Inter-Varsity Press

CONTENTS

Introduction

Section 1 Charity begins at . . .

What is charity?
Charitable purposes
Public benefit
Who is responsible?
Why register as a charity?

Section 2 Types of charitable organizations

Charitable trust
Charitable unincorporated association
Company limited by guarantee
Charitable Incorporated Organisation (CIO)
Industrial and Provident Society (I & PS)
Royal charters
Charities established by special act of Parliament
Community Interest Company (CIC)

Section 3 Overview of the Charities Act 2006

Part 1
‘Charity’
‘Charitable purposes’

Part 2: Regulation of charities
The Charity Commission
Charity tribunal
Registration of charities
Charitable Incorporated Organisation
Mergers
Other provisions
Part 3: Public charitable collections
Part 4: Miscellaneous and general

Section 4 The role of the Charity Commission
Regulator
Investigations
Review visits
Work with faith-based charities

Section 5 The image of the charity
The charity’s name
Use of sensitive names
Name change
Publicity
Logos and trademarks

Section 6 Governance and management
What is governance
Conflict between trustees and management
The founder trustee
Pastoral responsibility against legal responsibility
Appointment of chief executive/pastor

Section 7 The board
Role and recruitment
Qualities in a charity trustee
Induction and training
Meetings and records
The chairman
Code of conduct
‘Blue sky thinking’
Payment of a trustee
Delegation to committee and sub-groups
Financial responsibilities of the board
Liability of trustees
Succession policy
What if?
Corporate trustee
Custodian trustee

Section 8 Accountability
Accountability of the leader (CEO/pastor)
Accountability of the board of trustees/directors

Section 9 Administration
Address/registered office
Appointment of directors/trustees
Retirement/removal of trustees
The secretary
The treasurer
Annual return
Compliance
Records

Section 10 Membership issues
Who are the members?
Church membership
Charities meetings
Resolutions

Section 11 Associated charities
‘Daughter’ churches
‘Overseas cousins’

Section 12 Property issues
Acquiring a property
Disposal
Leases
Mortgages
Miscellaneous
Church or charity development projects
Town and country planning

Section 13 Charity contracts
Potential risks
Cancellation of the contract
Loss of independence
Possible tax and VAT implications

Minimizing risk

Section 14 Information technology
Website and email
Policy on the use of information technology

Section 15 Intellectual property
Copyright
Trademark
Patent
Protection

Section 16 Employment and discrimination issues
Establishing employment status
Recruitment and selection
Commencing and continuing employment
Terminating employment
Equality and discrimination in the workplace
Employment practice and procedure
Managing sickness absence
Family-friendly policies
Health and safety
TUPE regulations
Handling employment tribunal claims

Section 17 Pensions, insurance and investments
Pensions
Personal pension plans
Group personal pension scheme
Tax
Third-party contributions

Protecting the charity
Investment of charitable funds

Section 18 Vulnerable persons
Safeguarding and a duty of care
Legislation and statutory guidance
Some of the essentials

Section 19 Resolving disputes
Spotting the dangers
Options for dispute resolution

Section 20 Charities working overseas
National subsidiaries
Compliance with local laws
Calculating and managing risk
Kidnap, ransom, extortion, child protection and health and safety issues
Working with other NGOs
Accounting and management issues

Section 21 Finance
Accounts presentation, audit and independent examination
Format of accounts
The trustees’ report
Statement of Financial Activities (SOFA)
Balance sheet
Notes to the accounts
Audit and independent examination
Taxation issues

Credit control/cash flow
Annual budgets and projections
Receiving and accounting for cash
Borrowing money
Investments

Section 22 Fund-raising
Five possible ways to attract income

Section 23 Trading
Trading subsidiaries
Charity shops

Section 24 What can go wrong?
Fraud and money laundering
Lack of governance
Private benefit
Lack of independence
Funding failure
Malpractice
Failure to comply with legislation

Section 25 Risk management
Identification and management
Other steps in risk management
Trustee indemnity insurance

Section 26 Charity Commission Schemes, Orders, classifications and applications
Charity Commission Scheme
Charity Commission Order
Excepted and exempt charities
Unregistered charities
Cy-près applications

Section 27 Mergers, collaboration, takeovers, conversion and cessation of charities
Merger
Collaboration
Takeover
Conversion from one charitable entity to another
Cessation

