Emil Ford Lawyers

Is your Charity working towards its charitable purpose?

All not-for-profits are established for a purpose which is set out in their constitutions. The governors of the not-for-profit must ensure that the assets and income of the organisation are only used for that purpose.

For charities, the first ACNC Governance Standard sets out this obligation quite clearly. It requires charities to be 'not-for-profit' and work towards their charitable purpose. They must also be able to demonstrate this.

The Charity Commission for England and Wales fulfils a similar purpose to the ACNC in the United Kingdom. In late 2016, the Charity Commission published a report of its inquiry into a charity whose objects were:

1. the advancement of the Islamic religion;

2. to advance the education of the public in the ways of Islam;

3. to promote research into the Islamic faith and to publically disseminate the useful results of that research.

The charity attracted media attention as a result of an event it organised. This led to an investigation by the Charity Commission which examined:

1. the decision making of the governing body regarding due diligence and monitoring of guest speakers; and

2. the financial management of the charity, specifically payments to trustees and/or former trustees.

The Charity Commission said that a charity’s governing body must ensure, when organising events or distributing literature, that the message of the event and the literature is consistent with the charitable objects. There is also a duty to be vigilant to ensure that the charity’s premises, assets, staff, volunteers or other resources are not used for activities inappropriate for a charity.

The Charity Commission added that the governing body must ensure that proper and adequate procedures are put in place and properly implemented to prevent organisations and those who seek to encourage or support terrorism and/or extremist views from taking advantage of a charity’s status, reputation, facilities or assets.

In relation to the charity being investigated, the Charity Commission found that there was no evidence that the governing body at any time considered any risks particular individuals with whom it was associated posed to the charity and its reputation. Although comments attributed to certain individuals appeared to have been made in their personal capacity and not on behalf of the charity or at an event it organised, the Charity Commission noted that by associating with such individuals the governing body was putting the charity at risk in sharing, or being perceived to be sharing, a platform for the promotion of extremist views and in failing to adequately consider the risk the individuals posed to the charity and its reputation and the potential risk to the charity’s beneficiaries in being exposed to extremist views.

The investigation also found that a number of the charity’s governors had received payments from the charity which were considered more than reasonable costs for travelling expenses for board meetings and for the fulfilment of their duties. More than half of the governors had received payments for services which were in breach of the charity’s constitution and legal duties.

The lessons are clear. Charities and their governors must comply with the law. There are clear obligations on governors to always act in the best interest of their charity. They must ensure that its funds, assets and reputation are not placed at undue risk. The governing body must not use their charity’s name to promote views or activities inappropriate for a charity.

The governors are under a legal duty to ensure that their charity’s funds are applied solely and reasonably in furtherance of its purpose. They must also be able to demonstrate that this is the case. Accordingly, they must keep records and an adequate audit trail to show that the charity’s money has been properly spent on furthering the charity’s purpose for the public benefit.

Governors must not promote or support extremist views or activity that promotes terrorism and terrorist ideologies through the charity’s work. In addition, governors must not misuse a charity’s funds or assets and must ensure that its finances and property are used appropriately and in accordance with its charitable purpose.

If you have concerns in this area or would like a review of your charity’s operations, contact , or .

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