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A guide to fundraising due diligence, a donor compliance checklist, anonymous donations, scams and sanctions, with the Charity Commission Know Your Donor and other donor compliance checklists
Fundraising Due Diligence and Donor Compliance Checklists
Guidance on charity fundraising due diligence and a simple donor compliance checklist, plus guidance on gift acceptance, anonymous donations, scams and sanctions, with the Charity Commission Know Your Donor and other donor compliance checklists at the end. We also have a charity due diligence checklist.
What is Charity Fundraising Due Diligence?
Fundraising due diligence is the process of assessing the legitimacy, credibility, and ethical practices of organisations and individuals involved by carrying out checks to ensure that the donation complies with legal and ethical standards.
Fundraising Due Diligence - Donor Compliance Checklist
The fundraising due diligence you may need to carry out depends on you and the donor but here's a simple donor compliance checklist.
- Legal Check: Ensure the donation complies with the Fundraising Code and relevant laws, such as anti-money laundering or sanctions.
- Reputation Check: Assess potential impact on reputation of your charity. For example, the public image of the donor and any past controversies.
- Ethics Check: Verify alignment with your charity's mission and values. For example, green washing and being seen to be supporting corporate virtue signalling.
- Risk Check: Identify and manage potential risks associated with the donation, such as the financial stability of the donor, if a pledge is to be paid over several years.
- Transparency Check: Demonstrate transparency and accountability in fundraising practices. For example by disclosing the source and amounts of large donations, as long as this doesn’t violate any privacy laws or agreements with the donor.
The Charity Commission has published much more detailed donor due diligence guidance, such as it's Know Your Donor and other compliance checklists; see below.
Virtue Signalling
Virtue signalling, including 'green washing', is when companies make exaggerated or even false claims about their commitment to some form of ethical working.
- Look to see what underpins any ethical commitments in terms of specific action, funding commitment and/or evidence of delivery or impact.
- Also look back to see if the company has consistently committed to a course of action for a period of time, which it followed through on and to see if there has been any media criticism or controversies.
Donor Compliance - Gift Acceptance & Other Fundraising Policies
You cannot accept funding from a donor where it would not be in the best interests of your charity. For example, if a donor wanted to fund something outside of your charitable objects, or to impose unreasonable conditions or for any other reason that would not be in your charity's best interest.
And if you do but need to refund it, it's not quite as simple as it might sound. You may also need to consider issues, such suspicious donations, or managing large anonymous gifts, or those from vulnerable individuals. If you need any of these fundraising policy templates, you can download an Acceptance & Refusal of Donations, Refunds and Ethical Fundraising policies by logging in and asking the AI bunny nicely.
Fundraising Due Diligence - Other Than Donors
Fundraising due diligence is not something that applies only to donors. For example, when working with commercial fundraising companies. Charities must carry out appropriate due diligence to ensure that companies fundraising on their behalf are operating in line with the Fundraising Code, and have appropriate oversight and training. The Fundraising Code Section 7.3: Monitoring that fundraisers are meeting the code.
Fundraising Due Diligence - When It Goes Wrong
In the event your due diligence uncovers a significant problem, you must be mindful of your obligations to report major incidents to the Charity Commission and, if appropriate, the Fundraising or other regulator; see below.
FUNDRAISING DUE DILIGENCE - ANONYMOUS DONATIONS, SANCTIONS & SCAMS
When carrying out donor due diligence, be mindful that charities are at risk from attempts to breach sanctions and scams and, donations from anonymous donors, may pose a particular risk. Outlined below are how these should be managed, with detailed procedures contained in the Charity Commission Compliance Toolkit.
Fundraising Donor Due Diligence - Anonymous and Suspicious Donations
Donations through collection tins and online platforms are often anonymous and any donor may remain anonymous if he or she chooses to. The Charity Commission 'know your' donor principle does not mean charities cannot acceptanonymous donations and doing so is perfectly acceptable providing charities look out for suspicious circ*mstances and put adequate safeguards in place.
Trustees will take reasonable and appropriate steps to know who the charity's donors are and will not accept a donation where the risk to the charity is assessed to be greater than the benefit of having the funds donated.
Fundraising Donor Due Diligence - Sanctions
With the crisis in the Ukraine both the Commission and banks are focussing much more on the risk of breaching sanctions. This is a complex area as the sanctions applied can be to individuals, organisations or even countries, the sanctions applied vary and other countries also apply sanctions. In some circ*mstances a charity may obtain a licence from OFSI or rely on an exception in the legislation.
However, other than those exemptions, it is against the law to receive money, goods or economic resources from, or send these to – an individual or organisation subject to financial sanctions. In the event of any grounds to suspect the charity may be involved, or may become involved with a sanctioned individual, organisation or work in a sanctioned country, the first step is to read the OFSI guidance below, then seek and comply with their advice.
How Can Charity Trustees Identify Suspicious Donations?
There can be no absolute guide to what may be suspicious, but indicators are where significant sums are being donated, particularly if this is unusual, in cash or from overseas. Moreover, any prospective donor who wishes cash to be forwarded in advance or for the charity to pay some of the donation to a third party will always be considered highly suspicious.
Fundraising Due Diligence Checklist - Suspicious Donations
The following situations may indicate higher risks:
- Unusual or substantial one-off donations or a series of smaller donations or interest-free loans from sources that cannot be identified or checked.
- Being asked to act as a conduit for the passing of a donation to a second body which may or may not be another charity.
- If conditions attached to a donation mean that the charity would merely be a vehicle for transferring funds from one individual or organisation to another without the trustees being able to satisfy themselves that these have been properly used.
- Where a charity is told it can keep a donation for a certain period of time, perhaps with the attraction of being able to keep any interest earned whilst holding the money, but the principal sum is to be returned at the end of a specified, short, period.
- Where donations are made in a foreign currency, and again unusual conditions are attached to their use, eg including a requirement that the original sum is to be returned to the donor in a different currency.
- Where donations are conditional on particular individuals or organisations being used to do work for the charity where the trustees have concerns about those individuals or organisations.
- Where a charity is asked to provide services or benefits on favourable terms to the donor or a person nominated by the donor.
FUNDRAISING DONOR DUE DILIGENCE COMPLIANCE CHECKLISTS
Listed below are the fundraising donor due diligence compliance checklists and guidance from the Charity Commission E&W and other regulators.
Charity Commission Know Your Donor & Compliance Checklists
Fundraising Regulator
- Accepting, Refusing and Returning Donations.
- Professional fundraisers, commercial participators and partners.
- Self Reporting Fundraising Incidents.
OFSI Sanctions Guidance For Charities
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This Fundraising Donor Due Diligence Article Is Not Professional Advice
This fundraising donor due diligence article and compliance checklists are for general interest only and does not constitute professional legal or financial advice. I'm neither a lawyer, nor an accountant, so not able to provide this, and I cannot write guidance that covers every charity or eventuality. I have included links to relevant regulatory guidance, which you must check to ensure that whatever you create reflects correctly your charity’s needs and your obligations.
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