Moral money: the dilemma over university donations

Who should, or shouldn’t, a university accept donations from? In a society increasingly insistent upon transparency and moral purity, it’s an issue that has never been more fraught. Anna Britten looks at how finance departments can ensure their fundraising processes remain robust – and above reproach

We’ll never know for sure whether Jeffrey Epstein ever offered money to any UK universities. But thankfully none ever accepted the largesse of the deceased American sex offender.

Any UK fundraising manager or university financial director will surely feel a twinge of sympathy for their peers at, say, Harvard University which accepted a $9.1m gift from Epstein before his 2008 guilty plea to sex charges – last year, the institution said it was donating the remaining $210,000 of that gift to victims of sex trafficking and assault.

There might be slightly less compassion on offer, however, for senior leaders at Massachusetts Institute of Technology (MIT) responsible for receiving cash from Epstein after he was convicted of sex offending. MIT has now pledged to give the donations to charity and a review has confirmed the world-leading higher education institution “had no policy or processes for handling controversial donors in place at the time”.

It’s hard to think of a university donations scandal of this magnitude on this side of the Atlantic, but UK universities do solicit and accept money from wealthy individuals, foundations and companies whose values sometimes run counter, in the public’s perception, to those of impartial, independent research, scholarship and teaching. And UK universities do not share a common rulebook when it comes to these matters.

Examples include controversy over gifts to the University of Oxford and Imperial College from a charitable trust established by Sir Oswald Mosley, who was leader of the British Union of Fascists. A donation of £1.5m from the family of Colonel Gaddafi rained opprobrium on The London School of Economics in 2011. And after the University of Cambridge accepted over £6m from Ukrainian oligarch Dmitry Firtash, the gift was later used by his defence to try and launder his reputation when he was in court in the US and Spain (a further £1.95m donation to Cambridge was frozen).

In fact, Russell Group universities as a whole had their gift acceptance procedures analysed – and found wanting – in a report last May that was seized upon by the media.

In ‘Paying for a world class affiliation: Reputation Laundering in the University Sector of Open Societies’ – written by academics from Columbia University, the University of Oxford, and the University of Exeter for the US agency National Endowment for Democracy – concluded that universities “currently govern donations in a manner that is often inconsistent and secretive”.

It recommended, amongst other measures, conducting due diligence on a donor’s identity, the source of the money being donated, and whether or not the donor has a criminal history – and said higher education institutions should be a lot more transparent about donations.

Unlike MIT while it was banking (some of) those Epstein cheques, all universities should have a written gift acceptance/refusal policy steering them away from disaster – and most probably do, says Ian MacQuillin, director of fundraising think tank Rogare, which began life at the University of Plymouth: “The question is how good is it?”

The cost of research is not fully funded by the taxpayer, which necessitates that universities find other sources of revenue.

Enter ethical theory

Which brings us to ethical theory, and how you can’t produce a policy for your fundraising and finance teams – or even begin to make a sensible decision about a donation – without an understanding of it.

Often, fundraising decisions are made based on “what people ‘feel’ to be right”, explains Ian. “People often don’t distinguish between a ‘consequentialist’ approach (what’s right is based on best outcomes/avoiding worst outcomes) and a ‘deontological’ approach (what’s right is based on a moral principle, such as ‘we never accept money from fossil fuel companies’). Deontological approaches can often ‘feel’ right because they can be close to people’s own moral intuitions about a subject (climate change, for example).”

We saw this tension play out last December, when Oxford, Cambridge and Imperial College London were named as among universities given funding from oil companies. This led to criticism, for example from Green Party MP Caroline Lucas, who said there was “no justification” for taking cash from such donors – a deontological argument. But Imperial College defended itself, saying the money helped to “develop meaningful solutions to climate change” – a consequentialist riposte.

