Sunday Night approached Appco Group Australia and two of its marketing contractors, STM International and VMG Global, for their response to issues raised in our story. We also approached charities identified in the story including Camp Quality, the Peter MacCallum Cancer Foundation, the RSL Art Union and Special Olympics Australia.

You’ll find our questions – and their answers – below.

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Video statement from Appco

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VIDEO Video statement from Appco Video statement from Appco

You can also watch a video release from Appco Australia CEO Perveen Virdee here.



STATEMENT FROM PAUL BURKETT, APPCO GROUP AUSTRALIAN VICE PRESIDENT

I am at a loss to understand why I have been targeted and filmed by Channel 7’s Sunday Night program in a story relating to Appco Australia and fundraising for charities.

I am an independent business owner with clients in a number of sectors. One of my businesses provides services to Appco Australia but I have never been directly involved in providing fundraising services to Appco Australia’s clients.

As a provider to Appco I have regularly spoken at their annual conferences as a motivational speaker. Vision of my speech in 2015, taken out of context, has been used to promote a story that the Sunday Night program is running. Channel Seven does not have the rights to use this vision, the rights belong to Appco, and I request that it not be used as part of any story because it falsely links me to their fundraising activity.

I also request that the material filmed when a Channel Seven camera crew door stopped me outside the gym not be used given that the story relates to Appco and fundraising.



APPCO GROUP AUSTRALIA: RESPONSES TO QUESTIONS FROM SUNDAY NIGHT, CHANNEL SEVEN

1. Please identify the “Beneficiary” charities to which Appco claims it has distributed proceeds in 2015 and 2016.

It is up to each charity to disclose their relationship with Appco Australia and any financial agreement with us. We will not discuss their finances.

2. Are “Direct costs associated” the only payments made to marketing agencies? If any other payments are made please specify.

This includes all the payments Appco Australia makes to marketing
companies.

3. You have provided figures for 2016 and 2015 indicating “gross proceeds to beneficiary” for both Ongoing Pledges and Charity Product Sales. What are the net proceeds to these beneficiaries? In other words, does any other entity or person take fees from this fundraising process, other than Appco? If so, what is the actual benefit to these beneficiaries for both 2016 and 2015?

We have set out the financials of our fundraising activity. We don’t know and can’t comment on any payments charities make to other entities.
Appco Australia is not using a new or unusual outsourcing process and no charity would use us if we didn’t deliver benefits.
100% of donations through our ongoing-pledge campaigns go straight to the charity. The fees charities pay Appco Australia are paid from their fundraising budgets, in the same way that charities might pay fees to Channel Seven for advertising.
Put simply, for every $1 a charity pays to Appco Australia for an ongoing pledge campaign, they can expect to receive $3–$4 in donations over 3–5 years. That’s a good thing.
Of the $1 the charity pays Appco Australia, we pass on approximately 80 cents to specialist direct fundraising companies for their services.
Appco Australia uses its 20 cents to run its business. This is no different to a charity paying Channel Seven to advertise on TV except that, in our case, we only get paid on the results (donors) we actually deliver for our clients.
Regarding “Ongoing Pledges”

4. Appco says charities in this category pay it a one-off fee per donor acquired and that neither Appco nor independent contractors receive a percentage of individual donations. What is this fee and how is it calculated?

Just like TV advertising, the fee varies and is calculated on a campaign basis, based on factors including client budget, desired reach, campaign objectives and duration. The upfront payments to us come from the charities' pre-allocated fundraising budgets (which may, also include TV and newspaper advertising, etc). They are not taken from individual donations.

5. If the fee varies according to charity, please provide examples.

As above.

6. Appco states that if a donor cancels a pledge within a pre-agreed time-frame (usually three months) Appco Group Australia reimburses its charity clients for the acquisition fee. Does Appco or its marketing companies in fact deduct this amount from the “independent contractor” who obtained the pledge by operation of a compulsory bond account?

