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With recent controversy involving questionable donations to a royal charity, to the Tory party and to the London Science Museum, it is clear that the public increasingly expects openness and transparency from recipients. So how much do you know about your donors (especially any major contributors) and could accepting money from them harm your organisation?
While each of the examples here is slightly different, they all carry the same risk of reputational damage.
Prince Charles’ charity was accused of accepting donations in return for the recommendation of an honour (something which it denies).
The Tory party accepts it has taken money from several wealthy Russians, but denies anything was offered in return.
The Science Museum has accepted money from Shell and the Adani Group, a company with roots in coal mining, attracting protests from the UK Student Climate Network about greenwashing.
With budgets under pressure and uncertainty about how funding will look post-Covid, it is understandable that organisations will be tempted to take the money as no doubt they believe they can do good with it.
Dodgy money can come from any quarter, whether a major donor, a company, a trust or a foreign government (think Newcastle United). So how can charities protect themselves from a potential scandal?
The first line of defence is to establish an ethical policy that sets out the sources of funding you will not touch. These typically include people, companies or trusts that have made their money from alcohol and tobacco, weapons, pornography, from exploiting people or from environmentally harmful activity.
Ensuring that everyone in the charity is aware of the criteria means you are less likely to approach a potential donor in one of your barred categories.
But what if you are approached by a donor? This is where the second line of defence comes in, which is research.
Due Diligence Research
This is a specialist area of prospect research, which seeks to investigate the background and sources of wealth of a potential donor. How did they make their money? Are they associated with any scandals or linked to any criminal activity? Would taking their money create an unacceptable risk for your charity?
In cases where a significant donation is possible, it is worth the time and trouble to do some digging. However, it is not always obvious where money has come from, especially if it has been laundered or hidden behind a series of shell companies.
Today, most larger charities and institutions such as universities (which often receive large gifts) will routinely carry out due diligence research on their largest donors. It is certainly worth the time and cost to ensure that the funds they are taking are clean and ethical and to reduce the risk of negative publicity.
Ask if you Need Support
For charities without the facility to do their own due diligence research, it is possible to commission this from specialist researchers. So if you are uncertain about accepting a significant gift from a donor, do contact us, as we are able to provide this service.
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