In economically fraught times, it’s hard to envision a scenario in which your nonprofit would turn down a donation. But suppose that donation has the potential to put your organization in the hot seat because the donor is involved in illegal, unethical or controversial activities. In that case, it may be in your organization’s best interest to refuse the financial support.

Point, counterpoint

The risk of reputational damage is a compelling reason to decline controversial contributions. You might find that some of your current supporters are among the most vociferously opposed to these donations. Disagreements also divert attention from your ethical standards and positive accomplishments, not to mention alienating future donors.

However, arguments can be made to hold on to controversial donations. Not every donor is an angel or operating from purely altruistic motives. Insisting otherwise could drastically reduce revenue. The argument goes that money given to a nonprofit generally benefits society as a whole, particularly when the recipient engages in social welfare work. And, if you turn away funds, you could have to cut programs, dip into your endowment or sell other assets.

Put research front and center

A simple policy that helps prevent later embarrassment and regret is to research all prospective donors who promise gifts over a certain amount. Most nonprofits can’t afford a full-time staff dedicated to donation due diligence. But you might ask a board member or other volunteer to perform some basic searches. At the very least, search the donor’s name online using terms such as allegation, bankruptcy, bribe, controversy, court, fraud, human rights, investigation, prosecution, unethical and scandal.

Web searches can uncover vital information, including the source of a donor’s wealth, possible legal entanglements, support for other nonprofits and the historical business practices of any companies they own or control. Pay particular attention to the person’s public statements, such as those posted on social media, as well as stories from reputable news outlets. If such investigations seem outside your nonprofit’s wheelhouse, you may want to pay a professional background search service to look into more prominent donors.

Gift acceptance policy

Include a research requirement in any formal gift acceptance policy. A policy can help guide you when you need to make an important decision under pressure. If you have to refuse a gift, for instance, you can simply point the donor to your policy.

The policy should explicitly state which donations you’ll accept and which you won’t. Most organizations refuse donations of stolen funds or those clearly generated illegally. But what about “clean” donations that you suspect are given to support a dicey donor’s public relations efforts? What about anonymous gifts? Some nonprofits find anonymous donations risky by nature, but you may decide you can safely accept them.

If you accept donations from controversial donors, you’ll likely need to explain that decision at some point. So, include communications guidelines in your gift acceptance policy. Determine who will speak for your organization, which channels you’ll use and how much information you’ll share.

Surprise!

Also establish a process for handling gifts from donors that become controversial only after you’ve received them. It may help to consider this real-life example where the donor’s business actions directly affected the interests of a charity’s clients.



A pharmaceutical company’s new owner made headlines for dramatically increasing the cost of critical medications. At that point, some of his charitable contributions became public. One nonprofit that supports homeless people, some of whom depend on the drugs of the donor’s company, returned his gift. But the donor’s alma mater didn’t. The educational institution apparently decided that the owner’s business decisions didn’t undermine its academic mission.

Stick to your values

Regardless of where you stand on common gift acceptance scenarios, ensure your policy is clear and explicit. Generally, if a donation appears suspicious or inconsistent with your mission, it's prudent to decline it. In such cases, be sure to obtain board feedback and ensure that all decision-makers are in agreement.