It’s up to each marketing company to negotiate the payment arrangements that it makes with independent contractors. Appco Australia is not involved in that process.
However, it is understandable that those payment arrangements will often reflect the arrangements that Appco Australia negotiates with its clients. As such, we understand that independent contractors are paid by the marketing company to which they are contracted, based on the donors they sign up, and that they usually receive that payment ‘upfront’, before the acquisitions are validated. If the donor cancels within a pre-agreed period, Appco Australia reimburses the charity for that donor.
To allow for the possibility of cancellations, the marketing company and the contractor may agree that a percentage of the contractor’s fee per donor can be held in a security bond.
If any amount is agreed to be held in a security bond and the donor remains committed at the end of the given period (agreed with each client), the contractor receives the balance of their security bond.
The security bond encourages independent contractors to avoid pressure tactics and, instead, focus on connecting with potential donors who are likely to be genuinely interested and committed to the cause that they are promoting. It also encourages them to fully inform everyone they speak to about the cause they are supporting and commitment they are making.
In our experience, people signed up in this way are most likely to continue to give and less likely to request a cancellation.

7. What steps (if any) does Appco take to warn Australian donors about its fees for subscription and the actual percentage that the beneficiary will receive if a donor does not continue his or her donations for a period of 12, 24 or 36 month respectively.

The charity receives 100% of a donor’s donations all of the time. The direct debit is set up between the individual and their chosen charity.
Appco Australia complies with all state regulations around disclosure to donors. The forms people sign to authorise their direct-debit ongoing-pledge donations include details of the one-off upfront fee paid to Appco Australia. This fee usually equates to approximately 30% of their donations over the average 3-year lifetime of a donor.
We do retain our one-off fee if the donor cancels after 12 months or more. However, no other fees are paid to Appco Australia and the beneficiary (charity) is reimbursed if the donor cancels in the first few months.

'''8. Is the reported distribution amount for 2015 and 2016; a. the figure of monies actually donated to the grouped beneficiaries in that year– or is it a projection of likely future donations under the donor subscriptions obtained by Appco in that year;
b. Alternatively, if the figure concerns actuals monies donated in that year, how much of that money involved new donation subscription in either the 2015 or 2016, versus donations that had continued from previous years.'''

It is a conservative projection based on our 20-year track record of donor retention, which has consistently been an average of 3 years minimum.
The figures we’ve provided are a true representation of our fee vs the money raised from the acquisitions. It is based only on new donors signed in 2015 or 2016.

9. Does Appco keep most or all of the first year’s takings from some donors?

Appco Australia doesn’t keep any money from donors. Ongoing direct-debit donations from a donor go straight to the charity’s bank account.

10. How many and which of Appco’s charity clients for 2015 and 2016 paid more than 80% of donations made in the first year to Appco?

We are paid a fixed fee, agreed per campaign, from a separate, pre-allocated budget. We do not receive any funds from donations.

11. How many and which of Appco’s charity clients for 2015 and 2016 paid more than 90% of donations made in the first year to Appco?

As above.

12. How many and which of Appco’s charity clients for 2015 and 2016 paid 100% of donations made in the first year to Appco?

As above.

13. Does Appco use, or has Appco ever used, a tiered fee model under which, if donors agree to pay $20 a month, Appco takes 100 per cent in the first year; if donors pay $60 a month level, Appco takes 70 per cent in the first year.

No.

14. If so, are these fair and reasonable amounts?

N/A

15. Appco says that donors “typically” continue to give to the relevant charity for three years. What is the evidence and source for this claim?

We have been involved in direct fundraising for almost 20 years and, in our experience, this is the typical average lifetime of a donor. Our clients tell us that retention is one reason they continue to use this method. The Fundraising Institute of Australia and Pareto Fundraising can provide more sector-wide data and information.

16. Can Appco provide a beneficiary that will corroborate the represented donor history and the representation that they received up to 73% of a total donations made?

Our clients are telling us they’re not interested in talking to Channel Seven, but we will keep trying.

17. Appco states it receives no other payment than a one-off fee per donor acquired. Has Appco in fact told some charities it would charge a marketing fee in order to maintain a regular-giving donor database?

We don’t maintain any regular-giving databases and therefore don’t charge a fee for this. However, Appco Australia offers a range of services other than direct fundraising. Fees for these other services may be structured differently, just as in any business. We expect sponsorship of a prime-time Channel Seven program attracts a different fee to running an advert at 3am.

