Many sector-wide bodies and regulators – including the Charities Commission, the Museums Association and the Fundraising Regulator – lay out in various documents and codes their expectations of organisations that undertake fundraising and accept corporate sponsorship.
On this page, we have drawn together the guidance of these different bodies and summarised at the end of each section what the expected standards and practices are for forming and renewing sponsorship agreements are. Scroll down, or click on the links below to jump to a specific section.
Being equipped to fundraise ethically
Exercising ethical judgment about potential donors and sponsors
What an ethical fundraising policy should include
Why arts organisation need to exercise due diligence
What a due diligence process should involve
Ethical funding, intersections and sustainability
Being equipped to fundraise ethically
At Julie’s Bicycle’s ‘Leading Change’ event in 2015, 20 National Portfolio Organisations agreed that…
‘We need strategies for ethical funding and sponsorship’
And, before stepping down as Chair of ACE, Sir Peter Bazalgette echoed this, saying…
‘Boards [of trustees] need to have foresight, and to be able, for example to develop a clear and consistent policy around ethical sponsorship, deciding what is or is not appropriate for their particular organisation… What matters is clarity, consistency and transparency.’
A core reason for putting in place clear and consistent policies is that, as the National Audit Office (NAO) points out, private donors…
‘May have motives other than philanthropy, for example to achieve respectability, influence or undisclosed commercial gain.’
In its ‘Code of Ethics’, the International Council of Museums (ICOM) takes this reality into account…
‘The governing body [of a museum] should have a written policy regarding sources of income that it may generate through its activities or accept from outside sources.’
And the Institute of Fundraising (IOF) puts it more strongly…
‘A policy on working with companies, agreed by the trustees, is essential for a charity to be able to engage effectively with the corporate sector.’
In a recent report by the National Audit Office focussing on DCMS-funded museums and galleries, it found that many cultural organisations aren’t yet putting effective policies and processes into place. It noted that there was…
‘Inconsistency among museums and galleries regarding whether written policies existed and whether they were made available on the institutions’ websites’
In summary, best practice would involve…
- Adopting clear policies on fundraising and ethics which are made publicly available;
- Undertaking thorough due diligence processes for assessing donors in a consistent way
- Ensuring that there is transparency about how decisions are made and policies enforced
Exercising ethical judgment about potential donors and sponsors
While there can’t be a ‘one size fits all’ approach to fundraising, there are clear principles which lay out how a cultural organisation should exercise ethical judgment about those who it accepts funding from.
In its ‘Code of Ethics’, the Museums Association (MA) tells museums to…
‘Seek support from organisations whose ethical values are consistent with those of the museum…’
To do that, an arts organisation needs to first be clear about its own values because, as the IOF puts it…
‘Working with companies is the classic example of where value judgements need to be made’
In its report on ‘Due diligence processes for potential donations’, the NAO said the examples of best practice it had encountered were where cultural organisations…
‘Took into consideration whether the source [of funding] implied any conflict of interest with the entity’s charitable objectives.’
While its report focussed on relationships with donors, the NAO believes that the same standards should also be applied more generally to sponsors also. In that report, the NAO also highlighted that failing to take account of the risks posed by donors and sponsors…
‘Could have a damaging impact for the charity itself and its trustees, who could be challenged on whether they have met the requirement to act in the charity’s best interests’
The majority of recent media coverage on fundraising has focussed on sponsorship deals by oil and arms companies, and donors with controversial histories and business practices. Cultural organisations should take into account of the views of audiences, visitors and other stakeholders. In particular, they should take note of the growing consensus around which sponsors and donors are deemed to be ethically unacceptable to partner with.
A cultural organisation should consider rejecting a donation if…
- The values of the donor aren’t consistent with the organisation’s own
- There is a conflict of interest with the organisation’s objectives
- The relationship poses a risk to the organisation’s finances, standing or reputation
What an ethical fundraising policy should include
Clear policies and processes empower an arts organisation to accept or reject donations in a clear and accountable way. In its report, the NAO said the best policies it had seen would…
‘Set out a clear ethical position in respect of donations along with the principles which would be used to guide decisions taken by a charity on whether to accept or reject them.’
And the IOF makes clear that an effective fundraising policy should…
‘Define the parameters of associations across all types of corporate and partnership activity…’
And that includes…
‘Whether there are any prohibited form of donations or donor relationships’
In summary, a policy that meets expected standards would…
- Lay out a clear ethical position;
- Define how risks will be assessed, and;
- Detail a clear process for how decisions will made.
