Good due diligence gives charities the information they need to make defensible decisions about whether accepting a gift is in their best interest.
Those decisions aren’t always straightforward. A donor might have attracted criticism, but that doesn’t automatically give a clear reason to refuse their gift. On the other hand, the financial value of a donation doesn’t automatically outweigh any potential reputational or ethical risks that may come with accepting it.
Major gifts aren’t always an easy yes
With a rising cost of living and increased demand for services, charities are under huge pressure to secure funding. That’s why, when a large gift comes in, due diligence can sometimes be framed as holding things up and trying to find fault with donors.
We need to frame due diligence as something that supports major gift fundraising, giving charities the evidence they need to make and defend difficult decisions.
Due diligence isn’t about finding a perfect donor
Major donors may come with complex business interests, affiliations or opinions. Negative information doesn’t automatically make a donor unsuitable, but your organisation needs to be aware of it.
Due diligence should establish the credibility and relevance of potential risks and be proportionate to the size and nature of the gift. A gift acceptance framework can help distinguish between personal objections to a donor and factors that are a genuine risk. Personal ethics and values shouldn’t determine the decision in isolation. Your organisation’s objectives and agreed policies need to guide it.
What should charities consider before accepting a gift?
There isn’t a universal threshold for refusing a gift. However, some circumstances should trigger closer scrutiny and may ultimately justify saying no.
- Is the donor vulnerable, lacking capacity or making the gift under pressure?
- Is the source of the funding legitimate and understood?
- Does accepting the gift conflict with the charity’s objectives or governing documents?
- Could the association negatively affect beneficiaries, volunteers or staff?
- Could it damage the charity’s ability to recruit or form partnerships?
- Are there restrictions attached to the gift that make it difficult to use effectively?
- Are there legal or regulatory reasons the donation cannot be accepted?
Why your gift acceptance policy matters
Your gift acceptance policy should be in place long before a controversial gift lands on the table. A clear framework prevents you from making decisions on an ad hoc basis, aligns fundraisers, researchers, leadership and trustees, and makes fundraising more consistent.
Your policy should cover accepting, refusing and returning gifts. It should cover any industries, activities or funding sources that don’t align with your mission and any conditions that would make a restricted gift difficult to use.
It should also establish when different levels of due diligence are required, who carries out and reviews the research, and who makes the final decision.
Why independence matters
When a fundraiser has put months or even years into cultivating a relationship, they have an understandable desire for it to result in a major gift. That makes independent due diligence research even more valuable. This doesn’t necessarily need to come from an external organisation; someone else internally can conduct or critically review the research.
With clear gift acceptance thresholds in place, your organisation can decide when the size, complexity or level of risk associated with a gift justifies external due diligence. The final decision shouldn’t rest solely with the fundraiser responsible for securing the gift.
A good decision today can look different tomorrow
Information and circumstances change. A donor considered appropriate today may become problematic later, but that doesn’t necessarily mean the original decision was wrong.
Record the research undertaken and clearly document why a gift was accepted or declined, including any mitigating factors or discussion. If questioned in the future, you can demonstrate what you knew, what you checked and why the decision was reasonable at that point in time.
We know that one size doesn’t fit all
What’s right for one charity might not be right for you. Due diligence should be proportionate to the size, nature and risk of a gift, while reflecting your mission, vision, values and objectives.
That’s why we tailor our due diligence support to your organisation, considering how you work alongside external factors such as the potential impact of a gift on your reputation.
Whether you need independent scrutiny of your research or don’t have the time or resources to carry out due diligence checks in-house, we can help.
Find out more about our due diligence research.