Regarding “Charity Product Sales”
18. Appco says it is paid a set fee equivalent to 60% of the product sale. We are aware of charities who claim that under their arrangement with Appco they received as little as 10% of the product sale. How do you explain this?

We can only imagine this is after their own expenses, which we’re not privy to. Charities receive 40% of the revenue, which they otherwise would not have. If this fundraising activity did not deliver value for them, they would not continue to use it.

19. Appco says it retains 9% (pre expenses) of the fee and passes the rest onto the marketing companies it sub-contracts. What proportion of the Appco Fee as a whole is then passed back up to Vice Presidents, Organizational Heads and Promoting Owners by operation of either a Growth Incentive Payment or an Override payment – as set out in the Building Your Enterprise Documents (dated 2015).

There are currently no set fees, as contractual fees are individually negotiated with all sub-contracted parties. However, like any business, Appco Australia uses its own revenue in a range of ways. This includes paying contractors and consultants and rewarding these sub-contracted entities for continued performance and growth.
This is not unusual in any business. We imagine many of Channel Seven’s ratings-winning anchors, hosts and producers are rewarded in the same way.
Appco Australia continually updates its guidance to reflect changes and improvements to our business, which is the case with the document you refer to above.

20. What proportion of this amount is paid to Chris Niarchos or companies associated with him?

Chris Niarchos is paid a salary and does not receive a proportion of the fee paid to Appco Australia by any given charity.

21. What proportion of funds raised by selling raffle tickets on behalf of the RSL Art Union is paid to Appco?

We are not able to disclose the financial details of confidential client agreements. However, in general, clients pay a one-off upfront fee and the campaign could then run for months or years.

22. What are the net proceeds to the RSL for each sale / donation?

As above.

23. What proportion of funds raised by selling merchandise for the Australian Paralympic Committee is paid to Appco?

As above.

24. What are the net proceeds to the APC for each sale / donation?

As above.

25. Are amounts paid to Little Star Australia for production of materials included in Appco’s costs or paid separately by the charities?

They are paid separately by the charities.

Other issues

26. Is an individual’s advancement in an Appco related marketed company linked to the number of new recruits they are able bring into the company? Please provide this answer in the context of the Practical Application of the Australian Guidelines (dated August 2012)- and the Appco Group Australia ‘Criteria’ for advancement to each level as stated in that document.

No. First, an individual's advancement within a marketing company with which Appco Australia contracts is a matter for that individual and the marketing company in question. Appco Australia provides guidelines only – as the name of the above document indicates.
Second, Appco Australia understands that advancement is typically based on revenue and results achieved for clients, not recruitment. However, as noted, independent contractor advancement is negotiated between the individual and the marketing company they’re contracted to and can vary depending on individual circumstances.
Please note: this particular document is 5 years out of date. As in any business, Appco Australia has updated its guidance material numerous times since 2012, in line with changes to regulations, reviews of our business and/or general and continuous improvements in our supplier relationships.



FURTHER STATEMENT FROM APPCO

15 June 2017

Appco Australia – and all charities – must apply for state-based permits and comply with numerous different pieces of legislation and associated regulations across different states and different types of fundraising campaigns, such as regular giving/ongoing pledges, product sales, raffles and lotteries.

Attached are just some of the different state laws that must be complied with, and which Appco Australia is committed to upholding.

If Appco discovers that anyone representing our clients is not operating compliantly in any way, including in relation to the disclosure requirements imposed by law, steps will be taken (consistent with Appco Australia's contractual rights) to have the problem rectified immediately and, if required, to have that person removed from the relevant campaign.

One key legislative requirement is that in most states, but not all, charities’ payments to third parties like Appco Australia must be presented as a percentage of proceeds. We comply with this requirement, but it is not an accurate representation of our contractual arrangements with our charity clients because it implies that charities pay Appco Australia from donations.

This is never the case. As we have explained to you, the charity receives 100% of all donations direct into its bank account via direct debits from each donor. The charity pays Appco Australia a one-off fee per donor from a separate, pre-allocated fundraising budget. Many charities clearly feel this is an efficient way to acquire donors and raise funds.

The regulations around product sales and lottery campaigns for charities are different again because they involve a different type of transaction, which is not the same as an individual committing to an ongoing charitable pledge.

