26: Can a charity refuse or return a donation? Why a donations policy can help
A decision to refuse, return or accept a donation can arise quickly, especially in the age of social media, and trustees may have to make a decision on short notice, possibly under the glare of media attention. Added to this, the impact of COVID-19 has changed the fundraising landscape for charities, with donations and funding dropping in some areas and new challenges in maintaining oversight of usual financial controls. In such circumstances, there can be an increased risk of money being accepted without the usual due diligence and risk management processes taking place.
The Charity Commission published some initial guidance in 2018 aimed at helping charities which received Presidents Club donations. It followed this up with a blog on the circumstances in which charities may return or refuse donations. The Chartered Institute of Fundraising has issued detailed guidance that can help trustees to understand their options and decide on the right course of action for their charity.
When might a charity want to return or refuse a donation?
Generally, of course, charities do not want to refuse or return a gift. There are circumstances, however, where a charity may need to consider whether it can or should accept or keep a donation.
For example, if a charity has evidence that a donation was made by someone who lacked capacity to make the gift, it would be proper for the charity to return the donation because it would not be a valid gift.
In other circumstances, there can be concerns over the impact on the charity if it accepts (or in some cases retains) a gift, for example, if it accepts (or retains) a gift made by someone who has capacity but is in vulnerable circumstances, or if the gift is from a source which is associated with scandal, as in the case of the Presidents Club referred to above. These can be difficult questions for trustees to consider.
Can a charity refuse or return a donation?
As a general rule, the Charity Commission will expect charities to accept donations. In some cases, however, as in the examples mentioned above, charities may be concerned about the potential damage, perhaps to their reputation and / or to their fundraising or relations with stakeholders, if they accept (or keep) the gift.
When considering whether to refuse a donation or, if it has already been received to return it, the process is not straightforward and there are different questions and different rules which will apply in each case.
A charity is able to refuse a donation but to do so the trustees need to be satisfied, and able to show, that it is in the best interests of the charity. Making such a decision will involve a careful consideration, based on evidence, of the risks of accepting the donation against its benefit. Typically, the sort of risks which arise may be the projected loss of donations from other supporters or funders or the impact on staff or volunteers if the charity were to accept the donation. Another important factor is where accepting the donation would conflict with the charity’s purposes – for example, if a tobacco company were to offer a donation to a cancer charity, the charity could refuse the donation as it would conflict with the charity’s purposes.
The question of returning a donation is different from that of refusing a donation. This is because the charity has already accepted the donation into its charity funds, so the decision then relates to distributing those charity funds other than for its beneficiaries. The charity will still need to be able to show why returning the donation would be in the best interests of the charity, but it will also need to consider if the charity has power to apply its funds in this way. It may be necessary to ask the Charity Commission for advice or for the authority to return the gift.
These are difficult decisions for trustees to make and there is rarely one right answer; whatever the trustees’ decision, there will be those that disagree. It is important, therefore, that the charity trustees are clear about their decision, the reasons for it and the factors they took into account when reaching the decision. An added stress for charity trustees when making these fine-tuned decisions is that they are often made under time pressure, especially if there is press and / or social media interest.
What is a Donations Policy and why should a charity have one?
A donations policy can help reduce the stress of making these decisions, by providing a framework for decisions on accepting, refusing or returning donations. In devising the policy, the trustees will have considered their approach in advance, rather than when faced with a tricky dilemma. The policy then provides the trustees with a process to follow to help them avoid kneejerk reactions and instead to come to a properly thought through decision. It can also help to manage the press and social media interest, as the trustees’ decision will be supported by the policy.
Charities that already have a donations policy should make sure that their policy is up to date and regularly reviewed so that it is fit for purpose and ready for use if it becomes necessary.
The form and content of the policy will depend upon the individual charity. E.g. factors such as the size and resources of the charity, how many donations it tends to receive and from what range of donors, will all feed in to the policy. A donations policy should also fit in with the risk management policy of a charity, such as the financial controls, to identify and manage potential risks from donors, for example, identifying potential criminal activities that donors may be involved in. The Charity Commission’s guidance provides more information on how a charity should conduct due diligence and verify the identity of donors.
Serious incident reporting
Charities that are contemplating returning a donation should also consider submitting a serious incident report to the Charity Commission e.g. where there is, or a risk of, significant harm to the charity’s reputation. The refusal of a very large donation may also mean that a charity should submit a serious incident report e.g. if it may cause reputational harm to the charity or be linked to financial crime. The Charity Commission’s guidance sets out when and how to report a serious incident report.
If you think your charity could benefit from a donations policy, or wish to review your current policy, please contact your usual BDB Pitmans contact.