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Philanthropy and dubious donors: Should non-profit organisations take the money and run?

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Shelagh Gastrow provides advisory services to the philanthropy sector, higher education advancement and non-profit sustainability. She works with individuals and families on how to integrate their wealth and their values into meaningful and effective philanthropy. From 2002-2015 she was founder and executive director of Inyathelo and focused her efforts on strengthening civil society and universities through programmes to develop their financial sustainability whilst promoting philanthropy in SA. Her work has gained public recognition locally and internationally.

The world has become increasingly transparent with the advent of the internet and social media. We can, after all, see child labour and slavery, carbon emissions, river pollution, the impact of plastics and the disappearance of forests through logging and farming. We have access to more information about corruption, money laundering, State Capture and racketeering. Twitter and Facebook are full of complaints, articles and opinions about governments, companies and individuals. Even philanthropy has been under attack.

Twenty years ago many non-profit organisations seeking some ethical basis relating to potential donors to their cause may well have decided, for example, not to accept funds from tobacco or alcohol companies if they were dealing with children, while others refused funds from gambling and weapons manufacture.

Some were less scrupulous and there was the cynical view that a university or a non-profit could “clean” money made under dubious circumstances. However, with the knowledge we have now, the subject of donor exclusion is becoming a minefield of what money is clean, what isn’t and what is required to mitigate reputational risk on the part of the recipient organisation. This is a hugely complex issue as organisations seek support from others who share their values and objectives.

In addition to the above questions, there are other elements to consider when accepting money. These include the conditions of the grant that should not benefit the donor in any way; not have an impact on the independence of the recipient, nor expose it to risks or liabilities, or require significant additional costs on the part of the recipient.

On occasion, a donation of a building, for example, may require unbudgeted costs for maintenance, rates and taxes, insurance, security etc. In addition, the acceptance of any land and associated property should be based on its usefulness to the organisation, its marketability and any unacceptable terms in its title deeds would need to be checked. The property should also be subject to an environmental assessment and other legal issues that may affect acceptance of the land such as defined land use. 

There are many examples where a potential donor’s actions and values could conflict with a recipient organisation. For example, McKinsey has admitted to its involvement in State Capture and will be refunding billions of rand to SAA, Transnet and Eskom. The latter has also recovered more than R150-million from Deloitte. Would a donation from either of these companies affect the reputation of a university, for example?

If your organisation is involved in environmental issues, would it accept funding from Standard Bank, which recently announced that it would no longer fund new coal-fired power plant projects, but that it would continue to provide finance to thermal coal mining projects and companies “if they meet certain criteria”?

South Africa has seen a range of scandals in its corporate sector in recent years, including the collusion by construction companies in relation to the World Cup stadiums. EOH was linked to alleged corruption in a Department of Defence software deal, which Microsoft was accused of being complicit in.

The German software company, SAP, admitted to paying companies linked to the Gupta family for contracts with Eskom and in the same circle, auditing firm KPMG was seen as aiding and abetting Gupta family businesses in their corrupt activities.

Sugar company Tongaat Hulett was caught inflating its real performance numbers by R4.5-billion and again the auditors were Deloitte, who had also been the auditors for Steinhoff. A crime may not have actually have been committed, but the non-profit sector may well look at issues relating to ethics and values when it comes to the source of its funding.

International aid agencies support many South African organisations, but it is important to understand that foreign aid is not altruistic or philanthropic – it is driven by the donor country’s own foreign policy objectives.

There are many research organisations on this continent funded by foreign aid, and the purpose could be for the donor governments to have access to research in their own fields of interest. If an organisation is dealing with human rights, xenophobia and refugees, should it take funding from AusAid, when Australia’s treatment of refugees may contradict the objectives of the recipient?

Organisations, research institutes and universities could ask a range of questions about sources of funding and whether acceptance of funds could cause any backlash. Some examples include taking gambling money (and does that include the lotteries?); money from producers of baby formula if the organisation is involved in paediatric health; from the sugar, chocolate or fast-food industries if you are a health organisation; from companies such as Sasol and Eskom, linked to both air and water pollution, if you are an environmental organisation.

How far does one look when ensuring that your values are aligned? According to the report titled SCANDAL: Inside the global supply chains of 50 top companies, published by the International Trade Union Federation, “Working people pay the price of the scandal – slavery, informal work, precarious short-term contracts, low wages, unsafe work and dangerous chemicals, forced overtime, attacks by governments on labour laws and social protection, inequality – it’s all part of a great global scandal that is today driven by corporate greed with an eternal quest for profit and shareholder value.” 

In an article in the June 2019 Raconteur special report, when it comes to supply chains in the vehicle industry, the issue of the mining of cobalt in the Democratic Republic of the Congo has emerged. Seven of the world’s leading electric vehicle manufacturers, including Fiat-Chrysler, BMW and General Motors, had allegedly failed to carry out due diligence over their cobalt supply chains or checked how it was extracted, despite known human rights abuses in the mines.

How far does one dig to ensure that the donor has no hidden skeleton in the cupboard? For example, the endowment of a philanthropic foundation may well be heavily invested in fossil fuels, plastics and packaging companies, timber companies that log indigenous trees (for example in Mozambique) or companies that exploit cocoa and coffee farmers.

All these investments are legal and companies and individuals do not have to be found guilty in a court of law in order to smudge an organisation’s reputation as the public can “join the dots”.

When it comes to individuals, how much care is taken to ensure that they are not in any way linked with crime and corruption? One doesn’t want to land up with a situation like MIT in the US that had accepted funds from Jeffrey Epstein, a convicted paedophile. In this regard, the issue of the Rhodes Scholarships comes up and the number of South Africans who have benefited from what is historically seen as tainted money. 

What is important is that each organisation develops a clear policy and guidelines around the acceptance of donor funds so that there is no confusion among its board, staff, beneficiaries and other donors in relation to its purpose and values.

It is difficult to predict how far this complex issue can go and when a good donor is suddenly involved in a scandal of some sort that can affect the reputation of the recipient organisation. A policy will help to mitigate this risk. DM

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