I can see how situations can arise.
You see a need, you say to friends "shall we buy some Easter Eggs for the children at the foodbank?", everyone says "good idea, can I sling you a tenner?" and because it's all new and it's all among your mates, you get money into your paypal. Word spreads, and you get donations from other people. Maybe one of those people works for a local business. Everyone knows each other, everyone trusts each other, it's all informal and nobody worries that the money is getting misappropriated. Someone suggests setting up a stall in the local shopping centre. Most people buy an extra Easter egg and drop it off, but a few people give you a tenner for you to buy one.
Time passes, wavy lines, oo-ee-oo
The remit of your work expands a bit. You're basically running a charity, but nobody points this out to you. You're receiving hundreds, maybe thousands, of pounds a month but it's never been put on a formal footing. You're on PAYE, you don't need to fill out a tax return so this money never comes to the attention of an accountant who can guide you on proper process. The method you've come up with works, it's all just ticking along, and because you see yourself as basically an honest person, it never occurs to you that other people might think you're not behaving appropriately. Contact from a stranger to say "err, looks a bit sus, this" is seen as an attack on your project, an attempt to stop the kids getting presents, an attack on your personal integrity (you're an honest person, remember?)