An offer you can refuse: Understanding the Charity Commission's recent guidance on accepting donations.

When funding is always a challenge, saying no to a donor or returning a donation may seem unthinkable. But in recent years the charity sector has been confronted with several high-profile donation scandals, along with the issues of fossil fuel company sponsorship, sanctioned Russian oligarchs and disgraced big-pharma philanthropists. This has forced a re-evaluation of the ethical frameworks governing charitable contributions and the realisation by trustees that just because a donation is legal, it may still not be in the best interests of the charity to accept it.

Great Ormond Street Hospital's decision to return donations from the President's Club Charity Dinner, amidst widespread public outcry over allegations of misconduct at the event, highlight the complexities involved. They not only underline the importance of due diligence and ethical considerations in accepting donations but also the need to balance financial expediency against maintaining core values and public expectations to protect a charity’s hard-won reputation.

The Charity Commission's latest guidance on accepting, refusing, and returning donations sets out some parameters and considerations to bear in mind. The guidance seeks to empower charity trustees to make informed decisions that align with the charity’s purposes, values and legal obligations, ensuring that every donation supports the cause without compromising principles.

Accepting Donations: Due Diligence is Key

The guidance underscores the importance of due diligence, understanding the source of a donation and any conditions or restrictions that a donor may attach to a gift, or indeed a loan. Of course, many charitable donations are restricted to a particular use, and there’s nothing inherently wrong with that, but conditions that favour the donor or someone connected with them may be problematic. Similarly, the provenance of the funds should not be at odds with your charity's values or the interests of beneficiaries, whether that’s because of a risk of the funds being tainted by illegality, or simply because of the inappropriateness of a tobacco company funding lung cancer research, for example.

Refusing Donations: When to Say No

The decision to refuse a donation should never be taken lightly, and indeed the assumption will normally be that a donation should be accepted as being in the best interests of the charity. The new guidance provides a framework for making these tough calls, particularly when a donation could lead to a conflict of interest, compromise the charity's work, or originate from a dubious source. Just as accruing funds is in the charity’s interests, so is maintaining its integrity and reputation, so funding from other sources isn’t compromised.

Obviously, there are other circumstances where returning a donation is the right thing to do. This could be due to the donation being made in error, the discovery of information that would have led to its refusal had it been known sooner, or legal reasons that prevent the charity from using the donation as intended. I recently advised a charity that had received a sizable legacy, only to be asked by the solicitors for the money back, because they had miscalculated the Inheritance Tax liability of the Estate. The guidance offers clarity on how to navigate these situations, balancing legal obligations with ethical considerations.

Implementing the Guidance: Practical Steps for Charities

Like all such documents, the Charity Commission's updated guidance on donations is more than just a set of rules—it's a roadmap for navigating the legal and ethical grey areas that can arise when accepting some donations.

1.      Have a written policy: maintaining a formal policy means that you will not only be able to apply a consistent approach, even if personnel and circumstances change, but you can demonstrate compliance with the relevant rules and guidance, should any sort of challenge ever arise.

2.      Ensure your senior management understands and applies the policy: everyone involved in handling donations should be familiar with the rules and guidance, and should be applying your own policy. A trustee level ‘champion’ – someone on the board who takes responsibility for ensuring this area remains under review – is always a good idea too. And this and other risk areas can form part of a comprehensive risk management schedule and training programme.

3.      Document your decisions: Keep detailed records of the decision-making process for accepting, refusing, or returning donations. This documentation can be invaluable for demonstrating compliance and supporting your decisions should they be questioned.

4.      Communicate with donors: Transparency is vital. Be prepared to communicate your policies on accepting, refusing, and returning donations if you need to. Openness builds trust and helps manage expectations.

5.      Seek Advice When Needed: Don't hesitate to seek professional external advice when faced with complex decisions. It's better to navigate these waters with the support of experts than to risk getting it wrong.

If you would like to discuss any of these matters further, please be in touch by emailing consultingmjb@gmail.com.