Tag Archives: research

It ends with Google

On Tuesday I spent the morning at the Ship2B Foundation in Barcelona. Ship2B brings together social change organisations – charities and social enterprises – with grant-making foundations, companies, family offices and venture philanthropists. The social change organisations work on themes in ‘Laboratories’ where the foundations, companies and philanthropists provide advice, contacts and money to accelerate their growth, to ‘scale.’

I sat in on a presentation by the Water4Life lab group. Here were a range of projects on water use and water management. One project was using data from Aigües de Barcelona, the Barcelona water utility, to pinpoint areas of poverty in the city based on how much water each household was using. The project was analysing mass data gathered for one purpose (water supply bills) and using it for another (mapping and understanding poverty).

Which led me to think about the Information Commissioner’s current focus on public domain information collected for one purpose, being used for another.

The ICO have told charities that “publicly available data…is not fair game.” It is not enough to claim that you have a “legitimate interest” in using data from public registers such as Companies House, and news and press reports; you “must balance this against the prejudice to the rights and freedoms of individuals.”

The team at Factary is working hard to ensure we are fully compliant with this new emphasis from the ICO. So this week we contacted one of our suppliers to check that their data was fully compliant. They told us that “…in light of the new GDPR legislation we are currently in discussions…” with suppliers. This is a leading data house that provides data drawn from Companies House. Their end supplier is Companies House.

The Supply Chain

Factary – and any prospect researcher who uses UK companies information from one of the large data houses – is in a supply chain that starts at Companies House. At some point, someone is going to knock on the door of Companies House and ask “are you compliant?”

Before they made their data freely available to anyone, Companies House earned £8.7m in a year, selling it to data users. I have been registered at Companies House as a director since 1990. I have never, ever, had a letter from them asking me if it’s OK to publish my name and address in their register, and then to sell that data on to the big data houses.

I was never asked, because Companies House had a duty in law to gather my personal information and publish it. They turned my private information into public information. They promoted my private information “to power a great range of products” and to encourage “even more people to explore and use [the] data.”

Companies House represents the contradictions at the heart of the legislation that ICO is forced to apply. Data from Companies House that we all believed to be publicly available, and in which we all had a legitimate interest, is no longer “fair game.”

So who is the biggest supplier of publicly available data?

Google, of course.

A Little Light Googling

Every day, millions of people in Britain type the name of a person – a celebrity, a footballer, a friend, a company owner – into Google. Google returns thousands or millions of results; “Theresa May” returns 24 million publicly available results this morning, ranging from press reports to biographic reference sites.

I did not ask the Prime Minister if I might check her name in Google. I am certainly prejudicing her right to privacy by putting her name into Google, because thanks to Google I can see all sorts of scurrilous, unrepeatable stuff about our glorious leader.

Google is a massive re-purposer of publicly available data. Data gathered for one purpose (selling newspapers, or adverts in scurrilous blogs) is re-purposed every single day by Google on behalf of its millions of users.

This is where the contradictions in UK privacy legislation are crystallised. This is where the ICO is heading in its search for the right balance between legitimate interest and the rights and freedoms of individuals.

I want to be a fly on the wall when the ICO knock on the door of number 6, Pancras Square, London N1, the UK headquarters of Google. That battle – between the ICO and Google – will be one to watch.


5 Questions to Ask the ICO

The Information Commissioner, the Fundraising Regulator and the Charity Commission are due to meet fundraisers in Manchester tomorrow, on Tuesday 21st February, for the Fundraising and Regulatory Compliance Conference. The ICO have produced a conference paper for delegates to read prior to 21st, which can be accessed here.

The paper, amongst other things, sets out the ICO’s view of data protection in relation to Database Screening and, it seems, prospect research – although, whilst it mentions ‘Screening’ specifically, the paper rather ambiguously only refers to other [research] “…activities such as profiling individuals”. We do need to get some clarification on what they mean by this but, from the context, it does appear to refer to researching donors and supporters using public domain sources and/or using information not supplied directly by the data subject (so, prospect research).

