Are Charities Blissfully Unaware Of Due Diligence?

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The Prince of Wales Charitable Trust was recently reported to have received £3m in Fortnum & Mason carrier bags from a Qatari former prime minister between 2011 and 2015. This is on top of the allegations of cash for honours and cash for access related to The Prince’s Trust which is being investigated by the Metropolitan Police.

Are charity trustees truly aware of their legal duties and responsibilities?

Although there is no suggestion of wrongdoing, the receiving of a large unexpected and unsolicited donations always begs questions, and is not good for the reputation of a charity.

The Charity Commission gives clear guidance in how to carry out due diligence and full checks on donors, beneficiaries and local partners which form part of the legal duties and responsibilities of trustees of charities.

Trustees must avoid undertaking activities that might place their chairty’s funds, assets or reputation at undue risk.

Trustees should take a risk based approach that is proportionate to the size of the charity to comply with their duties, but as a minimum:

  • have appropriate internal and financial controls in place so all funds are fully accounted for;
  • proper and adequate financial records for the receipt and use of all funds with audit trails on decisions made;
  • consideration of what due diligence, monitoring and verification of use of funds they need to carry out; and
  • know their beneficiaries.

Trustees should take reasonable steps to ensure they:

  • can identify who they are dealing with;
  • can verify where the risks are high;
  • know what the organisation’s or individual’s business is and it is appropriate for the charity;
  • know what their business is with the charity; and
  • watch for unusual activities or requests.

A charity’s responsibility is not to establish if the intentions surrounding the donation were honest or not. However, trustees should carry out good due diligence and report concerns and suspicious activities.

A charity should have clear policies and procedures in place for trustees, employees and volunteers so they know what to do if something is suspicious or poses a high risk. Decision’s for refusing or accepting high risk donations should be recorded and that there is appropriate monitoring which is effective and credible including an audit trail and proper records.

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