Decision

The Friends of Blencathra Ltd: case report

Published 13 March 2018

This decision was withdrawn on 18 January 2022

This report has been archived as it is over 2 years old.

1. About the charity

The Blencathra Mountain sits within the Lake District National Park and is considered an important part of our national natural heritage. The 2,000 acre mountain was brought to the market in May 2014 with a guide price of £1.75m.

In response to this announcement, a local community group decided to try to secure ownership of the mountain for the public benefit. The group subsequently applied for charitable status, at which point the Commission advised the charity that its objects (which originally focussed specifically on raising funds to purchase the mountain) should be amended and widened.

The Friends of Blencathra Ltd was registered with the Commission in June 2014, with objects to promote for the benefit of the public the conservation and protection of the natural environment in particular Blencathra and to promote for the benefit of the public the provision of facilities for recreation or leisure, in particular on Blencathra.

2. Why the Charity Commission got involved

In early 2016 concerns were raised with the Commission and in local media about the charity, including a lack of response to requests for information about donations, and whether the trustees could raise the amount required to buy the mountain, and the subsequent plans to manage it.

Later on, the Commission was made aware of the withdrawal of Blencathra from the market, and that a number of donors were therefore requesting that their donations were returned.

3. The action we took

Because the charity’s filing of financial information was incomplete, the Commission requested accounts, bank statements, and meeting minutes from the charity. We also requested clarification on fundraising activities and any discussions the trustees had undertaken around the impact on the charity if the purchase could not proceed.

4. What we found

When we initially engaged with the trustees, we received assurances that negotiations were still underway with the vendors, as well as documented verification that the funds generated via donations to the appeal remained secure within the charity’s bank accounts.

In the meantime, as requested by the Commission, the charity submitted its overdue accounts which showed that it had a balance of approximately £240,000 at 31 May 2015, which was significantly lower than the £1.75m guide price. This underlined concerns expressed to the Commission about the charity’s ability to buy the mountain. However, the trustees maintain that they have always been confident that they had sufficient funds available to them to purchase the property at its market value. In September 2016, the charity released a statement that confirmed it no longer saw any prospect of a successful purchase after it was informed that the property was being vested in the name of the Eighth Earl by the vendors (The Special Personal Representatives of the late Seventh Earl of Lonsdale). According to the charity the price expectations announced by the Eighth Earl were significantly higher than those advised by the vendors.

After being made aware of this development, we provided the trustees with regulatory advice on the implications of this decision and the precise legal framework within which they must deal with the funds they held. The charity’s funds comprised:

• restricted funds raised before the group’s charity registration application and solicited on trust for the specific purpose of buying the mountain
• unrestricted funds that were solicited after the charity’s objects were formally widened in accordance with our advice during the registration application, explicitly on the basis that they were to be applied “for the objects of the charity”, or similar

The Commission advised that any unrestricted funds could be applied in furtherance of its objects or distributed to similar charities, but that restricted funds arising from the appeal to buy the mountain before the charity’s formal establishment must be dealt with as a ‘failed appeal’ in accordance with our guidance.

The trustees took their own legal advice and initially indicated that they planned to offer a refund to those who had donated more than £10. The Commission provided regulatory advice that the regulations do not allow for a specific threshold to be applied unless this has been addressed at the time of the fundraising appeal by explicitly making clear an alternative use of funds below a particular value should their plan fail. The charity decided to treat all donations from individual donors as restricted, regardless of when the donation was made or the amount of the donation.

The trustees notified donors directly where possible as well as via its website, social media, local press and local Parish Council notice boards that donations given for the purpose of purchasing the mountain could no longer be used for that purpose and that donors who gave money, or other property, for that purpose were therefore entitled to claim it back, less admin costs. The Commission confirmed that the charity is permitted by regulations to deduct reasonable administrative expenses such as bank charges, advertising, and mailing costs incurred in returning donations. In accordance with the Commission’s guidelines, donors were advised to contact the charity within 3 months and the charity provided a form for those that wished to disclaim their right to a refund and have their money go to a similar charitable purpose.

5. The impact of our involvement

Once the initial three month claim period was complete, the charity confirmed that it had returned £166,426 worth of donations, less a £6 admin charge per donation, for verified claims from individuals. The charity also received disclaim notifications totalling £21,013. This accounted for 78% of the £240,173 donated in total.