The paper initially outlines why an organisation should use a privacy policy to explain how they make use of data. It then explains the ‘legitimate interests’ condition in relation to the DPA. In this sense, the paper is useful in outlining that charities need to be honest and fair in their processing of data. This is something that cannot and should not be argued with. As we have said before (e.g. here and here), all charities must make sure they have robust, fair and easily accessible privacy policies which openly explain how they collect, store, use and process data.

The conference paper outlines situations in which such a policy must be communicated to a supporter, some ways this can be done, and even when it is not necessary / practical to do so. This is all useful and welcome information. We now hope that perhaps the Fundraising Regulator will issue some sample privacy policies at the conference on Tuesday that provide examples of the language that charities can use to comply with fair processing of data for fundraising.

However, the paper then states that it is ‘highly unlikely’ that charities will be able to rely on legitimate interests as a condition to process data for Database Screening – specifically using third party providers or involving any personal data not supplied by the data subject – or for ‘profiling individuals’. Instead these activities will require explicit consent from data subjects. This is because, the ICO states, these activities are a) not ‘compatible’ with processing data collected from a donor at the point of donation and b) not within the ‘reasonable expectations’ of a donor.

Please read the conference paper. Think about how it will affect you and your work and highlight any areas you feel are not clear. The conference on 21st February is a very important event and the questions we ask (and the answers we receive) about this paper are likely to have a long-term effect on fundraising and research. If you are not going to be at the conference on Tuesday, you can pass any questions that you may have about it directly to the ICO (send them to events@ico.org.uk and ask for them to be forwarded to the relevant dept).

Below are 5 of the questions we would like to ask, now that we have read the paper:

  1. The ICO say in its paper for this conference that individuals are “highly unlikely to expect” certain types of data processing. In the ICO’s press release announcing the British Heart Foundation and RSPCA monetary penalties they are quoted as saying “millions of people who give their time and money to benefit good causes will be saddened…” to know that charities would ask them for more money.
    1. Does the ICO have evidence that shows what donors expect?
    2. There is, in fact, strong evidence to support the fact that processing of personal data for research is within the reasonable expectations of many donors; a recent study concluded that 78% of donors said that better research before they are approached by a non-profit is the most significant area of improvement in fundraising in the past 10 years. Therefore, if fair processing is adhered to and prospect research is within the reasonable expectations of donors, then can the ICO confirm that charities can rely on legitimate interests to undertake this type of activity?
    3. Sources
      1. ICO, Fundraising and regulatory compliance, 21st February 2017
      2. ICO investigation reveals how charities have been exploiting supporters, 16th December 2016
      3. Breeze & Lloyd, (2013); Why Rich People Give. London, DSC.
  2. Tesco’s Privacy Policy, which customers using its loyalty card must accept, says: “We may also use personal data from other sources, such as specialist companies that supply information, online media channels (online media channels include websites, social media sites, pay TV providers and any other channels that become available to us), our Retail Partners and public registers (for example, the electoral roll)”. They state that they do this in order to provide a better service and experience to their customers.
    1. If a charity used this same statement in its privacy policy, could charities use the public and private domain sources listed by Tesco in research so as to provide a better service and experience to donors?
    2. If not, why not?
    3. Source: Tesco Privacy and Cookie Policy
  3. The paper for the conference says: “It’s legitimate for you to process personal data in order to properly administer donations received from individuals”. The paper suggests throughout, as highlighted above, that “administering donations” is the only purpose for which a charity would use data collected at the point of donation or at the point a supporter joins a charity database. It suggests, therefore, that fundraising (including the market research necessary for raising funds) is not a compatible purpose for processing donation information.
    1. Is it?
    2. If not, why can, for example, Tesco use transaction information for more than simply administering a transaction (see their privacy policy linked above)?
    3. As charities rely on fundraising to carry out their work, is it not within their legitimate interests to use data collected from supporters for fundraising purposes, providing that fair processing and the rules of PECR, the MPS/TPS/FPS etc. are all adhered to?
  4. Here is a common story: a charity Board member meets an individual at, say, a cocktail party. The Board member comes back to the charity fundraiser with the individual’s name and says “X is interested in what we do. And he is wealthy.” The ICO says in its paper for this conference: “Far more intrusive are activities such as profiling individuals, particularly where this involves getting more information that the individual has not given you, either directly or via third-party companies. In these cases the legitimate interest condition is highly unlikely to apply. So you’d need to seek the consent of individuals before doing such processing.”
    1. The X named by our Board member is not a donor. We have no permissions or opt-ins or opt-outs. Can we look him up on Google or LinkedIn or Companies House without his permission?
  5. The Charity Commission imposes a duty to check on donors and potential donors. The Charity Commission recommends that trustees understand their donors and asks: “Have any public concerns been raised about the donors or their activities?” The Commission suggests that “full use should be made of internet websites” to check on donors. This is directly contrary to the ICO guidance which would not permit the use of public domain information until the donor has signed up to our privacy policy.
    1. Given that we want to research a potential donor before she does this, whose guidance should we follow – that of the ICO or that of the Charity Commission?
    2. Source: Charity Commission for England and Wales, Tool 6: Know Your Donor – Key Questions