The Chartered Institute of Fundraising guidance (CIoF) says gifts should be rejected if they: 1) come from an illegal source (this includes money laundering, and due diligence checks are required; or 2) are detrimental to an organisation achieving its mission – ie they conflict with the mission (eg a tobacco company donating to a cancer charity) or constitute a reputational risk that could result in a loss of volunteers, staff or donations.

Crucially, the CIoF also says the anticipated benefit from having the cash must be weighed against this detriment.

“In other words,” Ian explains “would rejecting the donation, even though it might have a reputational risk, actually cause more harm to our cause and our beneficiaries than if we accepted it? The reputational risk is a consequentialist idea that you need evidence to sustain, whereas conflicting with the mission is a deontological idea.”

A well-written, robust gift policy that takes ethical theory into account, says Ian, will “help you make a decision that can withstand criticism. Many organisations stumble and attract criticism not because they have made a ‘bad’ ethical decision but because they have made an inconsistent one.”

One university working hard to make its gift acceptance policy consistent is the University of Edinburgh. Its dedicated Ethical Fundraising Advisory Group (EFAG) consists of senior university staff, alongside representatives from the University Court and student body, and was established in 2011 to “oversee the approved procedures for the ethical screening of donations, as well as consider and advise on whether the sources and purposes of prospective donations and philanthropic fundraising are ethically acceptable.”

Proposed donations to the University of Edinburgh are evaluated based on three principles: they must support the aims of the university; they must not damage the integrity and reputation of the university; and they must not impinge on academic freedom.

Depending on the amount of money being offered, checks on prospective donors range from internet and newspaper database searches – keywords include ‘controversy’, ‘fraud’, ‘human rights’, ‘scandal’ and ‘terrorism’ – to a full due diligence process and risk assessment. The latter includes checking on a donor’s friends and associates and assigning scores based on whether a behavioural red flag is a mild rumour or proven illegal activity.

Would rejecting the donation, even though it might have a reputational risk, actually cause more harm to our cause and our beneficiaries than if we accepted it?

Watch your language

Edinburgh clearly ‘gets’ ethical theory. Which is why anyone with less understanding of the ethics of fundraising may be surprised to find no mention of the words ‘values’ or ‘motives’ in its policy.
Language is important, as it can be slippery. Want to avoid endless, bad-tempered debates in the boardroom over donations? Leave ‘values’ out of it.

“I think talking about ‘values’ is really nebulous and it is difficult to make ethical decisions based on something that’s so hard to define,” says Ian.

“I think that almost any decision you can make based on ‘values’, you can make using a gift policy based on reputational risk and conflict with mission, without leaving yourself open to the charge of ethical inconsistency.”

Resist worrying about ‘motives’, too. How can you truly know what a donor’s motives are? And if you did know, who made you judge of what are ‘right’ and ‘wrong’ motives for making a philanthropic donation?

Again, it’s about consistency. It’s about reputational risk, not your own feelings, political views or whatever the education or culture secretary or students’ union tells you to do. Always.

Ian says the question for fundraising managers and finance departments is “not whether there is a no-strings donation (which implies there ought to be) but whether any strings attached are inappropriate or overbearing.

“There are plenty of alumni giving a monthly donation via direct debit that don’t expect anything in return. At higher levels of giving – when we are talking about major givers or philanthropy – much charity fundraising offers something in return for the gift, such as naming rights. There are arguments that this somehow ‘demeans’ the ‘spirit’ of giving (arguments I have to say I don’t subscribe to).

But if it’s accepted that a gift can be made in the expectation of reciprocal benefit, then the key thing is to ensure that the benefit afforded to the donor does not come at the expense of the organisation.

“For example, no university should accept a gift that infringes on academic freedom. This kind of ‘donor dominance’ is an issue in the mainstream charity sector, not just HE. It’s important that how such ‘strings’ (or reciprocal benefits) are handled is understood in advance and not made up on the hoof on a case-by-case basis (which is how organisations end up tying themselves in philosophical/ethical knots), which should be in the gift acceptance/refusal policy.

