Scope of donations

The principal purpose of this chapter of the Financial Procedures Manual is to set out and explain the procedures to be followed by staff in Departments in respect of income received by means of donation and expenditure against such funds

In this context ‘donation’ also include grants received from both charitable trusts and from Government bodies. Research Grants are not covered here as they have their own chapter of the Financial Procedures Manual – Chapter 19.

Topics covered in this section are:

• Responsibility for donation policy
• Structure of this chapter
• Definition - What is a donation?
• Types of income treated as donations
• Income which is not a donation

Responsibility for donation policy

The Finance Division is responsible for the University’s financial policies and accounting procedures: whereas, the Cambridge University Development and Alumni  Office (CUDAR) is responsible for the policy on the solicitation, acceptance, recording and stewardship of philanthropic donations. It acts as both the specialist department of the University responsible for donations to the University, and as the operational arm of the Cambridge Foundation, which was incorporated into the University in 2013.

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Structure of this chapter

The pages are set out in eight sections:

Departments should use this guidance in conjunction with the 'Procedures for Handling Donations' issued by CUDAR. These procedures are for use by all those who are responsible for seeking philanthropic donations for the benefit of the University and ensuring that such gifts are then appropriately managed. It includes guidance on:

• Solicition of donors
• Ethical guidelines
• Purpose of the gift
• Donation agreements
• Gift Aid and Tax efficient Giving
• Publicity and freedom of information
• Stewardship of donors

The Development Office's Procedures for Handling Donations is available from the Finance Division's website.

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Definition - What is a donation?

To be classed as a donation or grant, a receipt of funds or assets must have been freely given, with no consequent obligation on the University to provide goods or services to the benefit of the donor.

Income is often described as a 'donation' when in reality, if you look a little deeper into where it has come from and why you may find that it is not. Therefore, in deciding whether income may be treated as donation income, Departments need:

1. to identify whether the funded activity is research which needs to be processed through the Research Operations Office (ROO); and
2. whether the funded activity creates a trading relationship with the funder.

What income should be processed through ROO?

It is not always easy to differentiate a donation from a research grant. As a general rule, a research grant will be for a specific piece of research activity e.g. to examine the relationship between shark migration and global warming, whereas a donation will be much more general e.g. to fund the research and other activities of Professor Plum.

Additionally a research grant:

• will typically have been subject to an application process or detailed proposal;
• may have been won competitively;
• is likely to have been subject to peer review or other vetting procedure to evaluate the research proposal;
• will have a specific definition of the research to be undertaken;
• is likely to specify rights and obligations in respect of intellectual property and publication;
• will normally require a report;
• is likely to have conditions specifying what kind of expenditure is allowed to be spent against the grant.

What makes income a trading activity?

Trading income is income earned by a department from either another university department or an external customer, for the provision of goods or services, or for the use of space or facilities. Therefore, for the income to be a donation it is important to ensure that a funder, or provider of a grant, receives nothing in return.

The provision of regular reports to the funder of how their donation is being invested/used does not in itself constitute a supply of services. Similarly, it is acceptable for the donor to be recognised for their gift e.g. a small plaque mounted on a wall, or a building named after them. However if the donor's logo is on constant display, or other benefits are received, then the income starts to move away from that of a donation and into the region of sponsorship/advertising.

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Types of income treated as donations

Donation income

For the purposes of these procedures, "donation income" can include any of:

• gifts
• benefactions
• bequests
• legacies
• grants made by charitable trusts
• grants made by Government departments and agencies

This does not include Office for Student (OfS) income or Research Grants. Care must be taken to ensure that the income is neither a research grant nor some form of consultancy. In either of these cases the income is part of a contractual relationship and needs to be dealt with accordingly. Research grants and contracts are dealt with through the ROO.

Donations may be in the form of:

• single items of cash, cheques or credit card payments
• fee waivers
• investments
• regular receipts via payroll giving, bank standing order, direct debits or otherwise
• non-monetary assets

Charitable trusts

Approximately 40% of the philanthropic donations received by the University are from charitable trusts. In practice many individuals or organisations that want to give to the University (or other charities) set up such a trust, often known as 'Foundations'.

It is not uncommon for the Trusts to actually sponsor research grants within the University. In these instances the funds should always be identified as such from a financial accounting perspective, be handled by ROO.

However, there are occasions where although the nature of the funding was most clearly that of research due to the nature of the contract, the intention behind it was most certainly philanthropic. In these cases it is recorded in the University's financial accounts as a research grant but also included with CUDAR's figures as a donation.

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Income which is not a donation

Research grants

If an offer of support appears to fall between a research grant and donation, it is important to seek advice from Finance Division or ROO, because certain benefits to donors (use of logos, rights to attend seminars, access to academics) may trigger trading issues that need to be resolved.

Once income has been identified as being a research grant then no part of this can be treated as a donation. The money is either a donation or a research grant, not both.

This is supported by Financial Regulation 13.4:
'All research grant or contract income and expenditure, from whatever source of funds, must be notified to the Research Office and no part of this income may be transferred into donation accounts or other special funds, other than funding remaining unspent at the end of the research which the funder has agreed the Department may retain.'

Detailed guidance on the classification and management of Research Grants (M*** source of funds) is provided in the Research Grants chapter of the Financial Procedures Manual.

Excess research grant income

This is credited to source of funds EDCZ in departmental accounts and is not a donation. It is still part of the original transaction by the University to the sponsor of research.

Although potentially confusing, the last part of Regulation 13.4 is making provision for the scenario where we are required to return any unspent funding to the sponsor but, where the sponsor then specifically states that they wish to donate a corresponding amount back to the University. In practice the money may never leave the University however, it is technically two separate transactions. In these rare cases departments should liaise with both ROO and the CentralResearch & Accounting team within Finance as any monies would need to be transferred to either an H or E source of funds code.

Sponsorship

If the University receives sponsorship income it is obliged to acknowledge the involvement of the sponsor. To the extent that this returns a benefit to the sponsor the income is not a donation. For advice on the split between donations and sponsorship income (and related VAT status), refer to the Tax Team in the Finance Division.

Office for Students/HEFCE grants

Grants from the Office for Students (formerly the Higher Education Funding Council for England, HEFCE). The Teacher Training Agency (TTA) and other Government agencies whether tied to specific initiatives and with restrictions on expenditure, are not treated as donations. The J*** source of funds is used to identify these monies received and the associated expenditure. More guidance is available in the Chart of Accounts section of the Procedures Manual.

Trading income

As stated earlier, trading income is income earned by a department from either another university department or an external customer, for the provision of goods or services, or for the use of space or facilities. The income is not to be treated as donation income.

However, where, an individual waives personal fees earned outside the University for consultancy, or external lecturing and instead a sum is passed to the Department, this is classified as donation income.

Consultancy and trading contracts are dealt with either through subsidiary companies such as Cambridge Enterprise Limited established for this purpose or, if entered into by the University itself, using the trading accounts (GAAA sources of funds). There are rules determining what trading activities charities are legally allowed to undertake: see section 25 of Financial Regulations.

Proceeds from the disposal of assets

Income received for the disposal of an item of equipment or another asset does not constitute a donation (unless it is the immediate disposal of a donated investment as envisaged in section Availability of Funds).

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