These are just some of the questions we feel require clarification from the ICO and we’ll be submitting these prior to the event. We will also be attending the event on Tuesday and we’ll report back on what happened as soon as possible afterwards through this blog.

Please also keep an eye on Factary’s Twitter feed during the day as we will attempt, where possible, to Tweet any significant points or answers to any questions raised during the conference.


Thanks, Alastair

I have just had this lovely email from Alastair James, Senior Consultant at Global Philanthropic. He read my book, ‘How Philanthropy is Changing in Europe’ and wrote:

Dear Chris

I just wanted to say what a wonderful book you have written.

It is a fascinating volume, full of interesting and well-researched material, and I have learned a lot by reading it. You have approached the subject with the rigour of a true academic, but you have written it in a very engaging and accessible style.

I have come away with an overwhelmingly positive impression of philanthropy in Europe from reading your book, although you have also been very clear about the lack of information available in the sector. The fact that foundations are starting to be more open is a very good sign.

I also think that, in the current difficult climate, the book provides a lot of encouraging messages for fundraisers – not least the fact that fundraising has been going on for a long time in Europe, and will, for sure, continue to do so.

My warmest congratulations to you on this superb book.

Best wishes.

Alastair

Alastair James
Senior Consultant
Global Philanthropic
a.j@globalphilanthropic.com

 

Chris Carnie is the author of “How Philanthropy is Changing in Europe”, published by Policy Press. He writes in a personal capacity.


Factary and Europe

Dear customers, friends, colleagues

A brief note to reassure you that Factary will continue to provide services – consulting, prospect research and training – across Europe despite this morning’s referendum vote.

We will be following the negotiations closely and will continue to act, as always, in the best interests of our customers, our colleagues in the non-profit and philanthropy sectors, and of the beneficiaries that you serve.

We will monitor any implications that this vote may have for cross-border philanthropy and fundraising, and we are ready to discuss any concerns that you may have in this area.

Do feel free to contact us to discuss any questions that you may have, at any time.

All the best

Chris Carnie
chris@factary.com
Martine Godefroid
martine@factary.com
Marc Low
marc@factary.com
Nicola Williams
nicolaw@factary.com


Five ways to make use of donation data

There has been some interest online over the past few months in how prospect researchers can make the best use of ‘donation data’ – i.e. databases, reports and websites that list donations, showing who gave, how much, and to whom.

Recent blogs such as this one from iWave inspired us to carry out a survey amongst our subscribers to Factary Phi to find out for ourselves how and why they are using donation data. Some of their answers were unexpected – we found out that our subscribers are very imaginative when it comes to making use of data on donations in their research. Below we have outlined some of the ways our subscribers have told us they’re making use of the data.

If you use donation data in your research, we hope the innovative approaches of our subscribers prove inspirational to you!

The five ways our subscribers are using Phi data

  1. To understand philanthropic interests to help identify the best prospects

    Overall (and perhaps the least surprising in many ways) was that a whopping 90% of respondents to our survey mentioned that the two ways they mainly use the donation data in Phi were to:

    1. Research existing prospects, e.g.:
      • “Searching by name and checking which causes [prospects] are giving to, to determine philanthropic interests”
      • “Get a sense of causes these donors or prospects support”
      • “Research other charities supported by existing supporters and prospects”
    2. Find new prospects, e.g.:
      • “Identify people supporting competitor charities/similar causes through searching by [recipients] activity type”
      • “To identify new potential prospects giving to a similar cause”
      • “Check who is giving to similar causes [and] check who is giving to particular causes”

    As we know, using research on donation history to find prospects with an affinity to a particular cause has been long proven as an effective strategy for understanding which of your current prospects might prove to be the most likely to donate – and also for finding new potential likely donors. This is because many donors will have a specific interest in a particular cause and will more readily consider donating to organisations operating in a similar field in the future (Breeze & Lloyd, 2013). This type of approach to the research was said to be useful for researching all types of prospects on Phi, including individuals, trusts and companies.

