Posted by Deanna Hurst, Partner
6 ways charities should protect themselves from disreputable donations
Following the National Portrait Gallery’s public refusal to accept a significant donation from the Sackler family, the Tate and the Prince’s Trust also announced their intentions to refuse any future donations from the family. These are the latest in a series of charities making difficult decisions regarding so called ‘tainted’ donations. We look at the importance of the need for trustees to understand their responsibilities in relation to fundraising.
Any approach to fundraising starts at the top – and trustees must own responsibility for the approach their charity takes in relation to its fundraising activities. This includes being ready to deal with any situation which could cause harm to the charity’s reputation when fundraising.
It is important to remember what can happen if best practice is not followed when fundraising. The possibility of being in receipt of mired funds presents a serious reputational risk for a charity. There then follows a debate about whether it is in the charity’s best interests to refuse a donation or keep it. There is not always a black or white answer to these situations. The existing policy of the charity will be crucial and, in the case of returning a donation, a charity should be sure to obtain the Charity Commission’s (‘the Commission’) approval before doing so and effectively depleting the funds of the charity.
A high profile example is the controversial fundraising dinner hosted by the President’s Club Charitable Trust in January 2018. In this case, GOSH, one of the beneficiary charities, confirmed it would return all donations received from the President’s Club.
The Commission and the Fundraising Regulator (‘the Regulator’) both carried out investigations into this event. The Commission concluded that the charity’s trustees had acted in good faith and believed they were furthering the charity’s best interests. However, the trustees were found to have breached their duties by failing to act with reasonable skill and care and by exposing the charity’s assets, beneficiaries and reputation to undue risk.
The Regulator found that the trustees had little awareness of the Code of Fundraising Practice (the ‘Code’) or their duties in relation to fundraising. The charity had breached the Code by not having processes in place to monitor the activities of the third party that organised and staffed the event.
Charity Commission’s key fundraising principles
The Commission sets out six key principles that trustees should be aware of when undertaking fundraising activities:
1. Plan effectively
Agree or set, and then monitor, the charity’s overall approach to fundraising. A plan should take account of risks, the charity’s values and its relationship with donors and the wider public, as well as its income needs and expectations.
2. Supervise your fundraisers
The trustees should have systems in place to oversee the fundraising which others carry out for the charity, so that they can be satisfied that it is, and remains, in the charity’s best interests. This means delegating responsibly so that the charity’s in-house and volunteer fundraisers, and any connected companies, know what is expected of them.
3. Protect your charity’s reputation, money and other assets
Ensure that there is strong management of the charity’s assets and resources so that the trustees can meet their legal duty to act in the charity’s best interests and protect it from undue risk. This includes ensuring that there is adequate consideration of the impact of the charity’s fundraising on its donors, supporters and the public, making sure that the charity receives all the money to which it is entitled, and taking steps to reduce risk of loss or fraud.
4. Identify and ensure compliance with the laws or regulations that apply specifically to your charity’s fundraising
The legal rules that apply to various types of fundraising are detailed and complex, covering areas such as data protection, licensing and working with commercial partners. Trustees need to be sure that their charity is sufficiently informed and has obtained appropriate advice to ensure that its fundraising complies with all relevant legal rules.
5. Identify and follow any recognised standards that apply to your charity’s fundraising
These are set out in the Code, which the Commission expects all charities that fund raise to fully comply with the Code.
6. Be open and accountable
This includes complying with any relevant statutory accounting and reporting requirements on fundraising and using reporting to demonstrate that the charity is well run and effective.
Comprehensive resources are available to trustees and charities by the Fundraising Regulator and the Commission and the Commission provides detailed guidance on this alongside the Regulator’s Code of Practice.
Our experienced and mutli-disciplined Charities team can advise on a wide range of issues including trustees responsibilities and reputational issues. Contact the team on
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