A couple of years ago, the big controversies rocking the charitable sector in the UK centred around unethical fund-raising practices. Following the scandal of the President’s Club fundraising evening in January 2018, there is a new question for charities to engage with: when should they say no to donations?
Most of the focus in the coverage and debates about that evening centred, quite rightly, on the behaviour of the attendees towards the ‘hostesses’ hired for that evening. (One thing we have learned is how widespread the problem of myopia is amongst the philanthropically-minded great and – as it turns out, not-so – good, given how few attendees saw anything going on). Prominent amongst the voices of condemnation were the intended beneficiaries of the evening’s largesse. Reflecting the views of many of those charities who were to receive donations from the President’s Club, Great Ormond Street Hospital (GOSH) said it would be returning all previous donations, adding “we would never knowingly accept donations raised in this way.”
One question that springs to mind is whether the charities involved should have known what was going on. After all, rumours had reached the FT of what was going on at these men-only events. Should charities accepting money have dug a little deeper into the nature of the fundraiser? Charities can’t check everything – what goes on in the charity auction evening at the Puddletown Village Hall will probably stay there. But the President’s Club was a slightly different in reputation and size of donations it was able to make. What due diligence responsibilities do charities have? But even with effective due diligence procedures, the real question is how charities can decide when a donation is from an individual or organisation, or the result of a particular type of fundraising activity, that conflicts so profoundly with their ethical and moral standpoint, that they have no choice but to turn it down. How clean, in other words, does a donation have to be?
Just put the cheque back in the post?
As charities publicly indicated their intention to return previous, and refuse future donations from the President’s Club, the Charity Commission (the regulatory body for all charitable organisations), issued guidance to charities affected. In a statement issued in the days following the scandal, the Charity Commission advised charities that it was for trustees to decide whether to refuse a donation:
They must make this decision on the basis of the best interests of the charity. That will include weighing up any issues around how the funds were raised, which may include reputational concerns, against the financial impact on the charity of turning the donation down.
Charities are restricted in how and when they can refuse a donation, or return one already made (in the latter case, Charities in England and Wales must obtain approval from the Charity Commission, so just putting a cheque in the post with a polite thank-you-but-no-thanks acknowledgement isn’t going to work). Refusals or refunds can only occur where the donation (or donor) poses a threat to the reputation of best interests of the charity, or where a donation may negatively influence its work (for example, through the attachment of conditions to the donation). Regulations in England and Wales allow for this decision to take into account a moral dimension, whilst charities in Scotland are in principle not able to refuse solely on grounds of morality. Trustees, who are responsible for making such decisions, must demonstrate that refusing or returning a donation will lead to an actual ‘benefit’ accruing to the organisation; and this benefit must be a definite advantage rather than merely convenient.
Uneasiness about a particular donor based on the individual ethical standpoint of an individual trustee or member of the charity is not in itself sufficient. There must be tangible harm to the charity in keeping the money, or a tangible benefit (that outweighs the loss in income) from returning it. So GOSH must decide whether the reputational damage from accepting donations from the President’s Club is greater than the good which would come from that money. Seen in that light, the decision is a harder than it might at first appear. How do we judge damage to the charity (which has unequivocally condemned the evening and had no role in it whatsoever) against the potential benefits (in this case life-altering or saving) that could result from the donation? Whose interests should take priority in any decision: that of the charity with its ethical standpoint, or the needs of the individuals or community who are the ultimate beneficiaries? What may be poor-taste but within the bounds of acceptability for one set of trustees, might be seen as beyond the pale for another. Groping and sexual harassment are clearly unacceptable to all, but had that not occurred, would the other things that went on (the line ‘spice up your wife’, linked to an auction for plastic surgery, for example) at the men-only President’s Club fundraiser have been, if not acceptable, tolerable?
The Charity Commission recognised that in responding to the President’s Club scandal, the decision as to whether a charity could accept donations would differ from one organisation to another, and expressed the view that there was no single ‘legitimate’ response. The balance between harm and benefit is not always clear, and the ethical dilemma is about the good to which the money could be used, against the taint of its source. Should an environmental charity accept money from an oil company implicated in major environmental damage? Or a human rights charity (or university) accept a donation from a foundation run by a close relative of a dictator known for torturing those opposing the regime? Would a legacy from a convicted rapist be acceptable to a charity working with survivors of sexual violence? Perhaps if during their life the individual had accepted responsibility and indicated remorse, but what if not?
How clean does a donation have to be?
Charities are having to decide how clean donated money has to be, and where they draw the line between clean and dirty (clean here being used in a moral sense, not in relation to laundered proceeds of crime). One might take a utilitarian position, and say it is not the source of money that matters, but the good that is done through its use. But as GOSH and the other charities have found, the provenance of money does matter.
In deciding how clean money is, charities must decide where to draw the line. Not liking the politics of an individual or organisation is probably not sufficient grounds. In the unlikely event that Katie Hopkins made a large donation to a refugee charity, they should probably take that money without any qualms. But charities should certainly say no when a donation could influence behaviour through explicit attached conditions or an internalised fear of missing out on future funding (as may have been the case with Save the Children, who were accused of spiking critical stories about two corporate donors at a time when they were receiving funding from them). It is the murky in-between areas that are more difficult to judge, where the moral lens will lead to different judgements between organisations. And where different outcomes result, does this mean some charities are more unethical than others, or just that the benefit / cost analysis looks different across organisations?
Making the issue yet more complex is the question of how many washes it takes for money to become clean? Few would have qualms now about applying for and accepting a grant from the Rockefeller Foundation or the Mellon Foundation, despite the business ethics of their founders. At what point did we become to so easily distinguish the source of the wealth of these foundations, from the work those foundations have done since? And what of the modern-day Rockefellers? How long will it take for their money to become clean?
If money can become clean over time, it can also be easily tainted. To what extent should charities be expected to consider returning a donation, accepted in good faith, when the donor proves to have been less than they originally appeared? What is the statute of limitations for donations, beyond which they no longer carry the taint of their donor? This has been an issue for universities as well as charities. As the UK Higher Education sector increasingly looks to alumni and philanthropic donors for its endeavours, it is coming up against the realities of how to know what money to say yes to, and what to decline. In 2011, Howard Davies quit as Director of the LSE after the extent of donations from the Gaddafi family and contracts for work in Libya was revealed. The LSE was criticised for failing in due diligence and lack of proper oversight in Lord Chief Justice Lord Woolf’s official report. But there will have been many institutions holding their breath fearing their own past and current relationships with particular governments, ruling families and other significant international figures might be next to appear under the public gaze.
A few weeks on, and only one of those charities has formally applied for permission from the Charities Commission to do so: the Royal Academy of Music , which received £10,000 from the President’s Club at the end of 2017. Others are still in dialogue with the Charity Commission, or discussing what to do with their Boards of Trustees. It will be interesting to see whether the decisions of trustees match the early public statements of the charities once the bright gaze of public scrutiny has moved on.
Before the President’s Club can be formally closed, its assets must be put to charitable purposes. So presumably some charity or charities are going to benefit from the money raised by this organisation. Handily, the Charity Commission tends to make such dispersals discretely. It was surely right for all affected charities to say they would no longer accept future donations from the President’s Club. And the decision to return donations made from this organisation was probably wise too, despite the impact the loss of that money will have. But charities are increasingly finding themselves having to draw their lines in the sand in a much more public way than previously over the question of what counts as clean-enough. And one thing about sand, it tends to shift around quite a lot. The work of the due-diligence manager has become an awful lot more public in 2018.
 Not even in the top 10 of Dorset villages with funny names