeal by the charity. The new rules are simpler and more proportionate.

If any further relevant legislation is passed which impacts on the provisions discussed above, this page will be updated to reflect that impact.

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