Throwing bad money after good? Considering the ethics of charity funding

02 September 2021

In a world where charities and cultural institutions are facing increasing public scrutiny of past connections and present relations, it is more important than ever that decisions relating to donations, endowments and fundraising are properly made and documented. Senior Associate Frances Godden of our Charities Team considers the issues.

It is well over a year since the National Portrait Gallery made headlines by dropping a £1m grant offered by the Sackler family for ethical reasons, and yet the controversy behind the sources of charity funding, sponsorship and donations continues to dominate conversations in the third sector. In the wake of shifts in social attitudes to anything from #blm to climate change, organisations are increasingly held accountable by a more vocal and visible public. The age of ‘never apologise, never explain’ is over.

Over the past eighteen months we have seen the physical remnants of unpalatable histories either destroyed, repatriated, covered up, removed or ‘re-contextualised’. Many countries and organisations are evaluating their collections, displays, and inventories, identifying where precious items are acknowledged to be the spoils of war, slavery and imperial conquest, and seeking to return them to their country or people of origin. Now, the spotlight has widened to include questions about how – by what means, and from whom – our charities, galleries and museums are funded.

The sources of both historic and current funding for charities and cultural institutions, which rely so heavily on substantial private donations and fundraising from the public, have never faced more scrutiny. High-profile protests such as those championing equal rights, and forcing into the spotlight controversial corporate sponsorship deals, are forcing the third sector to engage more profoundly with the origins of both historic endowments, and present funding streams.

Historic endowments

Take, for example, the Barrow Cadbury Trust, a £4 million income charity whose activities are focused on championing social justice. During the last year, the charity has instigated its own investigations into the origins of its endowment, and in July 2020 stated in a blog that the Cadbury plantations with which it is associated deployed indentured labour, which was a system of bonded labour introduced after the abolition of slavery. More recently however, new material has come to light which showed a “more complex and troubling story”, prompting an unreserved apology by the Trust’s board and executive team for these past associations, and a renewed commitment to doing what it can to eradicate social and racial injustice and inequality.

Corporate sponsorship deals and gift shops

It is not just historic endowments which can cause difficulties. The sponsorship by BP of the British Museum is a debate which continues to run, causing staff and supporters alike to call for the alignment of funders’ core values with those of the organisation’s purposes. Neither is it solely corporate relationships which can cause controversy. Even the associations of objects sold in gift shops can create real problems in terms of public perception and wider narrative, as the Royal Academy of Arts discovered earlier this summer. Artist Jess de Wahls had her work removed without notice following complaints that she had expressed transphobic views. Later, the RA apologised having “thought long and hard” about the wider issues raised and in particular the protection of free speech, acknowledging that it reacted too quickly to the pressures of social media. All of this points to anxiety and nervousness within the sector, which is desperate to maintain critical funding whilst continuing to pursue the philanthropic work and purpose for which it exists.

Practical steps

Charities, and the executive boards which are responsible for running our great charitable and cultural institutions, are increasingly sitting up and taking note of the ethical arguments in managing income streams, which are already facing unprecedented challenges due to Brexit and the ongoing effects of the pandemic. Whilst, practically, these headaches are unlikely to ease any time soon, in governance terms, there are ways in which you can demonstrate publicly, and, for example, to the Charity Commission, that your organisation is taking a proactive approach to handling these issues.

At Birketts, the Charities team is on hand to advise how best these matters can be handled based on each charity or institution’s own circumstances. For example, we can advise on:

  • Know your donor: ensure that there is a named person or group responsible for undertaking a full assessment and scrutiny of the origins of offers of donations, sponsorship, partnerships and collaboration.
  • Fundraising Code: we can advise on both the Governance Code and the Code of Fundraising Practice, undertake audits of how your organisation is working, and suggest ways for improvement or change.
  • Risk Assessments: ensure that you have in place at all times a thorough and thought-through risk-assessment anticipating the implications (long and short term) of acceptance of such gifts or association.
  • Ethics Committee: establish a robust (and, ideally, predominantly independent) ethics sub-committee to consider and advise on issues which are likely to raise moral questions.
  • Powers and purposes: we can review your governing documents and constitutions, suggesting amendments where appropriate, and advise on the appropriate level of engagement and association with third parties based upon your charitable purposes and powers.
  • Deeds of Gift: it is important to fully document the terms and any conditions of significant donations, gifts or other beneficial arrangements with third parties. 
  • Charity Commission: we can advise on making serious incident reports, responding to regulatory investigations, and engaging with the Charity Commission where appropriate.

Whilst these have always been underlying issues for the sector more generally, the current preoccupation with the ethical argument is only set to gain momentum. If you would like to speak to us about how we can help you, please get in touch with Frances or another member of the Charities Team.

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at September 2021.


Frances Godden

Senior Associate

+44 (0)1603 542700


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