Meet our Expert

Frances_BarnwellFrances Barnwell – Managing Associate, Farrer & Co. 

Associate Director of Legal Services Oxford University; joined Farrer & Co in 2010. Frances has a wealth of experience in handling a wide range of contentious and non contentious matters arising in higher education including complex issues relating to constitution and governance and the impact of the Charities Act 2006.

 

“Under what circumstances can or should a charity refuse a gift or donation?”

The answer

Notwithstanding the pressure to accept much needed funds, it is incumbent on charities to ensure that donations from suspect sources, or that place unreasonable restrictions on the charity are refused and, where necessary, that monies already given are returned. Charities cannot guard against all future events and it may only be at some later stage that problems surrounding a given source of funding become apparent. However, they can take steps to ensure that they have a robust decision-making process when considering prospective donations and the conditions attaching to them.

Charity trustees may, or may be required to, reject donations for a number of legitimate reasons, and these are summarised briefly below.

  • They may decide that it would be unethical for the charity to accept funding from certain sources. Medical charities, for example, may be unwilling to accept research funding from the tobacco industry.
  • Donations may be unacceptable because the property offered would be too onerous in the hands of the charity. An example would be a property offered for the use of the charity that is in a poor state of maintenance, requiring substantial further investment from the charity before it could be of use.
  • Donations may be offered for purposes which fall outside the objects of the charity concerned. A charity whose objects are limited to supporting children would not be able to accept funds for the support of vulnerable adults.
  • There may be a conflict of interest between the work of the institution and the activities of the proposed donor.
  • The donor’s reputation or associations may be such that accepting funds would undermine confidence in the charity’s independence and adherence to its core values.
  • There may be concern that acceptance of the donation would constitute an offence under the Proceeds of Crime Act, the Terrorism Act (and related legislation) or the Bribery Act.
  • The donation may otherwise be unlawful, for example because the conditions attached would breach the requirements of the Equality Act 2010.
  • A charity may refuse a legacy where in its view it is under a moral obligation to do so, and where it is compromising a legal claim that has a reasonable prospect of success, or has the authority of an Order from the Charity Commission.
  • There are other circumstances where a court may intervene, for example where a donation is set aside in a claim under the Inheritance (Provision for Families and Dependents) Act, or in bankruptcy proceedings.
  • The donation may for some other reason pose a risk to the reputation of the charity.

Charities need to be mindful that attempts may be made to use the giving process for criminal purposes and they should not accept any gift if they know or suspect that in doing so they will be acquiring the proceeds of crime, or facilitating money laundering or terrorist activity. They may also be at risk from individuals who seek inappropriate advantage through the use of bribery. The Charity Commission has produced a toolkit ‘Protecting charities from harm’ (available online at http://bit.ly/MDxWJ4) which gives helpful guidance to enable charities to take appropriate steps to protect against such abuse and provides links to other relevant guidance produced by the Commission and the government. Charities need to put in place policies that will help to ensure that questionable activity is identified before the charity is put at risk, for example where a donor seeks anonymity. A request for anonymity may be acceptable where the donor is known to named senior officers of the charity or a reputable third party has carried out its own verification of the donor’s identity and probity, but may also be an indication that a proposed donation is suspect

Restrictions proposed by a donor, whilst made in good faith, may conflict with the provisions of equality legislation. Under the Equality Act 2010, it is unlawful for a charity to accept funds restricted to groups protected by the Act, unless the provision falls within one of the exemptions set out in the Act. The Charity Commission has produced guidance on the application of the Act ‘ Restricting who can benefit from charities’ (http://bit.ly/O7Ghbz). This provides some examples delineating the scope of the exemptions and the issues to take into account.

Subject to acting within the law, charity trustees have a discretion in assessing whether the acceptance of a proposed donation is or is not in the best interests of their charity. In making a decision, they should ensure that they have considered any applicable guidance from the Charity Commission. Compliance with the guidance is not a legal requirement, but charities do need to have good reason to depart from it and normally should not do so without obtaining professional advice. In situations where there is uncertainty about the propriety of accepting or refusing a particular donation, a charity may ask the Charity Commission for an Order confirming that it is acting properly.