The trustees submitted a request to the Commission to authorise them to equally distribute the £52,734 residual restricted funds from donors who could not be identified or found to the following 5 charities, which are based around Blencathra or undertake projects on the mountain and that are classified as having environment/conservation/heritage objects:

• Keswick Mountain Rescue Team (KMRT) (Charity number 1165345)
• Fix the Fells in partnership with the National Trust (Charity number 205846)
• Friends of the Lake District (Charity number 1100759)
• Cumbria Wildlife Trust Ltd (Charity number 218711)
• Mountain Heritage Trust (Charity number 1083219)

The Commission made a cy-pres scheme for the surplus funds on 2 October 2017 which meant that over £73,000 from the Friends of Blencathra campaign can be applied for use by similar charities for a range of projects, in line with donors’ wishes and the trustees’ intention that other charities benefit from their fundraising effort.

The Commission provided a significant amount of advice and guidance to the trustees to ensure that they understood the legal framework that applies when handling funds that can no longer be used for the purposes for which they were raised. Our regulatory intervention ensured that the correct legal requirements were implemented by the trustees and as a result, almost 70% of funds raised were repaid to donors. Donors who gave money or other property for that purpose are still entitled to claim it back, as long as they do so by 2 April 2018.

The trustees sought professional advice throughout the campaign and received advice from legal sources and professional estate management companies.

6. Lessons for other trustees

Whilst spontaneous voluntary effort and harnessing community spirit for the public good is commendable and this particular campaign was well-intentioned, the law around fundraising and appeals can be complex. Trustees should therefore consider a number of issues, as outlined below, and take advice about their responsibilities as early as possible.

6.1 Soliciting restricted and unrestricted funds

Charities should pay particular attention to the basis on which they are making an appeal before they start to raise money. Donations to charities are generally unrestricted and can be spent in furtherance of the charity’s purposes. The exception to this is donations or gifts made for a specific sole purpose; these are known as restricted funds. If a charity solicits funds (by means of an appeal) for a particular purposes, which for whatever reason cannot be fulfilled, donors may be entitled to have their money returned.

If a charity is fundraising for a particular appeal, it is advisable that at the point of solicitation they explicitly make clear one or more alternative uses of funds should their plan fail, such as being re-directed to a similar charity or absorbed and applied towards the charity’s general activities. This gives charities the power to use the funds in another way, if necessary, and avoid the potentially complex and resource-intensive process of returning donations, and ensures charitable causes benefit as much as possible.

More information on the difference between restricted funds and unrestricted funds can be found in Charity fundraising: a guide to trustee duties (CC20).

6.2 Dealing with a failed appeal

If the purpose for which restricted funds were raised cannot be achieved, the appeal is said to have failed and donors are entitled to be asked if they wish to have their donations returned or used for other similar purposes. Whilst the Commission can provide advice on the legal framework regarding a failed appeal, it is the trustees’ responsibility to decide if the appeal’s original purpose can no longer be met and to initiate the failed appeal process. This includes ensuring that public notice is given to enable donors to express their individual choices on what happens to their donation. Applying residual restricted funds requires the Commission’s formal authorisation in the format of a cy-pres scheme.

More information on dealing with a failed appeal is available in Charity fundraising: a guide to trustee duties (CC20).

6.3 Registering with the Charity Commission

Creating a charity or launching a fundraising appeal is often an emotional response to a particular situation. When launching an appeal individuals should duly consider whether setting up a new registered charity is the right option for them. They should consider alternative options such as working with an existing charity. When setting up a charity, trustees must give due consideration to what its charitable objectives will be. Purposes must benefit the general public or a sufficient section of the public. If a charity is conducting a particular initial appeal, its objects must be sufficiently wide to cover what else the charity will do when the appeal is complete or no longer viable.

More information on what to consider when setting up a charity is available in How to set up a charity (CC21a).

6.4 Maintaining public trust and confidence

Social media can be a powerful way to spread a charity’s message and reach potential donors. However, trustees should be mindful of the need to be transparent with the public to protect the charity’s reputation.

Appearing to be reluctant or slow to comply with legal responsibilities and update donors, particularly where there is a visible detriment to donors and significant public interest, can jeopardise public trust and confidence in the charity, therefore putting the achievement of its charitable objectives at risk. The Commission’s research into public trust and confidence in charities contains information on key drivers of trust.