  2. To help researchers shape fundraising strategy

    Interestingly, prospect researchers using Phi told us that researching donation data can be a way that they can help their organisations to plan fundraising strategy. Subscribers noted that the breadth of data on Phi allowed them, together with additional research, to benchmark types of donors to similar organisations or projects, thereby gaining an understanding of the current fundraising market. So, for example, the research might show if individual major donors would be more or less likely to support a particular type of project or campaign than trusts & foundations. Armed with this knowledge, researchers can then advise senior management on the likely avenues for support, thereby shaping the fundraising strategy around the type of donor most likely to give.

    The ability for researchers to ascertain potential levels of giving was another factor mentioned in helping to shape strategy – by using Phi to research donation levels, researchers are able to estimate the potential eventual Ask for current donors and existing / potential prospects. Knowing a prospect’s previous donation levels to different causes is a useful way to gauge their likely or potential future donation to your cause – and arguably more accurate than basing their estimated gift capacity on wealth data alone. This donation information enables researchers to contribute to discussions around fundraising targets for campaigns and projects, potentially putting them in a central role during decision-making around prospect allocation and fundraising strategy development.

    Also, some researchers stated that the data on Phi also helps them identify local recipient organisations (by searching for donations to a particular region or town) to see if there are common funders or funding networks prevalent in that local area, thereby contributing to an understanding of the potential local prospect pool or philanthropic networks to be cultivated. This approach was said to help both national charities with local offices and also regional organisations (such as hospices).

  3. To encourage stronger relationships between fundraisers and researchers

    We thought this was a particularly nice benefit to researching donation data!

    Some of our respondents reported that fundraisers were more willing to take on prospects that a prospect researcher had identified if they could provide information to the fundraiser on the prospects’ previous donations. When these prospects turned out to be decent (and ultimately donated to the cause), the fundraisers were then more open to working with the researcher’s suggestions in the future, thereby creating a better working relationship.

    Respondents also noted that even where information on specific gift amounts was omitted from the donation search, simply identifying that the prospect is philanthropic was sometimes enough to encourage fundraisers to act on their suggestions.

  4. To understand how donors give

    Turns out, knowing how donors give is almost as important to researchers as knowing how much they give.

    Subscribers reported that having donation data which covers a broad range of types of giving is incredibly useful. Being able to see prospects giving via their charitable trust, their company and as an individual gives a quick overview of the prospects’ philanthropic portfolio. Using this information, researchers can then advise on approach strategies – e.g. whether to approach a prospect as an individual major donor or via their charitable trust for a specific project.

    Breeze & Lloyd (2013) reported that whilst 73% of rich donors give via their charitable trust, 49% also give one off donations, 28% give via standing order/direct debit and 22% are planning to give via their will. This breadth of giving is reflected in Phi, with donations showing donors giving via multiple channels, making the data useful for trust fundraisers, corporate fundraisers and major donor or individual giving teams. Being able to contribute to so many areas of fundraising can make a prospect researcher an invaluable and valued part of the wider team.

    One subscriber also mentioned that the inclusion of political donations on Phi was especially useful as, because they were new to prospect research when they first started using Phi, they wouldn’t have thought of political donations as a source for prospect information. Also, US research in 2015 by DonorSearch reported that individuals who gave >$2.5k in political donations were 15 times more likely to give to a charitable organisation than those who hadn’t (whether this is also true of political donors in the UK is unclear, however).

  5. To improve the perception of researchers in their own organisations

    Perhaps our favourite benefit of all!