“Suppose someone in the sex industry wanted to make a £25,000 donation,” says Ian. “How would you make a decision to accept/refuse that based on their motives?

“Suppose a member of the creative industry wants to make a £25,000 donation. How would you make a similar decision based on their motives?

“Suppose it turns out their motives were exactly the same – either both beyond reproach or both equally suspect? Does that then mean that you would make the same decision to accept or reject in both cases?

“I suspect that in the case where motives were both good, many people might still want to reject the donation from the person in the sex industry, because they were worried about the reputational issues. Which means you can make the ethical decision based on the reputational issues alone.

“The bottom line is that £25,000 given out of the ‘right’ motives does only as much good as £25,000 given out of the ‘wrong’ motives.”

Or put another way, rejecting £25,000 of wrongly motivated donations can cause harm to your cause and beneficiaries (or at least not provide any good).

A robust gift policy will also specify the benefits donors are entitled to, and those they are not.

“Many donors try to throw their weight around, no denying it,” says Ian, whose think tank is currently working on a study of project on donor dominance (if you’ve experienced this, take their survey: It’s a matter of the organisation/institution being firm in how they deal with that, which many don’t do well.”

Reputational scandal often precedes calls for more transparency but universities worry it is not practical to reveal every aspect of their fundraising activities.

In the clear?

Any reputational scandal like that of MIT and Epstein, or Oxford and Mosley, inevitably draws calls from critics for more transparency.

The academics who authored the report mentioned earlier also push for more transparency. And, in January, Conservative MP Jesse Norman did so too, tabling a new clause to the government’s bill on free speech and academic freedom in higher education that would require HE providers to disclose the names of foreign donors of over £50k to the Office for Students (OfS), for publication on a public register.

The problem, as any seasoned fundraiser knows, is that being 100% open about all donations is not always possible or desirable.

Some universities refused to reveal details of any links, saying to do so could make it more difficult to raise funds from private donors in the future, thus harming the university financially. And they are unlikely to be reassured by Jesse Norman’s caveat that providers can appeal to the OfS only if they think transparency would put a donor “at risk of serious harm”.

“It’s probably good practice to have all donations made in public,” says Ian. “But some donors may genuinely want to give anonymously, for many reasons and motives, and shouldn’t necessarily be prevented from doing so if that’s what they want to do.

“In that case the gift policy needs to be specific about in what contexts this will be allowed and why, what due diligence checks will be made on the donation, and a reputational risk assessment on what might happen if the gift became known.”

Many organisations stumble and attract criticism not because they have made a ‘bad’ ethical decision but because they have made an inconsistent one

Frameworks not feelings

Ian boils his advice to university finance teams down to this: professional ethics is about having a robust framework to come to the best-evidenced and best-argued decision, based on facts and grounded in ethical theory.

“It can’t be decided by a board member saying, ‘I just don’t believe we should be accepting money from a sex worker,’ for example, because this can be gainsaid by another board member saying, ‘Sex work is work and I believe we should accept it.’ Stalemate.”

But what if you, or members of your team, believe your ethical responsibilities extend beyond the university – to, say, the environment (meaning no donations from fossil fuel companies) or a human rights issue (meaning cash from people with certain political views is abhorrent)?

OK – if there’s scope and specificity for that in the policy. A policy built on ethical theory, that does not repeatedly veer from a deontological (doing the ‘right’ thing) to a consequentialist approach (getting the best outcomes).

“The answer is to agree a robust policy at the highest governance level in the organisation, and have this written into the gift policy, so that you can make consistent and coherent decisions,” says Ian. “And not make it up on a case-by-case basis.”

In tough financial times, and without a guaranteed flow of morally spotless money, UK universities will always be vulnerable to questionable donors and the controversies that surround them.

All the watertight, written procedures in the world certainly won’t stop bad guys trying to freshen up their image via a university’s sort code. But they can help you keep out the quantifiably dodgy, keep your board united – and, most importantly, keep your head.

You might also like: The importance of investigating donors

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