The Charity Commission has launched an inquiry into the Presidents Club event © Tolga Akmen/FT
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Among the many issues to have arisen from the FT’s exposé of the Presidents Club is whether charities that received donations from the controversial event did the right thing by returning the money.

Great Ormond Street Hospital Children’s Charity was one of the first to announce it would return funds promised to it from this year’s dinner, as well as previous years, citing the “wholly unacceptable nature of the event”.

The charity said it was “shocked to hear of the behaviour” and would “never knowingly accept donations raised in this way”.

The Charity Commission for England and Wales has already launched an inquiry following allegations of lewd comments and groping at the event.

However, a YouGov poll this week found that two-thirds of people thought recipient charities should keep the money (one in five said the charities were right to return it, and the remaining 13 per cent were unsure).

Many people have been asking me whether the charities in question were obliged to return the donations.

The short answer is no. Ultimately, any decision would be up to the trustees of the individual charities. However, if you are a trustee of a charity — and I know that many FT readers are — this debate highlights some of your responsibilities.

Trustees are legally responsible for all the decisions a charity makes, including the ethical issues arising from accepting donations. They have considerable discretion. A useful source of guidance is the Charity Commission’s “Know your Donor” document which sets out key questions trustees should ask.

This clearly states that trustees who suspect that funds being offered arise from the proceeds of crime or relate to the financing of terrorism should refuse the donation and contact the police.

There are also obligations under charity law, and some charities’ constitutions make further stipulations. But beyond that, the key principle is that trustees must act in the best interests of the charity — making it fairly straightforward for them to decline donations if they wish.

Many charities have a formal policy about the types of donations they will and will not accept. For example, Pancreatic Cancer UK has a policy of not accepting donations from tobacco or drinks companies.

In the interests of independence, Greenpeace will not accept donations from any companies, nor governments or political parties, and returns cheques drawn from corporate accounts.

It gets trickier if concerns about the source of the donation are unrelated to the charity’s particular goals — as was the case with the hospital charity and its donor, the Presidents Club dinner. Trustees are allowed to decline such donations, but they must have sound reasons for doing so. Reputational damage is a key consideration. If the charity is tainted by any scandal, this could affect future donations. The “Know your Donor” guidance asks: “Would any adverse publicity about the donor have a damaging effect on the charity?”

Often, these issues are essentially moral, rather than legal. Tracy Howarth, head of regulatory compliance at the Charity Commission, points out that trustees “must also consider the wellbeing and protection of staff and all those who come into contact with their charity — not just those they are there to help”.

But the cardinal rule is that when declining a donation, the trustees’ decision must be collective, carefully reasoned, and properly documented in the event of a future challenge.

The size of donations was a key factor in this debate. The Presidents Club Charitable Trust gave £280,000 to Great Ormond Street’s charity in 2016, according to its most recent published accounts. Yet this made up just 0.3 per cent of the charity’s income from “donations and legacies” and even less if you include income from “investments and trading”.

So how diligently should a charity research an entity which provides such a tiny fraction of its annual income? The Charity Commission says this should be “proportionate” to the scale of the donation.

In the case of Great Ormond Street, I think one could argue this either way. The Presidents Club made a five-year commitment to raise £500,000 for Great Ormond Street in 2015, a significant sum. On the other hand, the club’s sole annual fundraising activity was the black-tie dinner — not the kind of event that would usually raise any concerns. Would alarm bells have been raised if the charity asked to send a representative to the dinner? More than half of Great Ormond Street’s trustees are women, and the dinner was a men-only event.

In Great Ormond Street’s case, declining and returning the money will not affect the charity’s finances. Its most recent accounts show the charity holds funds equivalent to nearly three years’ worth of expenditure. Many charities in a less fortunate financial position would be simply unable to repay donations because they money would already have been spent. Returning the money could imperil the charity — the protection of which is the trustees’ primary responsibility.

The new Fundraising Regulator has a code of practice which stipulates that fundraising should be “legal, open, honest and respectful” but as a non-statutory body, adherence to its code is essentially voluntary.

This case has also shown that trustees cannot rest assured even if the donor is a registered charity — which the Presidents Club was. Normally, the UK’s statutory charity regulators will only act if prompted by a complaint. Before the FT’s investigation, no formal complaints had been received.

Which leaves us with the question — were the charities right to return the donations? My personal view is that Great Ormond Street and the other recipient charities should keep the funds. They clearly do not condone the alleged behaviour at the Presidents Club, and were not complicit in it. The trustees’ focus should return to where it belongs — on serving their beneficiaries.

Caroline Fiennes is a director of Giving Evidence, which encourages and enables charitable giving based on sound evidence, and the author of “It Ain’t What You Give — It’s the Way That You Give It”. Twitter: @carolinefiennes

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