Of interest to – all charities, their boards and advisers and non-charitable companies with a long-term relationship with a charity in England and Wales
The Charity Commission has released draft guidance for charities connected to non-charitable organisations, to help trustees manage any real or perceived conflicts of interest or loyalty.
The draft guidance is aimed at trustees with a long-term close connection with non-charitable entities, which could take the form of a trading subsidiary, commercial business relationship or other not-for-profit or social enterprise partnership. As with other commission guidance, the document includes detailed information, an at-a-glance summary, decision-tree graphics and a checklist for trustees.
In recent years, a number of commission case reports uncovered specific issues relating to managing such close relationships, and the commission has acted to protect the reputation of individual charities and the sector as a whole.
For instance, there have been news stories about:
- Charities funding research by non-charitable organisations with political aims
- Significant commercial benefit accruing to a connected organisation through a charity’s activity
- Grey areas where stakeholders are unsure if a service is being provided by a charity for beneficiaries, or by a subsidiary organisation to raise money for the charity.
The draft guidance on relationships between charities and non-charitable organisations can cover instances when the same people help run both entities, when organisations share names and branding, and when funds regularly move from one organisation to the other.
Specifically, it deals with instances of charities working with non-charitable entities to:
- Provide or receive funding
- Complete shared projects or deliver services
- Involve them in fundraising activities
- Share names, branding, websites, staff or premises
- Share communications, information or data.
The draft guidance is clear that charities can work with other charities and non-charitable organisations, but in doing so it must further their charitable purposes. However, recent media stories have shown that sometimes the relationship can be unbalanced, and trustees need to be aware of their duties to protect the charity and act in its best interests.
The guidance reflects information already available in a range of commission communications, but for the first time pulls all the relevant information together in a specific document.
In seeking external feedback the consultation:
- Covers all relevant areas
- Clearly describes the relevant legislation
- Highlights ways to avoid unintended consequences for charities
- Outlines issues and risks in a manner that trustees should find easy to understand and helpful, and which enables them to put measures into practice.
When drafting the new Charity Governance Code, consultation responses highlighted ongoing and real concerns about how to manage the relationship between a charity and its subsidiary undertakings, and also when the charity is established by a commercial entity.
This draft guidance therefore aims to fill a gap in the governance canon. It will be of most interest to those charities already in, or considering, a long-term relationship with another organisation, but should be essential reading for academy trusts.
Along with noting some of the dangers of such relationships, the draft guidance also gives practical examples of how trustees can measure if relationship is healthy, appropriate and protects the unique position of charities. In short, all trustees, senior managers and advisers should read the draft document and get involved.
If you would like to contribute to ICSA’s submission to this consultation, please send your comments to lthomson@icsa.org.uk by 7 May 2018. Formal CPD is available.
Should you wish to respond directly to the consultation you can do so via this link. The deadline for submissions is 15 May 2018.
