Dated 16 May 2022

DUE DILIGENCE AND ETHICAL FUNDRAISING POLICY

TEATRO VIVO LIMITED

A registered charity in England & Wales (number 1151584)

 

Introduction

 

“Due Diligence” is the steps taken by a charitable institution to assess another organisation or person it is considering receiving philanthropic support from. These steps are taken to protect the charitable institution against damage to their reputation or finances.

 

The Fundraising Code of Conduct, as outlined by the Fundraising Regulator, states that:

 

• You must not refuse or return donations, except in exceptional circumstances.
• If you decide to refuse a donation, you must keep a record of your decision and the reasons for it.
• You must carry out due diligence, appropriate for the size and nature of the donation, on both the financial and reputational dealings of possible partners before accepting their donations.
• You must only refund donations in line with your charitable institution’s policies or in exceptional circumstances.

 

Arts charities increasingly rely on philanthropic donations due to the limited/ reduced availability of public grant funding, i.e., from ACE. Donations carry unique risks as a source of income and there have been high-profile cases of the damage that can be caused if these risks are not well managed. Risks include:

 

• Legal risk – if accepting a donation could breach legislation such as the Proceeds of Crime Act 2002.
• Financial risk – if the donor cannot honour the donation pledge in full or part of it, but spending decisions are made based on the assumption the donation will be received.
• Reputational risk – if accepting the donation creates an association with an individual or entity which is perceived to be inappropriate or unethical by other stakeholders. This would include the perception of the public, employees and significant donors
• Dependency risk – if accepting the donation (and/or terms of the donation) gives the donor an undue level of influence over a charity and its trustees

 

This document outlines the suggested approach to Due Diligence. An agreed, a regularly updated and clear policy for both the Due Diligence process and the acceptance of gifts encourages clarity and consistency in internal decision making and will reduce the risk of accepting donations from inappropriate sources. It will also help build a relationship of trust with the donor community and reduce the likelihood that an inappropriate request for donations or funding  is made.

 

Acceptance of gifts

 

Teatro Vivo will NOT accept a gift in at least the following circumstances:

 

• We will not accept donations or sponsorship in circumstances where the cost of servicing the sponsorship or donation is greater than its value, or unreasonable in terms of its size or impact on the work of Teatro Vivo.
• We will not accept donations or sponsorship in circumstances where it would materially and demonstrably compromise Teatro Vivo’s vision and values or risk bringing Teatro Vivo into disrepute.
• We will not accept support which consists of goods, services or property which Teatro Vivo or its associated charities cannot lawfully use, convert, exchange or sell in direct support of its charitable activity.
• We will not accept gifts that are linked to the proceeds or actions of crime

 

Due diligence

 

Step 1: Initial Risk Assessment

 

Due Diligence checks will be carried out in the following circumstances:

 

• Where gifts are made by individuals of or above the value of £10,000 (which is the sector recognised threshold to trigger increased due diligence checks and is consistent with money-laundering regulations applied to the sale of goods and services).

 

• Where gifts of any size are made by businesses from sectors that can create a high risk of conflict with our charitable objectives, such as tobacco and alcohol manufacture, the arms trade, oil and gas extraction, betting and adult entertainment ("High Risk Sectors").

 

• Where gifts of or above the value of £10,000 are made by a company, partnership, limited partnership, limited liability partnership or other business structure based overseas.

 

• Where gifts of over £50,000 are received from a company, partnership, limited partnership, limited liability partnership or other business structure based in the UK (which is considered to carry less risk than businesses in High Risk Sectors or those that are based overseas.

 

• Where gifts or funding is received from a Trusts or Foundation that is registered with the Charity Commission in the UK (which are deemed to present a low risk), the Artistic Directors will carry out a risk assessment on at least the first occasion that the Trust or Foundation donates to Teatro Vivo .

 

Initial Due Diligence checks will be carried out by the Artistic Directors who will draft a due diligence report. In exceptional and appropriate circumstances, this report might be commissioned from an external organisation such as Factiva - Dow Jones.

 

Initial Due Diligence checks will include the following:

 

• What business is the donor involved in and associated with? Does this include industries or sectors inconsistent with the charity’s purpose?
• Has the donor received unfavourable media attention for their actions?
• Have they been or are they involved in litigation?
• What is the source of the donor’s money? Is it legal and is there any risk that the source does not exist or will not be available to the charity in the future?

 

Common factors which could indicate a higher-risk proposal:

 

• A requirement to repay the donation (in substance a loan).
• A donation in an atypical foreign currency.
• A donation which requires unusual transfer arrangements for the funds to be received by the charity.
• A donation where very specific services need to be provided to secure the donation.
• A requirement to pass on the donation to a specific entity or use for a specific unusual purpose.
• The donor requests anonymity.
• Donations which potentially create a relationship in perpetuity.
• Donations are sourced from countries with a problematic international status or regulatory environment.
• Donations from bodies with which the charity has a significant pre-existing commercial relationship, or which could result in financial gain for the donor.
• A donation which could impose a very restrictive course of action on the charity and compromise the independence and effectiveness of the Board.

 

Due Diligence reports on potential gifts between £10,000 and £50,000 which are not identified as being high risk should be reviewed and approved by an appropriate board member.

 

Due Diligence reports on potential gifts of £50,000 and above, any gifts between £10,000 and £50,000 that have been identified as being high-risk and gifts from High Risk Sectors will be referred to the Gift Acceptance Committee.

 

Step 2: Gift Acceptance Committee

 

The Gift Acceptance Committee is responsible for the approval of higher-risk donations. It will be made up of:

 

• the Chair of the Board (Chair);
• the Treasurer;
• both Artistic Directors; and
• any other Board members the Board should appoint to that committee.

 

Once the report is shared with the Gift Acceptance Committee, the Chair will convene a meeting (in person or online) within two weeks to discuss and determine whether to accept the gift or not.

 

Formal records of decisions will be made. In addition to recording the decision, these will act as a source of guidance and aid consistency of decision making. Audit trails will also enable Teatro Vivo to demonstrate compliance with its policies and procedures to the Board, regulators and auditors.

 

Data protection legislation imposes significant penalties on organisations that do not handle the personal data they hold and control responsibly. A library of intelligence on the donor community can be beneficial but it is essential that charities hold these in accordance with data protection legislation and recognise that individuals have a legitimate right to know what personal information is held about them. The Artistic Directors will oversee what and how information is stored to ensure best practice.

 

It is essential that this process is undertaken at the earliest opportunity and should be executed prior to Teatro Vivo either requesting a donation or funding or receiving a gift.

 

In the event that a Gift perceived as high risk is received in advance of the Due Diligence process being carried out, the Artistic Directors will notify the Chair of the Gifts Acceptance Committee at the earliest opportunity. The donor will be contacted immediately and informed that a Due Diligence process will be conducted before the organisation can accept the gift. If the Gift Acceptance Committee recommends that the Gift is not to be accepted, it should be refunded within one month to the donor in accordance with the Fundraising Code of Conduct as set out by the Fundraising Regulator. The Artistic Directors will inform the donor of the decision by the Gift Acceptance Committee.

 

Training requirements

 

Training/study in the following areas will be required for the Gift Acceptance Committee and the Artistic Directors:

 

• Bribery Act 2010;
• Money Laundering Regulations 2007;
• Fundraising Code of Conduct as set out by the Fundraising Regulator; and
• UK General Data Protection Regulation.