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Charities face scrutiny on links with non-charitable organisations

As the Charities Commission launches a consultation on charities that are connected with non-charitable organisations, Julia Penny highlights the issues that trustees need consider when dealing with such relationships.

"JuliaPenny"
Julia Penny

April 2018

The Charity Commission issued a consultation on maintaining your charity’s separation and independence, which closes on 15 May 2018, with the aim of improving the way that charities interact with connected organisations that are non-charitable. The guidance is for charity trustees of a charity which is connected with a non-charitable organisation such as a:

  • trading subsidiary;
  • commercial business;
  • not-for-profit organisation.

Connected, for the purpose of the guidance, means a deliberate connection, such as through ownership of shares, common personnel or purposefully having the same or similar name. 

The reason for issuing the guidance is that a charity can only have a relationship with a connected non-charitable organisation if it furthers, or helps to further, the charity’s purposes and is in the charity’s best interests. The Commission has seen a number of instances in the recent past where such relationships haven’t been handled correctly by trustees and so wants to highlight the necessary steps in this guidance.

Common issues

The draft guidance sets out quite detailed explanations and examples in respect of common issues likely to arise as follows:

  • providing funds to the non-charitable organisation;
  • receiving funds from the non-charitable organisation;
  • completing shared projects or delivering services together;
  • involving the non-charitable organisation in fundraising;
  • sharing names, branding and websites;
  • sharing communications;
  • sharing information or data; and 
  • sharing premises or staff.

It also reminds trustees of existing guidance in CC3 The Essential Trustee.

The draft guidance is 39 pages but the Commission has also issued a handy “at-a-glance” summary that will help trustees understand when they need to refer to the more detailed guidance and a checklist to help them review their actions and decisions.

It will be important to ensure that you are considering these issues if you are a trustee. If you act for charities with this type of relationship you should also bear in mind the risks of reputational damage or of a Charity Commission investigation if the charity is not considering these issues in a robust enough manner (or at all).

Julia Penny FCA is Technical Director at SWAT and a London Council Member. Follow Julia @JSPenny

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