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To accept or not to accept - when can a charity turn down a donation?

29th Jan 2024 | Charities & Social Enterprise
A hand holding coins in reaching out to an empty hand

The relationship between charities and donations might seem straightforward – a donation is given to a charity which, in turn, is used to further the charity’s purpose. Many charities rely on the goodwill and donations of others to function.

So, when might a charity ever turn down a donation? Samantha Pritchard, partner, and Anna Glover, paralegal, both in our charities team, discuss the reasons why this might occur.

When they are legally obliged to refuse

There are certain scenarios where trustees must turn down a donation as a matter of law.  For example:

  1. Trustees must be able to identify their donors and the sources of the funds they provide.  Where those checks reveal a risk that those funds are the process of crime or terrorism, the charity must refuse the donation (and take additional steps to disclose this to relevant authorities).
  2. Trustees must be able to comply with the terms of any gift.  Where a donation comes with ‘strings attached’, those conditions must be capable of being met by the charity and must not undermine the charity’s independence.  Where this is not possible, the donation should be refused.
  3. A charity can only accept a donation that furthers its purposes (or one of its purposes).  If accepting a donation would require the charity to apply the funds outside of its purposes, the donation should be refused, as to do otherwise would place its trustees in breach of trust.

Of course, with the second and third examples, a charity may wish to go back to the donor to discuss changing the conditions or the purpose for which the funds can be applied such that those donations can then be accepted.

Charities should also bear in mind the Charity Commission guidance which advises that any anonymous donation over £25,000 should be assumed to be suspicious unless the charity can assure itself that this is not the case.

When it is not in the charity’s best interests to accept

Charities may be put in a tricky spot when a donor’s money has been acquired through methods which are counter to the charity’s purpose.

For example, if a charity’s purpose is to tackle environmental issues or to protect endangered animals, how should they respond when a donation has been raised through the fossil fuel industry?

Wariness around ethics extends beyond rejecting donations from sources which directly contradict the charity’s purpose. Institutions including the National Portrait Gallery and the Tate have recently refused donations from the Sackler Trust owing to allegations against Purdue Pharma (which the Sackler family own), which is alleged to have fuelled the opioid crisis in the United States. How might have the trustees of those institutions reached their decision to refuse?

As a general rule, the starting point should be that a charity accepts a donation if it is lawful for them to do so and therefore that refusal in any other circumstance should be relatively rare and done with caution.

The Chair of the Charity Commission, Orlando Fraser, has said recently that charities should be careful when turning down donations for moral reasons.

In a recent speech, Fraser criticised “demonstrative personal squeamishness around sources of philanthropic funding” which “may benefit the sense of righteous progressiveness of a trustee… but will most likely not serve the beneficiary reliant on the services a charity provides”.

Fraser also indicated that where a charity’s decision to refuse funds is “materially irrational”, the Commission may intervene.

Managing risk

Trustees should not refuse donations on a whim, but that is not to say that there won’t be circumstances where it is within the range of reasonable decisions that a trustee body might make.  

In some circumstances, significant risks will arise for a charity in accepting a donation.  For example, where accepting the donation is likely to cause other funders to walk away from the charity, or disengage a significant proportion of beneficiaries, or cause severe challenges for retaining or recruiting staff or volunteers.  

Where the risks or financial impact of accepting the donation outweigh the benefits, it becomes easier to see where trustees might conclude that it is in the best interests of their charity to refuse.

Trustees still need to exercise caution however around allowing their own personal moral or ethical perspectives to unduly influence decisions they take on behalf of their charity.  

One way of doing so is by developing a donations acceptance policy which provides a clear framework for how trustees consider these tricky issues and allows them to put aside their personal views in favour of clear and unbiased considerations from the perspective of the charity and its best interests.

New guidance on the horizon

The Charity Commission is due to publish new guidance for charities on “Accepting or Refusing Donations” in early 2024.

It will be interesting to see how this guidance reflects the changing landscape in relation to these issues and the guidance it may provide for trustees on the factors they should consider when making these difficult decisions.

For assistance in developing your donations policy, or in considering whether or not you can turn down a donation, please contact Samantha Pritchard using [email protected] or 0191 211 7905.

Frequently Asked Questions
When should a charity return a donation?

If a donation is obtained from an illegal source, from a donor who lacks capacity, where the donor does not legally own the funds or if the donation is given subject to conditions, and those conditions haven’t been met.  Otherwise a charity should only return a donation if it is in the best interests of the charity to do so.

Do charities have to give back donations if they don’t meet their fundraising target?

If a charity’s fundraising appeal fails, the trustees must offer donors their money back. There are exceptions where the donations received are from a cash collection, such as a collection box, the donations are the proceeds of a lottery, competition or other similar fundraising activity, or any individual donor has contributed £120 or less in total to the appeal.  A charity can avoid returning donations in such circumstances by ensuring the appeal is carefully worded such that it does not fail.

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