Why arts organisation need to exercise due diligence
Undertaking effective due diligence on proposed donors and sponsors is essential, and this should be clearly specified in a fundraising policy. The Code of Fundraising Practice states that…
‘Organisations MUST carry out a process of due diligence, proportionate to the scale of the relationship, before engaging in a partnership.’
While this is not a legal requirement, the Fundraising Regulator treats this issue as a professional standard to be met by all fundraising organisations.
The MA’s Code of Ethics tells museums to…
‘Exercise due diligence in understanding the ethical standards of commercial partners with a view to maintaining public trust and integrity in all museum activities.’
Crucially, the Charities Commission points out that it is only through conducting effective due diligence that trustees can claim to have fulfilled their legal duty…
‘…A significant aspect of a trustee’s legal duty to protect charitable assets, and to do so with care, means that there should be proper due diligence checks on those organisations that work closely with the charity’
What a due diligence process should involve
Interpretations of ‘due diligence’ can vary greatly between different cultural organisations despite there being many policies and guides laying out the standards that are expected. In the context of corporate sponsorship, the MA states that a museum will…
‘Need to conduct thorough and well documented research to demonstrate that they have understood the nature of the company’s business, and any claims made against it.’
And the National Audit Office highlights that…
‘Effective due diligence requires appropriate intelligence to support evidence-based decisions.’
And that…
‘A range of external sources should be used where feasible to gather complete, reliable and corroborated information on a prospective donor.’
The Charities Commission makes clear to trustees the importance of conducting this thorough and well documented research as part of due diligence checks…
‘Ensuring that the appropriate level of research and checks are carried out will help you and your co-trustees to satisfy yourselves about the solvency, integrity and reputation of the partner…’
The NAO also spells out the scope of the research and checks that should be undertaken…
‘Due diligence procedures should encompass a potential donor’s reputation and associations along with the provenance and reliability of their funds.’
And as part of their risk assessment procedures, cultural organisation should…
‘Incorporate quantitative and qualitative risk factors…’
Related to this, the NAO points out the importance of keeping records of any due diligence processes that are undertaken because…
‘Audit trails also enable staff to demonstrate compliance with an organisation’s policies and procedures to trustees, regulators and auditors.’
They NAO also advises that…
‘Consistency of the evidence base and decision-making can be aided by due diligence checklists setting out expected steps and sources of evidence to be consulted for different types of donations.’
A due diligence process that aligns with the existing guidance in this area should include…
- Thorough and well-documented research and checks, which are;
- Appropriate and proportionate to the scale of the proposed relationship, and;
- Formally recorded in order to demonstrate compliance and accountability.
Ethical funding, intersections and sustainability
Fundraising is not a standalone issue – it intersects with many other areas of an arts organisation’s work and is a reflection of its values. Policies on environmental sustainability, modern slavery or diversity may therefore need to be referenced within fundraising policies, or vice versa.
For example, the Royal Court Theatre specifies its approach to fundraising within its ‘Environmental Policy’…
‘We will aspire to take an ethical approach to fundraising whenever possible and appropriate, working with those who share our environmental and ethical values.’
The interconnection between environmental sustainability and financial decision-making is also reflected in Julie’s Bicycle’s ‘Museums Environmental Framework’. It describes best practice as a situation in which a cultural organisation has its…
‘Ethical sponsorship, partnership and fundraising policy is defined, applied and evaluated’
Goal 3 of ACE’s current strategy is to create a cultural sector where…
‘The arts, museums and libraries are resilient and environmentally sustainable’
And specifically, that…
‘The cultural sector embraces environmental sustainability and has reduced its carbon footprint’
‘Embracing environmental sustainability’ implies a holistic way of working, where sustainability issues inform decision-making across operations, governance and fundraising – but also a recognition that climate change is inseparable from issues of race, gender and social justice. In light of this and the growing impacts of climate change, arts organisations should consider incorporating questions such as the following into their due diligence processes…
- Would this donor or sponsor undermine our commitment to environmental sustainability in other areas or parts of the organisation?
- Would this partnership legitimise the unsustainable extraction and burning of fossil fuels?
- Does the proposed partner impact the lives and livelihoods of those on the front lines of climate change?
Culture Unstained 