Electric Shock for Age UK

The Charity Commission has published a report detailing its conclusion in the recent case concerning a commercial partnership between Age UK and the energy company E.ON.

The investigation focused on speculations brought about by a media report in February 2016 that the charity received £6 million a year from energy supplier E.ON to promote the Age UK fixed 2 year energy tariff to older people and that the tariff was more expensive than other tariffs available.

Whilst the Charity Commission (the Commission) identified in its initial investigation that the trustees had established systems for reviewing the suitability of products prior to selection, it was not so apparent that Age UK fully assessed the risks of approaching beneficiaries with a commercial product in an area where the charity also campaigns on behalf of its beneficiaries.

The Commission expressed its concerns that involvement in the energy market may cause significant risks to a charity, therefore Age UK should evaluate whether its continued partnership with E.ON is beneficial to the charity in the long-term. In support of this, the Commission required to have clarification on whether the trustees had valuable input in overseeing and controlling the commercial partnership with E.ON, with a view of maintaining the charity’s best interests. It was found that the charity did have oversight mechanisms in place, however the Commission deemed these to be inadequate and it expected more regular reviews to be conducted.

A further issue put forward by the Commission was that the commercial partnership, as well as the fee or commission received by the charity through the trading subsidiary, was not made transparent enough to customers. Consequently, Age UK was advised to inform the public of any commission or fee received by the charity on all Age UK branded products.

David Holdsworth, Chief Operating Officer at the Commission stated that “working with a company may bring many benefits for a charity including raising funds and increasing awareness of the cause. However a charity’s name and reputation are valuable assets which trustees must protect……we recognise the benefits a stable and secure income stream can bring to a charity.”

From this statement, it is evident that the Commission is not against charities entering into agreements with commercial organisations. However, the Commission also strongly urges trustees to be clearer about how their charitable aims can be benefited through the engagement of any intended commercial partnerships.

The Commission also expects trustees to:

  • have appropriate processes in place for oversight and control of commercial partnerships;
  • be able to demonstrate that such partnerships are in the best interests of the charity and have processes to review that they remain so;
  • consider the risks to the charity’s name and reputation when engaging in such partnerships; and
  • where products or services are sold using the charity’s name or branding, there is transparency as to the fee or commission that the charity receives.

A range of charities need to carefully consider commercial agreements they enter into to ensure that the charitable aims are served. This applies to charities of all sizes and not only  to registered charities but also those that are excepted or exempt. For instance some housing associations as providers of social housing with charitable objectives would need to carefully consider commercial agreements entered into to ensure charitable objectives are fulfilled.

Forbes Solicitors regularly advice charities of all sizes including housing associations and trustees on a range of governance and commercial issues, as well as provide training on trustees’ obligations. If you have a question or would like to know about training we offer, please contact Daniel Milnes.

Nat Avdiu

About Nat Avdiu

Nat Avdiu is a Paralegal in the Contracts and Projects team at Forbes Solicitors. Nat provides updates for clients on a range of issues including: governance, data protection and freedom of information, procurement and charity law.
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