Introduction
Giving donations to charities or local groups in lieu of flowers at funerals has become an increasingly common trend in the UK. Industry estimates calculate that the total raised through In Memoriam donations managed by funeral directors is circa £100 million per year and growing.
Funeral directors are put in an unusual position when they collect these donations; they are in effect acting as the “collecting agent” of the charity and with that comes responsibilities to ensure that robust processes are followed. If not, it leaves funeral directors vulnerable to disputes over amounts raised.
The draft code of practice for funeral directors on which the Scottish government is currently consulting requires that “All funeral directors must have a policy in place for managing donations which is understood / known by staff and is readily accessible to the client.” We believe that before too long, it will be a legal requirement for every funeral director in the UK to have such a policy in place.
We have developed this guide with support from SAIF – the trade body for independent funeral directors – so that it can be used as a basis for a donation management policy for your business, regardless of whether you are an InMemory customer or not, and also whether or not you provide an online donation facility. It is not only based on our considerable experience working with funeral directors, but also on the requirements laid down by the government for good processes when handling charitable donations, as well as advice given by major charities and the UK Charities Commission.
Contents
- Key steps in the process
- The charity account
- Recording & filing
- Cash donations
- Cheque donations
- Online donations
- Gift aid
- Reconciliation & reporting
Key steps in the process
If the family opt for donations to be managed by the funeral director, the funeral director should make them aware of how the full process works during the funeral arrangement.
Most notably they need to be aware of:
- How donations will be managed
- What type of donations can be accepted:
- Cash
- Cheques
- Online card/paypal donations
- Any costs or deductions associated with collecting donations, for example:
- Any funeral director charges for collecting and administering the donations
- Credit/debit card processing charges – these are typically deducted from the donation
- Percentage deductions made by the funeral director or any third party managing the process for the funeral director
- The collection period for donations
- What information the family will receive at the end of the collection process
Where practical, the receipt of all donations should be acknowledged by the funeral director. This can be via email or written form.
The charity account
All monies banked by the funeral director – cash, cheques made payable to the funeral director and online donations – must be placed in a separate ‘charitable donations’ bank account.
This account must be reconciled and be subject to audit by the company’s auditors annually.
Donations should not be banked into any trading or personal bank account of the funeral director for any reason.
Many of the high street banks offer accounts for this specific purpose. Funeral directors are acting as a collection agent for the charity or group that the family has chosen. They must therefore maintain a clear distinction between trading funds and funds collected on behalf of a charity.
Recording & filing
As donations are received, they must be recorded, ideally on the day of receipt. The minimum data to be held for each donation should be:
- In whose memory the donations are made
- The name(s) of the donor
- The donor’s address (if known)
- The donation value
- The form in which the donation was received e.g. cash, cheque etc.
If Gift Aid is to be claimed, the donor’s title and address must be recorded.
All donations received, that have not been taken online i.e. cheques and cash, should be kept in a specific filing system for charitable donations.
There should be a different file for each deceased person, with the name of the deceased clearly written on the outside of each file.
Many funeral directors use large envelopes, or reusable zip lock bags to store the donations. These containers must be stored in a secure location and ideally in a safe overnight.
Cash donations
All cash donations received should be held in separate sealed envelopes. It should state the deceased’s name and from whom the donation has been received.
Placing the cash into the envelope and sealing this should, where possible, be witnessed.
There is usually a collection at the funeral service(s). Many funeral directors use a locked box, which is an excellent solution.
Where the collection is via a plate, or similar, a third party e.g. a verger/minister etc., should be given an envelope to put the collection directly into and seal it, thereby acting as a witness.
The name of the deceased and the collection description e.g. “Collection St Mary’s”, must be recorded on the envelope, to avoid confusion if the funeral director is performing back-to-back funerals that day.
Under no circumstances, should any member of staff accept cash donations at a service that are not sealed in envelopes or a box.
As soon as the conductor returns to the office, the box/envelope should be opened and counted, ideally with a second person to act as a witness.
3 simple rules
Cash is clearly the most difficult type of donation to control. The charity commission identify 3 simple rules:
- Keep it secure – for example, putting unopened post in a locked drawer in case it contains donations. Any cash donations held overnight should be placed ideally in a safe, or at worst, located in a secure place.
- Record it – the amount, the donor’s name and the date, must be recorded for each donation.
- Bank it – into the charity account as soon as possible.
The name of the person counting and recoding cash donations should be recorded and ideally the count should be checked by a second person.
Cheque donations
The funeral director should always request that cheques are made payable directly to the charity(ies) for which the family have elected to collect donations. These should be stored in the appropriate filing system and sent to the charity at the end of the collection period along with the charities report.
Despite funeral directors’ best efforts, cheques are still made payable to the funeral director. These should be banked into the funeral director’s charitable donations bank account at the earliest opportunity.
Charity Aid Foundation Cheques (CAF cheques) should be handled in the same way as a cheque payable to the charity.
Online donations
Online donation systems should also give the donor information on how they may donate offline. It should also provide them with the ability to download a Gift Aid form to accompany their cheque or cash donation.
Any costs or deductions from the donation to be made by any party should be clearly explained and quantified on the website donation pages before the donor donates.
To prevent any potential upset, written permission should be gained from families before biographies and or photographs / videos are shared online. This is best included within the arrangement documentation.
Online giving is fast becoming the standard way to donate, with a major benefit being the ease in which donors can add Gift Aid, therefore boosting the donation by 25%.
On behalf of the government, The Charity Commission has made a clear recommendation to funeral directors that they should encourage online donations wherever possible, in the wake of a recent prosecution of a funeral director for stealing funds donated in memory:
“The NAFD provides specific advice for funeral directors when dealing with charitable donations, which encourages the use of online charitable donations services wherever possible.”
We have provided some guidance on how to encourage more donors to donate online in our resources pages.
Gift Aid
Where donors elect to add Gift Aid offline, the funeral director must ensure that the Gift Aid declaration forms are the latest versions issued by HMRC. You can download a gift aid declaration form from our resources page.
If the donation is made online, the Gift Aid declaration must also follow the latest version as issued by HMRC and explain how donors who have added Gift Aid in error can amend their election.
Reconciliation & reporting
At the end of the collection period, any donations given in memory of the deceased must be checked and reconciled against all donations received. All offline receipts should already be recorded and these, plus any online receipts, should be reconciled and a report produced and sent to:
- The charity(ies) or body the family have chosen, detailing by donation how much has been received, from whom, the date received and ideally, in which form it was received (e.g. cash, cheque or online). This should be accompanied by the payment for the total of the banked donations into the charitable donations account, less any deductions.
- A list of donations received and the total collected, should be sent to the family. Many funeral directors choose to list only the names and total, rather than identify the value of each individual donation.
- The funeral director must maintain records of the donations received and the payments made for each
deceased person. These records must be kept for 7 years.
Where a funeral director collects charitable donations, their charitable donations account should be regularly reconciled and form a part of the year-end audit process, undertaken by their external auditors.
At the end of the process, when the report listing the donations and the payment is sent to the charity, the funeral director should include details of the next of kin or person responsible for arranging the funeral, requesting that an acknowledgement of receipt should be sent directly to them. This then acts as conclusive proof that the funeral director has correctly completed their responsibilities and the funds have been received by the charity or group selected.