Political and Charitable Donations

This section forms part of GIACC’s overall guidance on gifts, hospitality, entertainment, donations and other benefits.  It gives specific guidance on dealing with the corruption risk in relation to political and charitable donations.

Separate sections deal with the corruption risk in relation to other categories of benefit.  These other sections can be accessed on the following links:

 

Note that this guidance is in relation to political and charitable donations which are being given or received in a business context, and is not applicable to any such donations given entirely in a personal context.


 



What are political and charitable donations?

Political donations are the giving or providing of cash, venues, equipment, personnel time or other benefit to a political party or to an individual or organisation nominated by or connected with a member of a political party.

Charitable donations are the giving or providing of cash, venues, equipment, personnel time or other benefit to a charity or to an individual or organisation nominated by or connected with a charity.

 

A donation could be considered to be a bribe if it is given or received with the intention of influencing someone to act improperly, or as a reward for having acted improperly.

 



What types of donation are not likely to be regarded as corrupt?

Donations which are not likely to be regarded as corrupt include:

 

  • Political donations to a party or politician who has or could have no direct or indirect influence over a  decision which could affect the organisation.  For example, a donation made by an organisation to local government elections when the organisation:

    • does no work, and is not planning to do any work, for that local government, party or politician;
    • has not applied, and is not planning to apply, for any permits or approvals from the local government.
  • Charitable donations to a charity which has or could have no direct or indirect influence over a  decision which could affect the organisation.  For example, a donation to a charity supporting international famine relief, prevention of disease, provision of water etc. when the organisation has no involvement in the work undertaken by those charities.
  • Donations which are too low in value to have any likely impact on any decision which could affect the organisation.



What types of donation are more likely to be regarded as corrupt?

Donations which are more likely to be regarded as corrupt include:

  • Political donations to a party or politician who has or could have direct influence over a decision which could affect the organisation.  For example, an organisation makes a donation to a political candidate.  The candidate wins office and is appointed Minister of Infrastructure.  The Minister has direct influence over contract awards.  The organisation is awarded a major contract shortly after the Minister is appointed.
  • A charitable donation to a charity which is connected with a person who has or could have direct influence over a decision which could affect the organisation.  For example, an organisation makes a donation to a charity.  The charity is controlled by, or benefits, a person (or relative of a person) who has direct influence over contract awards.  The organisation is awarded a major contract shortly after the donation is made.



Guidelines for political and charitable donations


Total prohibition

To counter the risk of political or charitable donations being corrupt, or being perceived to be corrupt, or being in breach of applicable law, an organisation may totally prohibit the offer or receipt of political and charitable donations in connection with the organisation’s business.

In many countries, political donations may be restricted by law.  For example:

 

  • Political donations by organisations may be prohibited.
  • There may be financial limits on the political donations by organisations.
  • There may be a prohibition on political donations by organisations which have a contract with a public sector body.
  • These limits on donations by organisations may also apply to the owners and managers of the organisation.

It is difficult for an organisation to ban its personnel from making personal political donations out of their own funds, as this could be a restriction on their right to support a particular party or individual.  However, it is likely to be appropriate to prohibit personnel from making personal donations where these could be connected, or be seen to be connected, with a decision by a public sector body in relation to the organisation’s business.  Where personnel are permitted to make personal donations, the organisation should remain completely independent of such donations.  For example, it should never pay or repay the personnel’s donations, or co-ordinate or organise the personnel’s donations.

Charitable donations are normally very different in concept to political donations.  Most charities have no connection with politics and have no decision making role or influence over public sector procurement decisions, and so pose a minimal risk to an organisation that a charitable donation could be corrupt or be perceived to be corrupt.  Many organisations see charitable giving as an important part of their corporate social responsibility programme.  Therefore, a total prohibition of charitable donations may be inappropriate.  However, there is a risk that a charity could be connected to a political party or a person with a decision making function, so the organisation does need to control charitable donations (see section below on partial prohibition).

 

Partial prohibition

For the above reasons:

 

  • A total prohibition of political donations is probably preferable to a partial prohibition:
  • A partial prohibition of charitable donations is probably preferable to a total prohibition.

If the law does not require a total prohibition, and if the organisation does not wish to implement one, then it must implement adequate controls over political and charitable donations.

 

Controls and factors

The following are recommended controls, and some factors to be taken into account in implementing these controls. 

 

  • If the giving of political and/or charitable donations is prohibited by the organisation, then state the prohibition in the organisation’s policy.
  • Consider the intention behind the donation.  The intention behind the donation should always be considered.  If it could be intended to influence someone to act improperly, it should not be offered or accepted.
  • Consider the perception.  Do not give a donation if it could reasonably be perceived to be corrupt.  There are two common perception tests:

    • “Newspaper test”.  Would a newspaper be likely to report the donation, and, if a newspaper did report, what would the public perception be? 
    • “Prosecutor test”.  If the donation did lead to a corrupt outcome, with the result that a prosecution takes place, how would you explain the donation in court to a prosecutor?  Would your explanation be plausible to the judge or jury? 
  • Consider the legal and regulatory environment.   Before giving a donation, ensure that the law of the territory, and the regulations of the recipient, allow such a donation. 
  • Undertake due diligence on the political party or charity before any donation is made.  The purpose of this due diligence is to ascertain whether there is any connection between the political party or charity, and any business transactions, organisations or individuals with which the organisation is involved, or is likely to be involved.  As with all due diligence, the level of enquiry depends on the circumstances, and should be reasonable and proportionate.  
  • Be cautious about donations which could be intended to influence, or could reasonably be perceived to influence, a tender or other decision in favour of the organisation.  If the due diligence above establishes a connection, then there is a risk that the donation could be an attempt to influence an outcome, or could be perceived to be such an attempt.  Either avoid making a donation in these circumstances, or only make it if there is reasonable certainty that it could not influence, or be perceived to influence, an outcome.
  • Decide whether the donation should be publicly disclosed.  In some cases, the law requires donations to be disclosed on a public register or in the organisation’s annual accounts.  Even if not required, some organisations voluntarily disclose donations on the basis that transparency can help avoid the perception of corruption.
  • Require approval in advance of the donation from the compliance manager (and, if appropriate from an additional senior manager).  The amount which it may be permissible to give for a charitable or political donation could be significantly higher than the amount allowed for a gift to an individual.  Therefore, appropriate approval should be obtained in advance.  The reasons for the request and the approval should be documented, and the compliance manager must be satisfied that the donation is appropriate, and is not corrupt, and could not reasonably be perceived to be corrupt. 
  • Require donations given to be appropriately recorded.


Sample benefits policy

 

See Benefits Policy for a sample policy which includes political and charitable donations which an organisation can adapt and use.

 



Guidance on other types of benefits

 

Separate sections deal with the corruption risk in relation to other categories of benefit.  These other sections can be accessed on the following links:





Page first published on 19th January 2016

 

 

© 2016 GIACC