Why has the SNP been accused of fraud?

by | 3 Sep 2021

The SNP is under police investigation for potential financial fraud - what might it have done wrong?

There has been much speculation about financial fraud in the SNP and this has led to a formal police investigation. Much has been made of the fact that the SNP isn’t a charity and that it is not illegal for a political party to fail to maintain a separate account for ‘restricted funds’.

Both these points are true, but they seem designed in part deliberately to divert attention from what may actually be fraudulent. If there has been fraud it is not about what happened when the money was ‘in the bank account’ but how it got there and where it went when it left. That relates to the regulation of fundraising.

Many types of organisation fundraise – local association, not-for-profit sports clubs, social enterprises, charities, political parties and more. The regulation of fundraising is not contained solely within charities law and does not apply only to charities and the emphasis on this in the SNP case has been an intentional misdirection.

The Chartered Institute of Fundraisers sets out the position on its website. The relevant aspect here is the regulation of whether you have used money for the purpose for which you have raised it. That is explained under the dealing “Honouring your promises to supporters” and it states:

“If money is raised for a specific purpose, it has to be used for that purpose. This means that you will need to think carefully about what you will do if you raise more money than expected or if you fail to achieve your fundraising goals. If you think it’s likely that you may exceed your target, you may need to inform donors from the start how any excess funds will be used.”

This is not just good practice, it is required. The Chartered Institute of Fundraisers does not police fundraising behaviour – in Scotland that is carried out by the Scottish Fundraising Standards Panel (in the rest of the UK this function is carried out by the Fundraising Regulator).

But they both regulate the same Code which you can read on the Fundraising Regulator’s website. Here the relevant section is Section 2.7 on “Using Funds”. It states:

2.7.1. You must use all funds raised for a particular cause for that cause.

2.7.2. You must make sure that donations are used to support the cause in line with any conditions attached to the donation. This may be conditions the donor sets when making the donation or representations you make (either verbally or in fundraising materials) about how the money will be used.

2.7.3. You must keep a record of donations that are given for specific purposes to make sure that you keep to the conditions of the donation.

2.7.4. You must make sure that you do not suggest money is for a restricted purpose (such as buying a goat, or helping a particular child) when it may be used for a different purpose or for the general purposes of a charitable institution.

2.7.5. If you are fundraising for a particular purpose, you must include a statement saying what will happen to funds you receive if the total amount raised is not enough to reach (or is more than) the target.

The first two instances of ‘must’ are bold in the regulations – this formatting has not been added. The fundraising situation is very clear; if you make a contract with an individual such that they will give you money and you will use that money for a specified purpose, the specified purpose and exactly the specified purpose is the only legitimate use of the money.

If there has been fraud it is not about what happened when the money was ‘in the bank account’ but how it got there and where it went when it left

It explicitly rules out the argument that you can use it for other, similar purposes or that the general purposes of the organisation fundraising can substitute for a specific condition set during fundraising.

In the case of the SNP that means that if the money was raised for ‘an independence referendum’ that would be a condition set at the point of raising the money (effectively a contract with the donor) and that it is therefore not legitimate to use that money for purposes other than a ‘referendum’ campaign.

Had this money been raised from general subscriptions the SNP would have been free to use it for any purpose consistent with the constitution of the party. But in this instance conditions were applied and the requirement was to ensure that the money raised was tracked at every stage and then spent only and solely in line with the conditions set at the point of donation.

Is this illegal or fraud? This site is not legally qualified to make any reliable statement on that and that is the subject of the police investigation.

But it helps to explain why, even if everything contained within the SNP accounts has been tested for fraud by the party’s auditors, they still attached a statement indicating that they were not confirming that no fraud had taken place.

If there was illegality it was as a result of breaking conditionality applied to fundraising by using it for a purpose other than that for which it was raised and not the subsequent accounting practices once the money was in the party’s accounts.

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