Section 28 Evaluating effectiveness

Appendix 1 What to do when
1. A trustee retires or resigns
2. A charity needs to appoint a new trustee
3. Trustee numbers fall below the minimum permitted
4. There is a dispute between board members
5. Payment is to be made to a trustee
6. There is non-attendance or non-involvement by a trustee
7. Trustees claim they are not consulted
8. One trustee cannot agree with a majority decision of the board
9. The trustees wish to delegate their responsibilities
10. It is difficult to recruit new trustees
11. The trustees wish to make and ex gratia payment
12. The governing document of the charity needs amending
13. The charity runs out of money
14. You discover a ‘problem’
15. The charitable purposes for which the charity has been set up are no longer possible
16. The charity wishes to spend money to do something that is outside of the charity’s ‘objects’
17. The Charity Commission write to say they are coming to visit
18. The ‘leader’ will not be accountable
19. There is a claim against the charity
20. There is a failure to file accounts/annual return or hold an AGM
21. There is a vote of no confidence in the ‘leader’
22. There is a conflict between the ‘spiritual’ and the ‘legal’
23. The charity wants to undertake a ‘mega’ project
24. The risks to the charity are too large
25. The charity has a problem with a key staff member
26. There is a ‘suspicion’ of someone or something
27. The identity of the trustees is not clear
28. There is a ‘request’ for compliance by an overseas government
29. The charity is facing an unusual/new challenge
30. The charity can no longer spend ‘restricted funds’
31. The word ‘limited’ is unnecessary in the charity’s title
32. The charity has permanent endowment
33. VAT is an issue
34. An urgent response is needed from the Charity Commission
35. The charity works with vulnerable beneficiaries
36. The charity wishes to purchase a leaving present for a retiring trustee
37. It all gets too much!

Appendix 2 Definitions
Appendix 3 Useful addresses

From the INTRODUCTION

You never forget the first time!

For me it was when I was aged nineteen. I had been involved with others in the production of pre-recorded radio programmes that were being distributed to hospitals, and now I was being asked whether I would consider joining the board of trustees for the soon-to-be-set-up, new charity. I knew very little about the requirements of the office that I had agreed to take up. Thirty-five years later (in fact earlier this year), I, as the surviving trustee of those originally appointed, oversaw the closing down of the charity and the disposal of its assets. Job done, mission completed. ‘There is a time for everything, and a season for every activity under heaven,’ said Solomon. The ‘season’ for that charity’s activity had passed.

In those thirty-five years I learned a lot about charities and, if I had known then what I know now, I would have done some things differently. But I will never forget the vision, commitment and skill of those who volunteered in it. And I know that the lives of many people throughout the world were enriched by the activities of that charity over its lifetime.

My day job is that of a lawyer and I have had the opportunity to observe, and in many cases work with, charities involved in a variety of undertakings throughout Europe, the Middle East, Africa, Asia, the USA and Australia. Without doubt the British have left their charitable footprint far and wide. We have built hospitals, established schools, relieved poverty, undertaken development and birthed churches. Some of these churches now send ‘missionaries’ to the UK with the same zeal that our forefathers demonstrated when they left these shores many decades before.

Much has been accomplished, and whilst it seems that the needs and opportunities are even greater than they have ever been, it is increasingly unlikely that we shall be as effective in our endeavours in the future, unless we rise to the challenge of meeting the ever-increasing standards of governance and management that the charitable sector is required to achieve.

The ‘old ways’ of running charities will no longer suffice. The intervention by the Charity Commission into several Christian charities in recent years (some of which have made the headlines) reminds us that all may not be as it seems on the surface.

The buzzwords today are ‘accountability’, ‘risk management’, ‘dispute resolution’ and ‘governance’. They, together with
legislation concerning child protection, fund-raising and money laundering, impose requirements on charities’ activities that did not exist twenty-five years ago. (The investigations dept of HMRC have been heard to say that churches and charities are in their sights, as ‘you can usually find problems, without looking too hard’.) In many respects the standards imposed on the trustees and managers of charities are higher than those which apply in the commercial world.

This book is offered in response to the increasing legislative and other requirements that are now imposed upon charities. It is not a book to be read ‘from cover to cover’ in one sitting. Rather, it is intended as a reasonably comprehensive overview of the main ‘issues’, together with appropriate guidance on responding to them. The law is always changing and so, where possible, I direct the reader to websites of the relevant bodies, which are able to change more rapidly than the printed word.

Some of the issues covered (notably those in sections 3, 16 and 20), raise potentially serious ethical questions for the Christian conscience. It is quite possible for a conflict to arise between biblical principles and the law of the land.

Indeed, some believe that such conflicts are likely to become more common in the UK in the future. Without necessarily sharing that pessimistic view, I do acknowledge that the trustees/directors of Christian charities need at least to be ready to face this possibility and its potential consequences: either sanctions from the courts if the law of the land is ignored, or lower standards of Christian faithfulness if it is obeyed. However, this handbook is designed as a practical application of the legal principles that govern the running of charities, and so consideration of specific moral dilemmas arising from the law lies beyond its scope.

Whilst the material is relevant to all charities, I have, where possible, sought to personalize it to the Christian charity sector in the sincere hope that it will be a practical resource to enable them to achieve compliance with excellence. After all, should we not honour God in this way?

Clearly, it would have been impossible for me to complete a book as comprehensive as this without the considerable assistance of other experts. I would like publicly to record my sincere thanks to (them) ...

The law is that in existence at December 2007

Paul Martin
London
December 2007