Are mixing consumer products with fund raising an ethical/legal way of raising money for charities?

My niece raised money so she could go on an adventure cycling holiday and asked for money half of which paid for her holiday the other half went to the charity. Effectively the donation to charity was highly diluted. There was strong pressure to subsidize the holiday as this was a charity donation. She had a good holiday and I guess the holiday was cheaper as the travel company being a charity does not need to be taxes. Looking at the charity's annual report it seems they can pay its executives well based on the holiday business while appearing to be a very efficient charity in terms of taking very little from the charity donations. Do you see this business model as sufficiently transparent and ethical, or are they exploiting a loophole in their charitable status. What is to stop them selling cars without tax whereby the part that they would have paid in tax goes to a charity?