Tamsin Anderson from Mills & Reeve recently presented a comprehensive overview of when and how charities can refuse or return donations at a CFG webinar, drawing on the Charity Commission's guidance and her extensive legal experience in the sector.
Tamsin, who outside of work is also a trustee of the National Youth Choirs of Great Britain, emphasised that accepting donations should be the default position for charities. As she noted, quoting Charity Commission Chair Orlando Fraser: "The law generally expects charities to accept monies where they are available in order to deliver on their purposes for the public benefit, and not to return or refuse them without very good reason."
Since the webinar, Charity Commission Chief Executive, David Holdsworth, has reaffirmed this guidance and urged charities to accept ‘contentious or controversial’ donations if they are in the charity's best interest. Holdsworth added that he feared donations being “withheld for fear of being rejected” could add to charities’ current financial challenges.
However, the landscape of public expectations around charitable donations is constantly evolving, which can make things very difficult for charities. Tamsin referenced several recent controversies, including the 2018 Presidents Club scandal and ongoing debates about accepting funding from oil companies, drug companies, and organisations with links to conflict zones.
Tamsin observed that charities have often been criticised for both refusing and accepting funds from these areas, adding: "Basically, you can't win. It's a really hard decision that you can't win. But you can follow the rules to make sure that any decisions that your trustees make can be evidenced and justified."
The presentation outlined some key circumstances where donations can be refused or returned:
- Mandatory refusal: Including donations from illegal sources, donors lacking mental capacity, or situations where accepting would result in legal claims against the charity.
- Best interests of the charity: Including cases where donations fall outside the charity's objects, compromise independence, or create unacceptable levels of private benefit. A charity must have the constitutional power to return or refuse donations, either expressly or under a general power.
- Special powers: Where the law provides charities special powers to return/refuse, such as ex gratia payments, or failed appeals.
Tamsin stressed that trustees must make decisions that are "rational and reasonable and supported by clear evidence."
She highlighted Fraser's warning that "demonstrative personal squeamishness around sources of funding may benefit the sense of righteous progressiveness of a trustee or charity executive, but it will most likely not serve the beneficiary reliant on the services the charity provides."
The Q&A session of the webinar revealed several practical concerns from attendees, with questions focused on topics including:
- Whether charities need to apply the same level of scrutiny to small donations as large ones. Tamsin advised that while scrutiny can be proportionate to size, basic checks for issues like terrorism links or mental capacity concerns remain important.
- The tax implications of returning donations (this varies depending on circumstances and timing).
- How to handle donations made by mistake. Tamsin suggested this could typically be resolved under general powers without requiring special permission.
- The distinction between soliciting and accepting donations (particularly in contexts where funding sources might conflict with charitable purposes).
A particularly interesting discussion emerged around donations from donors lacking mental capacity. While acknowledging this as a "real red flag," Tamsin referenced the case of Olive Cooke, which resulted in significant changes to fundraising regulations to prevent inappropriate fundraising from vulnerable people, such as the elderly and people with Alzheimer's.
Whilst this specific case was more focused on solicitation from charities, rather than the practice of accepting or refusing donations, Tamsin was keen to highlight that charities need to be aware of potential litigation with regards to elderly donors, particularly with larger donations.
Tamsin concluded by directing attendees to several useful resources, including guidance from the Charity Commission, the Chartered Institute of Fundraising's practical resources, and Rogare's detailed and thought-provoking guidance on the ethics of accepting and refusing donations.
The presentation provided a valuable framework for charity trustees and executives navigating these complex decisions, emphasising the importance of careful consideration, clear documentation, and balanced judgment in protecting both charitable assets and reputation.