We accept that the plethora of regulations in this area can cause confusion amongst the public and journalists and we would welcome legislation that allows for more consistency and clarity. But this does not excuse Channel Seven from making false claims, such as Appco Australia is “skimming off donations” or that Australian donors would be “shocked” by our conduct. Appco Australia’s conduct is at all times fully compliant with the law.

We repeat our offer to help you get it right and avoid confusion that might unfairly affect charities’ ability to generate funds for their causes.



CAMP QUALITY

Our questions to Camp Quality:

1. What percentage of a donation or pledge obtained by Appco through its marketing companies is kept by Camp Quality and what percentage goes to Appco?
2. How much of this amount is paid in the first year?
3. By way of example, how much is paid to Appco on the basis of a $39 monthly ongoing pledge?
4. How much of Camp Quality’s annual revenue for 2015 and 2016 was raised through Appco or its affiliates?
5. What were the total amounts Appco was paid in these periods?
6. What was the total revenue raised by Appco in these periods?

Response from Camp Quality:

Camp Quality is not in a position to respond to questions surrounding Appco’s business undertakings other than to say the matters currently before the court have nothing to do with Camp Quality.
What we can state is that, as demand for our innovative programs and services for children impacted by cancer and their families has increased, we have pursued several methods to grow our donor base and secure long term, sustainable funding to meet the increased need.
Donor acquisition, via face-to-face fundraising, is just one of these methods and, while it does not currently constitute a major portion of our fundraising revenue, it has proven to be very effective, with every $1 invested returning $2.45 over the lifetime of the giver.
We remain extremely grateful for the support of our partners – be they individuals, community groups or businesses - in helping us continue to strive to ensure our services and programs are provided completely free of charge to any child impacted by cancer – be that their own diagnosis or the diagnosis of someone they love – and their families, and we undertake to continue to work relentlessly towards this end.

Following the broadcast of our story we received the following statement from Camp Quality:

Camp Quality has a very talented team of staff and volunteers who are responsible for coordinating and managing all of our fundraising strategies and initiatives. As with a number of not for profits, our team is focused on ways we can drive sustainable income to ensure we can continue to provide our services and programs completely free of charge to kids impacted by cancer and their families.

On occasion, we have enlisted the support of outside agencies to assist us engage donors in a cost effective way. We have previously worked with Appco but ceased working with them due to the issues that arose. We have no intention of working with them again.


PETER MACCALLUM CANCER FOUNDATION / VMG GLOBAL

Our questions to the Peter MacCallum Cancer Foundation:

1. What percentage (and dollar amount) of a donation or pledge obtained by Appco through its marketing companies is kept by the Peter MacCallum Cancer Foundation?
2. How much of this amount is paid to Appco in the first year of the pledge?
3. By way of example, how much is paid to Appco on the basis of a $39 monthly ongoing pledge?
4. If the payments to Appco are made from the Foundation’s existing fundraising budget, what was the total amount paid in 2015 and 2016?
5. What was the total revenue raised by Appco in these periods?
6. Would the Foundation be concerned if marketing contractors were telling donors that just 9 percent of a $39 monthly donation (over a maximum period of 12 months) would go to “administration” and that the rest would go to Peter Mac?
7. Does the Foundation believe that donors are properly made aware that up to 93 percent of a donation may go to Appco if they stay for only a year?
8. Does the Foundation have any concerns about the ongoing use of Appco contractors, given the pending class action and the related allegations that staff have been grossly underpaid / encouraged to engage in bizarre 'hazing' rituals in the event of poor performance?

Response from Peter MacCallum Cancer Foundation:


1. What percentage (and dollar amount) of a donation or pledge obtained by Appco through its marketing companies is kept by the Peter MacCallum Cancer Foundation?
APPCO is paid a one-off fee per recruit to generate public donations to the Peter MacCallum Cancer Foundation. This fee varies depending on how much is donated. Due to commercial in confidence this fee structure cannot be disclosed, however, we can confirm figures cited by APPCO which state for every $1 we pay to APPCO we expect to receive at least $3 - $4 in donations over 3 – 5 years.
2. How much of this amount is paid to Appco in the first year of the pledge?
For commercial in confidence reasons, we are unable to disclose the financial arrangements between APPCO and the Peter MacCallum Cancer Foundation.
3. By way of example, how much is paid to Appco on the basis of a $39 monthly ongoing pledge?
As above.
4. If the payments to Appco are made from the Foundation’s existing fundraising budget, what was the total amount paid in 2015 and 2016?