    As stated above, relationships with fundraisers have been known to improve through using donation data as a research tool, but subscribers further noted ways in which making use of donation data in different ways can highlight the enormous contribution prospect research makes to a team. Some examples are:

    • Prospect researchers use the data to increase their knowledge of the prospect pool and to prioritise long lists of prospects by previous giving – this is invaluable information when discussing cultivation strategies and allocating prospects to fundraisers.
    • Data on giving history enables researchers to boost numbers of new prospects, which can bring research into a more central role when moving through a campaign, for example.
    • Research into philanthropic interests had highlighted where prospects had made large gifts to other organisations that had strong links to their own Trustees or Chairman. Noting these links and connections was hugely important in devising an approach strategy for the prospect and wouldn’t have happened about without the research into philanthropic affiliations and donation history.

One more thing…

Perhaps the best outcome of all, for everyone involved, is to know that some of our subscribers have stated that research into prospects’ donation history ultimately helps lead to new gifts for their organisations. Which is, after all, what it’s all about!

We hope this proves useful for you in your own research.

And, finally…thanks to all of the subscribers to Factary Phi who took part in our survey!


Bring in the New

Q: Where can you find more than 9,000 philanthropists who took the brave and often complicated step of creating a new grant-making charitable trust (a ‘foundation’ in international terminology)?

A: In Factary’s new New Trust Update Archive.

The new NTU Archive is many things. It’s a simple, fast and efficient way to find trusts and foundations in the UK. It’s a great way of finding out about philanthropists, and it is a history of the last ten years of philanthropy in the UK.

Factary began recording the new wave of philanthropy back in 1993, when we noticed that the Charity Commission for England and Wales was experiencing a boom in trust registrations. We discovered that the registration documents for charities – which are in the public domain – contained information that allowed fundraisers to get a clearer idea of what the activities of new trusts, and who was behind them. This was not, at the start, an easy process. We had to take the train to Taunton (where the Charity Commission keeps part of its archive) and request, one by one, the registration documents for these new charities. We then had to go through each document by hand to pick out the charities that looked like they might be, or might become, grant-makers, and start the process of research.

The second part of this process has not varied much over the years – we still carry out detailed research on each trust, contacting trust administrators and aiming to establish who is behind the trust, what their interests are, and what they hope to do.

The Factary team moves fast on that research, and subscribers to New Trust Update (we limit the number of subscribers to 100) rely on us to be the first to hear about new grant-makers.

The result is a rich database of more than 2,500 trusts with interests in arts, rights, women, older people, animals, the environment… the whole range of charitable activity. Users of the NTU Archive can search the entire data set using combinations of codes (for example, ‘Education and Training’) and keywords, to find trusts that were created with those interests.

Users can research trustees by name. There are more than 9,000 trustees listed here, so this is a rich database on individual philanthropy – people who are concerned enough about a social or environmental issues to create a foundation or to join the board of a new foundation. Information on philanthropy in the UK – with the honourable exception of Factary Phi – is hard to find and this data, linking people to their philanthropic interests is invaluable to the non-profit sector.

Factary’s Will Whitefield emphasises that this is a record of the moment that the trust was created. ‘It’s like a birth photo of the trust. When we research the trust it is around a month or two old; so the trustees, objectives and finances are from those early days.’ But that in itself is valuable, because it allows a researcher to see who the baby was, and how it grew up.

There are plenty of examples of this. The Bernard Sunley Charitable Foundation that we reported in June 2005 topped £4m in income in March 2015, double its spend at start-up. The Schroder Foundation, reported by us in March 2005 and created with a £10 deposit, had grown to £2.2m by April 2015 – that’s 22 million percent growth if you do the maths.

But tracking less spectacular growth is also relevant. For example, a search using the keyword Africa throws up 167 trusts. Pick an early one, such as the Egmont Trust and compare it with the Charity Commission’s current record for the foundation you can see that founding trustees Clare Evans (who had worked with ActionAid in the 1990s) and Jeremy Evans are still in place, but that three others have joined (and two left) over the ten years since we reported its registration in our April 2005 edition.

In here you will find the origins of venture philanthropy and impact investment. The Private Equity Foundation – we reported on it in November 2006 – is in there as is the moment in 2013 when it merged with Impetus to form Impetus Private Equity Foundation. The Apax Foundation – we reported its registration in March 2006 – is there too.

