Accepting, or refusing, donations can sometimes be difficult decisions for the trustees of charities. Clear donor acceptance policies and training for staff involved in fundraising can do a lot to deal with routine donations and to set donor expectations appropriately, but some donations can raise more complex issues which require trustee input, particularly in relation to the legality of a donation, its source, the reputation of the donor and the impact of any restrictions the donor wishes to apply to the donation.
Most charities are resource-intensive and donations will generally be readily employed in the charity's interests for its charitable purposes. There will generally need to be clear, compelling reasons to justify concluding that refusing a donation is in the interests of the charity.
In this article we look at just one type of issue with donations - where a donor wishes to make a donation for some sort of project or benefit but wishes to restrict those who can benefit by reference to their personal characteristics. The key piece of legislation in this area is the Equality Act 2010.
In outline, the Equality Act 2010 prohibits organisations, including charities, from discriminating in the terms on which they provide services by reference to certain personal (or 'protected') characteristics specified by the Act, including:
Administering a donation or project in a way which discriminates against pupils by reference to any of these "protected characteristics" is likely to involve discrimination which would not only be prohibited by the Equality Act, but may also be misconduct from a charity regulatory perspective.
There are exemptions under the Equality Act which can permit charitable donations to be applied in a way which would otherwise be discriminatory. For example, if the restriction is written into charitable trusts on which a donation for a project or benefit is given, then it may be possible to justify the discrimination involved either as a proportionate means to achieve a legitimate (ie non-discriminatory) aim or if it is for the purpose of preventing or compensating for a disadvantage linked to the protected characteristic. Whichever exemption is being considered, care is needed. The justification should specifically address the particular restriction and the way it will be applied. It should also be supported by clear evidence.
In addition, the Equality Act modified the position in relation to charitable donations on written trusts which restrict those able to benefit from them by reference to colour. The net effect is that the trusts are to be read as if any restriction by reference to colour was not included. A donation for the promotion of education of underprivileged white pupils made to a charitable independent school would therefore take effect as a gift for the promotion of the education of underprivileged pupils generally.
If applying the terms of a donation would involve discrimination prohibited by the Equality Act, the legal consequences can be serious. If the terms on which the donation is made take effect as trust restrictions (as is usually the case) then the donation would not be charitable because prohibited discrimination is not charitable. The gift would not be valid and would fail as a result. The consequences of that are likely to be most serious where the gift is made in a bequest since there is no prospect of re-negotiating the terms with the donor. It is often assumed that the Charity Commission can use its powers to 'save' a donation of this kind, but this will not be the case unless they and the executors can be persuaded that they are not dealing with a non-charitable gift on discriminatory terms, but rather a donation motivated by a general charitable intention to which the problematic restriction is merely incidental. Otherwise a failed donation will return to the donor's estate.
The reach of charity law extends past that of the Equality Act where restrictions based on personal characteristics are concerned. Charity law affects restrictions based on any personal characteristic, whether or not it is a protected characteristic under the Equality Act. Just as donations given for purposes involving prohibited discrimination are not charitable, donations given for purposes which contain any restriction which cannot be properly and clearly justified may also not be charitable.
A donation to fund a bursary defined by any other personal characteristic could therefore fail in a similar way to one involving discrimination prohibited by the Equality Act, if the restriction cannot be justified by reference to the charity's objects (or the objects of the donation if narrower). It does not matter - as is usually the case - that the donor can justify the gift for their own reasons. For example, it might make personal sense to a donor who supports a particular sports team to fund a project exclusively for other supporters for whom the donor experiences positive feelings based on their shared interests. But it is unlikely to be possible to justify the restriction by reference to most conceivable charitable objects.
Aside from these legal considerations, any school considering accepting a donation to fund a bursary fund on terms that restrict who may benefit will have wider practical issues to consider.
A school's reputation could be harmed if it accepts gifts on terms whose restrictions are controversial. But even turning the gift down is unlikely to be a neutral act in terms of managing the school's reputation, presenting the school with the challenge of finding a way to disengage from the offer without being drawn into potential controversy.
Even if restrictions can be justified legally, they could be harmful in the wider picture of the school's strategy for promoting access and inclusivity and to adapt to changing needs in society.
Restrictions in gifts to fund bursaries have the potential to raise complex and sensitive issues for the school, the donor and the public. Some issues relate to the law's protection of equality both through the Equality Act and under charity law more generally. However, restrictions and equality raise other, non-legal, issues for independent schools in relation to their values and reputation management.
Even if there will be cases where they will not work, soft preventative measures are probably the first line of any strategy. Certainly a school's fundraising team needs to be equipped to have sensitive conversations with potential donors as they come forward. But a reactive strategy is only part of the picture. Many donors leave donations in wills, sadly without first having made their generous intentions known during their lives. These donors may only have encountered the school's general fundraising messages and will probably not have had an opportunity to engage with a school and understand the relevant legal restrictions.
But perhaps the simplest and most positive approach a school can take to potential donors by Will is to have a well-publicised bursary fund and to encourage anyone considering a substantial donation to the fund to discuss it with the school before making any provision in their Will.