NSW Office of Liquor, Gaming and Racing says it will investigate Appco Group over gift voucher program

This article is more than 6 years old

This article is more than 6 years old

A global company that raises funds on behalf of some of Australia’s largest charities will be investigated after it emerged that 96% of the $12.2m it raised for Special Olympics Australia was not retained by the charity.



Since 2011, the Sydney-based Appco Group has implemented a gift voucher program on behalf of Special Olympics Australia, a charity that runs sports for people with intellectual disabilities.



A Guardian Australia investigation into Appco's conduct of the program, and its fundraising work for other charities, has found:



• Special Olympics Australia retained just 4% of the money raised from the gift vouchers

• Promotional leaflets and sales pitch templates given to street fundraisers failed to mention Appco, or its cut of the program's revenue

• Under another program it runs for the World Wildlife Fund (WWF), Appco collects 85% of donations made in the first year

• Professional fundraisers now generate about 90% of regular donations to Australian charities

• The industry's code of ethics does not address commercial agreements between charities and fundraisers

Last year the Special Olympics Australia gift voucher program raised $12.2m. The charity’s financial statements show that $11.7m was later paid in expenses.



Special Olympics Australia’s new chief executive, Nicola Stokes, said that about $7m of the program’s expenses was paid as fees to Appco. She said the organisation was reviewing all its fundraising procedures, with a decision due at the end of June.



In response to inquiries by Guardian Australia, the New South Wales Office of Liquor, Gaming and Racing (OLGR) said on June 2 it would launch an investigation into Appco’s conduct of the voucher program.



According to NSW regulations, street fundraisers should give potential donors basic information about “the intended distribution of funds raised in the appeal”, or of any payments made to a third party.



But a promotional leaflet used by Appco workers, obtained by Guardian Australia, fails to mention the company or the percentage of proceeds from the program that is kept by Special Olympics.



Similarly, a sales pitch template given to street fundraisers includes no information about Appco or the percentage the company is paid in fees.



The company’s website says Appco face-to-face fundraisers generate $40m in donations every month around the world. Appco Group Sports, which raises money specifically for sporting organisations, claims to have 700 offices worldwide.



The company raises money for some of Australia’s largest not-for-profits, including the WWF, the Surf Life Saving Foundation and CanTeen.

Appco’s commercial clients include private banks such as HSBC, Barclays and Citibank, as well as insurance companies, pay TV operators and energy companies.



An Appco contractor, Legacy Marketing, closed in February 2012 after a News Corp investigation revealed how staff on the street were trained to “profile” potential donors, screening out “POYSN”: the poor, old, young, stupid and non-English speakers.



Legacy Marketing's manager, David Macdonald, was reportedly transferred to another company under Appco's Australian umbrella.



WWF started working with Appco in 2002. Appco’s face-to-face fundraisers sign people up to WWF’s regular giving program, whereby ongoing monthly donations are made through direct debit from the donor’s bank account.



Fine print at the bottom of the WWF pledge form shows 85% of donations made in the first year are paid to Appco. Print at the top of the form states in capitals, “100% OF THE AMOUNT YOU GIVE WILL GO DIRECTLY INTO THE CHARITY’S BANK ACCOUNT”.



Monthly donations solicited by Appco are sent directly to WWF’s account, before a fee is paid to the company.



In a statement made to Guardian Australia, the chief executive of WWF Australia, Dermot O’Gorman, said: “Donors that come to us from face-to-face fundraising on average stay with us for approximately three years. Almost three-quarters of funds donated via this method goes directly to WWF, with the rest invested in sourcing new supporters.



“As a conservation organisation we don’t have the necessary skills in-house to undertake this kind of work. The most cost-effective way to fundraise for our projects is to employ the assistance of external fundraising experts.”



WWF said Appco was only one of the face-to-face fundraising companies the charity employed.



Another Appco client, the cancer charity CanTeen, would not confirm what percentage of donations to its Regular Giving program went to Appco, saying only that the program delivered a threefold return on the fee, but only after three years.



A spokeswoman for CanTeen said face-to-face fundraising was “the most cost-effective way to recruit regular donors”, and that fundraisers played an important role in “driving awareness about CanTeen’s important work”.



“Any conversation they have with members of the public could lead a young person in need of support to contact CanTeen, which could have a massive impact on their ability to cope with their cancer experience,” she said.



Appco is a member of the peak body for professional fundraisers, the Fundraising Institute of Australia (FIA), which has developed a code of ethics for the industry.



But FIA’s chief executive, Robert Edwards, said the code covered only the interaction between street fundraisers and the public, not the agreements between fundraising companies and charities.



“At the end of the day, [that’s] a commercial arrangement between the charity and their supplier,” he said.



“Clearly charities use external providers because it's a skill-set they don't have themselves, and it allows charities to spend the money they do have on the causes they represent.”



Edwards said professional fundraisers were responsible for 90% of regular donors to charities in Australia. “That's what charities want ... [Street fundraising] does work. And yes, there are some issues about it, but it's a necessary evil.”



Charitable fundraising is regulated at state level. Last year a Treasury discussion paper recommended that fundraising regulations be standardised nationally and overseen by the newly created federal body, the Australian Charities and Not-for-profits Commission.



However, the Abbott government has moved to abolish the ACNC, saying it creates unnecessary red tape, and that “the people serving our community don’t deserve a new level of scrutiny”.



In March, 54 major charities, including Save the Children, Lifeline and the RSPCA, wrote an open letter appealing to the government to spare the regulator, saying it had done “impressive work” towards efficiency and transparency in the industry.



Comment was sought from Appco but no response was received at the time of publishing.



The headline on this article was corrected on June 20 to make it clear that although Special Olympics only receives 4% of money raised, Appco did not keep the remaining 96%. It took a fee of around 57%. Also the standfirst and the article have been corrected to make it clear that the OLGR has said Appco will be investigated.