Sector Focus: Key considerations when deciding whether to accept or refuse a donation

02 Apr 2024 Expert insight

By nicoletaionescu / Adobe

In March 2024, the Charity Commission published new guidance to help charities decide whether to accept, refuse or return donations. This is an issue that many charities have had to address, and it has come into sharp focus in recent years with several high-profile media stories.

The guidance is clear that the starting point should be to accept and keep donations, as donations help to further a charity’s purposes. However, there are cases where a charity must reject a donation. In other cases, a charity may choose to refuse a donation where it is in the charity’s best interests to do so.

When must you return or refuse a donation?

The guidance sets out several cases where donations should be returned or refused. Donations must be refused if the money comes from an illegal source or has an illegal condition. If this happens, a charity should follow its legal duties which may include reporting to the Charity Commission or the relevant authorities.

There are several other scenarios where a charity will probably need to return or refuse a donation. This includes a donation which falls outside of your charitable purposes, a donation which would undermine your charity’s independence and a donation which you expect would result in a valid legal claim. While it is likely you will need to return or refuse donations in these cases; it may be possible to work with the donor to mitigate the issue.

There are specific provisions in place for failed fundraising appeals, and the Charity Commission has issued guidance which covers this issue.

What about cases not covered by the guidance?

If you are considering refusing or returning a donation, the starting point is to check whether your circumstances are covered by the guidance. If they are not, you first need to check whether your charity has the power to refuse or return the donation. This may be a general provision in your governing document, such as a provision which allows you to do anything which furthers your charity’s purpose. If in any doubt, legal advice should be sought. The Charity Commission’s guidance notes that there may be circumstances which mean you need to change your charity’s governing document.

Assuming that the above is met, a charity must decide whether returning or refusing a donation is in line with the charity’s best interests. This is likely to involve weighing up the various factors and deciding what is in the best interests of the charity overall. The Charity Commission’s guidance sets out a list of the various factors to consider which include the value of the donation, the risks involved in returning or refusing the donation, and the impact of potential negative public criticism. While this list may not be conclusive, it is likely to provide trustee boards and management with a steer as to the factors to consider.

We’ve decided to return or refuse a donation – what next?

As with any key decision, it is important that the decision-making process is properly documented. This should include the key factors the trustees considered in making the decision. Trustee boards should also carefully consider how the decision will be implemented, and how any risks will be managed. If necessary, a contingency plan should be put in place – for example, to deal with any negative publicity.

Trustees should consider the need to report a serious incident to the Charity Commission and should follow the relevant guidance. Trustees should also consider the need to take further advice, which could include legal, accounting or tax advice.

And finally

Deciding to return or refuse a donation is a difficult topic, and one which can be emotive. It is critical that the various risks and factors are carefully weighed up, and the decision-making is recorded. Having a documented policy in place may help to ensure a consistent approach and a process which involves the right people. If in any doubt, seek professional advice. 

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