Finally, there is all the great inventiveness of philanthropy here. There are foundations with names based on Beatles’ lyrics (“Love Is All We Need”, registered and reported in 2007), those with hopeful names (“The Making a Difference Foundation,” “Heaven Can Wait” or “The GoodFund”) and foundations from the UK’s vast pool of celebrities, from Gordan Ramsay, chef to the late Dan Maskell, tennis champion.

Factary’s new NTU Archive is an open book on the growth of organised philanthropy in the UK. For more information just get in touch with Nicola Williams.


I want to be in America

It’s frustrating, living in Europe (no, this is not going to be a piece about Mr Cameron and his referendum…)

It’s frustrating because we have so little data on philanthropy. Everywhere I look there is data on philanthropy in the USA, and a stream of clever academic research papers from across the Atlantic on who is giving, why they are giving and what they are giving.

But Europe? Yes, there are some very good centres of research, but there are not nearly enough of them.

This morning I checked the listings for academic centres of research into philanthropy, at the International Society for Third Sector Research. The results? Of the 153 academic centres of research identified by ISTR, 53 are in just one country. Yes,the USA. The next nearest country by volume of research centres is the UK, with just 11. Counting all of the centres across Europe, we still come to a smaller total than the USA with 36 centres against their 53.

Here are the (approximately) 50 countries of Europe:

Academic Research Centres in Philanthropy, Europe

Academic Research Centres in Philanthropy, Europe

And here is the single United States of America:

Academic Research Centres in Philanthropy, USA

Academic Research Centres in Philanthropy, USA

Quantity is not the same as quality, and Europe’s research centres produce a lot of very useful and valuable data. But we are being held back in our understanding of philanthropy in Europe because we have not built the academic power-houses that our colleagues in the US have created. This is a source of bias in our research – with all that wealth of data from the USA the models from across the Atlantic have become the norm. In Europe this has led a few people – notably in France – to look for new paradigms, different models, in philanthropy research. Good news, if we are to build a balanced, culturally-sensitive, understanding of philanthropy.


Due Diligence: can you accept that donation?

The Colonel and the College

In December 2008, London School of Economics approached Saif Gaddafi, son of the Libyan leader Colonel Gaddafi, for a donation. On the 23rd June 2009, the governing Council of LSE agreed to accept a gift of £1.5m from a group of companies in Libya, channelled via the Gaddafi International Charity and Development Foundation, controlled by Saif Gaddafi. This story emerged in the media only after the uprising against the Gaddafi regime began, in February 2011.

LSE was attacked in the UK press for having accepted the gift and the controversy grew so severe that by March 2011 the Director of the LSE Sir Howard Davies resigned. The LSE Council later funded an independent enquiry led by Lord Woolf.

As Lord Woolf’s report makes clear, all this was in the historic context that at the time when the gift was being considered, Libya was being seen as a potential friend by the West. The UN Arms Embargo against Libya had been lifted in 2003 and the Bush administration had removed Libya from the list of countries that sponsor terrorism in 2007. The Colonel had been met by Tony Blair in an official visit in 2007; the then Prime Minister saw Gaddafi as a potential ally. In 2009, Libya was seen as eccentric but progressing steadily in the right direction.

But just two years later the Colonel had become a reputational risk for LSE. The School’s reputation had been damaged, and the Director’s neck was on the block.

This story illustrates many of the issues in due diligence and major donors:

The Speed of Change

It shows how fast reputations can change. Your celebrity donor today can tomorrow be vilified because he has been caught, literally, with his pants down. Due diligence today is useful, but it is only of any value if it is a continuous, reviewed process.

Complexity

It shows how hard it is to measure reputational risk where there is complexity. This gift was supposed to come from a consortium of companies, in a country in which little or no corporate transparency exists, channelled via a foundation led by the son of a dictator. Complexity makes due diligence difficult. But major donors often lead complex lives and make gifts via complex structures.

Just what are we measuring?

What, in the case of the Colonel, was LSE supposed to be measuring with its due diligence work? The Colonel’s reputation with the politicians? His son’s reputation? The ways in which his wealth had been accumulated? Clarity in understanding what we are attempting to measure is a key part of due diligence work.

So, what is Due Diligence?

