The Commission carried out a consultation on its draft guidance ‘Charities working with non-charitable organisations’ last year. It received a great deal of response to the consultation and it committed to look again at its draft guidance to aim to take into account the many concerns expressed. Stone King submitted a response to the consultation in which we noted that:
‘…while we acknowledge that grant-making to non-charities can potentially be higher-risk, we feel that the guidance implies that grant-funding an organisation which is not a charity is unusual or not particularly desirable – we believe that such funding is a legitimate, and common, method of achieving the granting charity’s charitable purposes and that the guidance does not reflect this.’
‘It is common for charities to make grants to individuals and organisations that are not charitable, or which have wider charitable objects than their own, indeed this is quite common, as long as they take appropriate steps to ensure that the funds will only be used to further the granting charity’s own charitable purposes.’
The new guidance appears more positive about relationships between charities and non-charities and the benefits that these relationships can bring. There are still some concerns around practicality and the high bar set in terms of documentation required between charity and non-charity. The guidance, which does not contain any new legal requirements but rather draws together current requirements and best practice, is relevant where a charity is working with a commercial business, another not-for-profit organisation or social enterprise or when working with its own trading company.
The key principles in the new guidance:
- Recognise the risks
- Do not further non-charitable purposes
- Operate independently
- Avoid unauthorised personal benefit and address conflicts of interest
- Maintain your charity’s separate identity
- Protect your charity
Where the Commission reviews a charity’s connection with a non-charity it will expect trustees to have applied this guidance. Documenting any relationship with a non-charity is key to demonstrating compliance e.g. in minutes of trustee meetings etc. The Commission expects you to be able to explain and justify your approach, particularly if you decide not to follow good practice in this guidance.