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The Charity Commission
Charities vary widely in size and activity. Of the 160,000+ registered
charities, the 440 with income in excess of £10m per annum generate 44%, while
100,000 generate less than 1%, of the total income of all charities.
Activities with charitable purposes include the relief of financial hardship,
the advancement of education and religion, and certain other purposes for the
benefit of the community. All are regulated by the Charity Commission
which also aims to provide help and assistance.
The Charity Commission aims to improve the governance, accountability and efficiency and effectiveness of charities by providing guidance and advice to charities to help them operate more efficiently and effectively. Charities can approach the Commission for advice on new ideas or proposals on any issue concerning the running of their organisations.
The Charity Commission have powers to enable Charities to adapt to the modern world and to change their regulating documents. Guidance is available on the Charity Commission website.
Trustees
Trustees must always act in the best interest of the charity, even if they are
nominated by another body such as a local authority. They are unpaid and
must not receive any benefit, at least not without approval in the governing
document and the Charity Commission in accordance with its
guidance.
Trustee indemnity insurance is a potential benefit to the trustees. If this cover is to be provided by the charity (even if this cover is provided "free" as part of a package of policies), the Charity must apply to the Charity Commission for permission to make the payment, and without such permission the insurance company can void the policy in the event of a claim. The application procedure was revised in March 2003.
Trustees must ensure that they read and understand their charity's governing document. The Charity Commission publish a free detailed guidance booklet CC3 which may be worthwhile reading for new and existing trustees.
Trustees should make themselves aware of the additional restrictions on charities such as procedures for the purchase or sale of land and buildings.
Self appraisal
As with employees, one way of establishing the skills of Trustees, and identify potential
weaknesses, is to ask Trustees to complete a self appraisal
form. This
form can act as a checklist of Trustees knowledge and can also request Trustees to confirm that they are not
disqualified from
acting as a Charity Trustee and list the appropriate disqualification provisions of the Charities
Act 1993.
Public confidence and good management
Support for charities is affected by the public's perception of the standards of
the charitable sector generally and one of the aims of thr Charity Commission
is to improve the management of charities.
Useful documents such as The Hallmarks of a Well-run Charity and a Self Checklist for Internal Financial Controls are available on the Charity Commission website. Booklet CC21, which sets out the registration process, also contains useful background information. It is an example of helpful Charity Commission guidance, as is the Model Memorandum and Articles of Association for an incorporated charity.
Accounts
A charities governing documents may impose an audit obligation on any
charity, but the Charities Acts 1993 and 2006 state
- an unincorporated charity with income of less than £10,000 does not need any
report.
- an unincorporated charity with income between £10,000 and £250,000 needs an
independent examination, but the examiner does not need a professional
accountancy quailification.
- an unincorporated charity with income between £250,000 and £500,000 needs an
independent examination, and the examiner must be a member of a specified accountancy
body.
- an unincorporated charity over £500,000, or income over £100,000 and assets
over £2.8m, must have an audit
- an incorporated charity with income less than £90,000 and assets below £2.8m
does not need a report buy must file statutory accounts
- an incorporated charity with income between £90,000 and £500,000 needs an
accountants report
- an incorporated charity with income over £500,000 or assets over £2.8m needs
an audit.
Tax exemption
Charities are not generally exempt from VAT, and are subject to income tax
or corporation tax on their trading profits for fundraising purposes, but not
for trading if -
Non trading income, if it is applied for charitable purposes, is generally exempt from income tax under TA1988 Section 505, and basic rate tax can be recovered from donations received under Gift Aid.
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Reminder - disclaimer applies. Please feedback your comments. This page was last modified 5 April 2008.