Charity relationships with non-charity third parties

All charities are set up to further a public benefit of one description or another. The exact way this happens is described as a charity’s charitable purpose. Everything a charity does must help to make a positive difference to its beneficiaries and sit comfortably within that charitable purpose. Therefore, it goes without saying, that if a charity has a connection with another organisation that isn’t a charity, this must work in a way which allows the charity to continue furthering its charitable purpose.

For charitable organisations, such connections can bring immense benefits. It might be a primary source of funding or provide brand value or other valuable resources that benefit the charity or help the charity to save money. Equally, the non-charity organisation might act as a corporate trustee or even be the sole member of the charity.

However, it can also open a charity up to risks – some of which can be significant. For example, could the connection:

• result in the charity supporting or carrying out work outside of its charitable purpose?
• mean the charity is acting outside of charity law?
• exert an inappropriate level of influence or control over the decision-making of the charity?
• result in reputational harm because of the association?

Connections to non-charity organisations, therefore, naturally bring challenges. These challenges can extend to areas such as integrity and ethics; transparency and adequacy of trustee oversight. A charity might be required to consider serious incident reporting and how it protects people (including staff and beneficiaries) or the management of conflicts of interest and loyalty as a result of a connection with a non-charity organisation.

The Charity Commission has published guidance for charities in managing these types of relationships which centre around six key principles, namely:

1. Recognise the risks
2. Don’t further non-charitable purposes
3. Operate independently
4. Avoid unauthorised personal benefit and address conflicts of interests
5. Maintain your charity’s separate identity
6. Protect your charity

Trustees are well-advised to take heed of this guidance and ensure they not only take advantage of the benefits but also consider and mitigate the risks. They must feel confident in their ability to demonstrate adequate documentation of each relationship and that they understand the purpose of the connection showing this to be in the best interests of their charity and not furthering those of the non-charity.

It is these challenges that we’ll be considering at the Charity Governance Summit in September. Join us as we discuss these types of relationships and look in more detail at the kinds of challenges they bring.

Claire Robson