As above.

5. What was the total revenue raised by Appco in these periods?

As above.

6. Would the Foundation be concerned if marketing contractors were telling donors that just 9 percent of a $39 monthly donation (over a maximum period of 12 months) would go to “administration” and that the rest would go to Peter Mac?
It is our understanding that face-to-face fundraisers are not trained to provide this figure. It is not consistent with our model.
7. Does the Foundation believe that donors are properly made aware that up to 93 percent of a donation may go to Appco if they stay for only a year?
Donors are made aware that there is a one-off fee for their recruitment. The amount varies based on how much is donated.
8. Does the Foundation have any concerns about the ongoing use of Appco contractors, given the pending class action and the related allegations that staff have been grossly underpaid / encouraged to engage in bizarre 'hazing' rituals in the event of poor performance?
Our suppliers must comply with all relevant legislation. We take our obligations in supply chain management very seriously and expect our suppliers to treat their personnel with respect.
9. Additional background:
The funds donated by our regular givers have been transformational and are vital in providing sustainable and predictable net returns, allowing for significant cancer research investment for many years to come.

Our questions to VMG Global:

As you may be aware, the Seven Network’s Sunday Night program is producing a report on Appco Group’s fundraising activities. In the course of our investigation we have become aware of VMG Global contractors making what appear to be false or misleading statements to donors.
In particular we have evidence of VMG Global contractors soliciting monthly donations for the Peter MacCallum Cancer Foundation stating that just 9 per cent of a $39 donation would go to administration and that all the rest goes to Peter Mac. Further, the representation is made that if the donor gives $468 for one year, only $42 goes “to admin”.
Can you please clarify:
1. Are these statements accurate, and if not, what is VMG Global’s response?
2. Is it the case that 93 per cent of the donation goes to Appco and/or VMG Global in the first year, not to the Peter MacCallum Cancer Foundation?
3. Is this information made available to donors before they hand over their credit card, or only if they read the fine print afterwards?
4. Does VMG Global accept it has an obligation to accurately inform charity donors about where the money goes, and does it believe it has met that obligation in light of the above?

Response from VMG Global:

We believe that VMG and all contractors have an obligation to provide accurate information to charity donors and we expect all contractors to do so in line with all relevant regulations.
Mark Mallison
VMG Global



RSL ART UNION / STM INTERNATIONAL

Our questions to RSL Art Union:

1. What percentage of funds raised by Appco is kept by the RSL Art Union and what percentage is paid to Appco and related parties?
2. If the amount paid to Appco is a fixed amount, please specify.
3. In the case of sale of raffle tickets or other ongoing commitment, how much is paid in the first year?
4. What was the total amount the RSL Art Union received from Appco’s fundraising activities in 2015 and 2016?
5. What was the total amount the RSL Art Union paid Appco for its fundraising activities in 2015 and 2016?
6. We have evidence of Appco-contracted fundraisers for the RSL Art Union repeatedly telling potential raffle-ticket buyers that “100% of funds raised go the RSL” and that the marketing company does not take a fee. Can you confirm this is correct, and if not, what is the correct position.
7. What steps are taken to ensure donors/purchasers are told what funds will be paid Appco or other third party fundraisers?


Statement from RSL Art Union General Manager Tracey Bishop:

Like many high profile Australian charities, RSL Art Union contracts direct sales companies from time to time with the aim of attracting new memberships.
This activity accounts for a small proportion of our overall fundraising efforts.
RSL Art Union is contractually unable to comment on individual marketing supplier arrangements as these are commercial in confidence.
Suppliers receive training materials from RSL that accurately outline our cause and its services. We expect the professional companies we engage to adhere to RSL quality and compliance guidelines which forbid fundraisers from “providing incorrect information about the cause or damaging the RSL brand by misleading customers on services”.
RSL has internal governance processes to help manage its direct sales suppliers. These include a formal code of conduct, a Quality Assurance and Compliance Program and mandatory training and education. We also call all new customers recruited through direct sales companies for feedback on their experience.
We expect companies engaged by RSL Art Union to represent our brand in accordance with the law. If factual evidence emerges that this is not the case, we will review our contract termination rights.
All organisations, including RSL Art Union, have operating costs but it is accurate to say that 100% of profits go to supporting the wellbeing and welfare of ADF members, former servicemen and women and their families. In this we are no different to the thousands of Australian charities who raise funds to support worthy causes, be it through direct donation, events or lotteries.
The funds RSL Art Union raises has enabled world-first research into Post-Traumatic Stress Disorder to improve the prevention, diagnosis and treatment of the illness amongst current and former service personnel. RSL Art Union fund raising also enables Mates4Mates, the contemporary veteran support group for wounded, injured and ill former and current service personnel, to deliver a range of rehabilitation, education, adventure and counselling programs. Scholarships for further education, legal assistance, crisis accommodation and direct welfare are also provided to the veteran community with funds raised by RSL Art Union.
We are passionate about our cause and strive to always act in the best interests of our generous and loyal supporters.

Sincerely,
Tracey Bishop, RSL Art Union General Manager

Our questions to STM International:

As you may be aware, the Seven Network’s Sunday Night program is producing a report on Appco Group’s fundraising activities. In the course of our investigation we have become aware of STM International contractors making what appear to be false or misleading statements to donors.
In particular we have evidence of STM International contractors selling raffle tickets for the RSL Art Union stating that “100 per cent” of the money received would go to the RSL, and that the marketing company does not take a fee.
Can you please clarify:
1. Are these statements accurate, and if not, what is STM International’s response?
2. What percentage (and dollar amount) of such ticket sales goes to the RSL Art Union, and what percentage (and dollar amount) goes to Appco and to STM International?
3. Is this information available to charity donors/raffle ticket buyers, and if so, where?
4. If such information is not available, why not?
5. Does STM International believe it has an obligation to accurately inform charity donors/raffle ticket buyers about where the money goes?

Response from STM International:

STM engages in product sales to customers for RSL Art Union. This is very different to donations. Customers are purchasing a retail product, and this is clear in the marketing material and the information the customer receives at the point of sale. RSL Art Union processes all customer payments and distributes all products. STM’s contractors are expected to provide clear information to customers according to all relevant regulations and RSL Art Union’s requirements.

Daniel Tonkin
STM International Pty Ltd



SPECIAL OLYMPICS AUSTRALIA

Our questions to Special Olympics Australia:

1. Can you confirm that Appco contractors are authorised to wear Special Olympics paraphernalia and represent themselves as entitled to raise funds for Special Olympics.

2. Can you please clarify exactly what is the relationship between Special Olympics, the Mater Foundation and Appco.

3. In particular, can you clarify what proceeds from these fundraising activities go to each of these entities.

4. What percentage of any donation or sale obtained via this partnership is kept by the Special Olympics and what percentage goes to Appco and/or the Mater Foundation?

5. In the case of an ongoing commitment or pledge, how much of this amount is paid in the first year?

6. How much of the Special Olympics’ annual revenue for 2015 and 2016 was raised through its partnership with Mater Foundation?

7. What was the total amount the Mater Foundation received from this partnership in these periods?

8. What was the total revenue raised by Appco in these periods?

9. In 2014 it was reported in The Guardian (19/6/2014) that only 4% of $12.2m raised for Special Olympics by Appco was retained by the charity. Appco stated it had taken a fee of around 57%. What accounted for the remaining 39%?

10. Liquor and Gaming NSW conducted an investigation into this matter and “determined to take no action further action for reasons including … Special Olympics’ termination of its contracts with Appco Sports Group”. Does Special Olympics have any concerns about the use of Appco contractors under its partnering arrangement with Mater Foundation?

11. Does Special Olympics have any concerns about the use by its partner of a company that is alleged in current court proceedings to have grossly underpaid its workers?


Response from Special Olympics Australia:

I am very grateful for the opportunity to respond but we will not be commenting on this investigation.

Corene Strauss,
Chief Executive Officer
Special Olympics Australia

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