Due diligence is used in the context of “doing a thorough job of checking a prospect.” Up to now most of the focus in due diligence work has been on companies. But fundraisers are now asking for due diligence research on individual philanthropists, wherever there is a concern that reputations or finance could be at stake, or where there is a moral issue to untangle.

What can we check?

1. Is he who he says he is?

At Factary we were asked this recently. A man who said he was a Vicomte had been in contact with the nonprofit and there was talk of a very large gift, possibly into the millions. The nonprofit had started to cultivate the relationship with meetings and social events. The nonprofit’s in-house researcher was suspicious and asked us to carry out a due diligence check. It was difficult because he had covered his tracks well, but eventually we demonstrated that he was definitely not a Vicomte, definitely not French, and that lived in a very small house in Peckham. There were hints that he had done this kind of thing before, although no public reports of convictions. We reported our findings to the nonprofit who stepped away from the relationship.

Proving that a person is the person that they claim to be is difficult – you don’t normally ask potential donors for their passport or ID card – but it’s an essential part of due diligence.

2. Is there money, really?

Does she have the money – a key question for fundraisers – should also form part of a due diligence process, just as it would if you were a business and about to take on a new customer. This means researching wealth and income, shareholdings and properties.

3. The Source of the Money

The origins of the funds to be donated are researchable…in some cases. There are geographic limitations (I have tried, and failed, to identify the source of wealth of certain Russian oligarchs) and there are historic limitations (how far back do you really want to go? The source of her money? Or of her grandmother’s fortune?).

4. Criminal convictions

Due diligence research can reveal criminal convictions where these are recorded in the public domain. But some of this is of limited value. In Spain, for example, a common search will list the overdue parking fines of Spanish citizens – hardly the basis for “reputational risk.”

5. Reputation

This is the slippery, difficult-to-define word of the due diligence researcher. We can research reputation in the press and media (but is that not a very biased source?), we can research the circle of contacts that a prospect moves amongst, and we can ask people-who-know-people for their opinions.

The focus of reputation should be trustworthiness – the perception in the public mind that your organisation can be trusted. Your objective is to maintain and enhance your organisation’s trustworthiness. So reputational risk means; “If we link up with this donor, could this damage the public perception that we can be trusted?”


Can we Check Everything?

There is much about donors that we cannot check. Thankfully, most of us have lives that are private.

We can’t check on money held in banks – it’s private. We mostly can’t check wealth held through private trusts, or wealth held in certain jurisdictions (try the Netherlands Antilles, for example…) We can’t tell whether someone’s secret sexual activities will, tomorrow, be the subject of long-lens photo-“journalism” or of a kiss-and-tell story in the yellow press.

Ethical and Legal

There are ethical and legal frontiers too:

Data protection

You are simply not allowed to store defamatory material on people. So how are you going to record the (reputational risk-related rumour) that he was a diamond smuggler in his youth?

Nor can you store information on sexuality, health or religion. Any of these could, in some organisations, imply a reputational risk.

Researcher ethics

Those of us in prospect research live with clear ethical guidelines (see the Association of Professional Researchers for Advancement). For me, for example, this means that I am not willing to use private detectives or false “survey calls” to source information on philanthropic prospects. The first is too intrusive and the second is, simply, lying.

Real-Life Issues

In real-life fundraising we face other issues. For example, if the Director General says we should accept the money, what do we do? Do we stick to our agreed due-diligence procedure? Or does the DG’s political power mean that we take the money despite our concerns?

Other organisations question the whole moral basis of this type of research: “We don’t do due diligence on our normal consumer donors, so why do it with strategic or major donors?”


The debate starts here

There are no perfectly satisfactory answers to these questions. But we were in the same place over the issues that arose from starting prospect research 20 years ago.

In time we will together build the protocols and sector norms that we need to enable us to do a good job of being duly diligent. Now, we need the debate.

 

Factary provides due diligence research for clients. For more information contact Nicola Williams, Research Manager, nicolaw@factary.com

Factary’s Chris Carnie will be running a workshop on Due Diligence and Major Donors at next week’s International Fundraising Congress Noordwijkerhout, Netherlands.

This is a slightly extended version of a piece that first appeared in http://101fundraising.org