In the UK most churches have charitable status. Several also have associated charities, often to help facilitate a ministry to those who are poor or in need. Most other nations have a comparable charitable structure, although inevitably they differ in the detail.
For well over 30 years I have worked within a charitable environment on the staffs of both the Newfrontiers family of churches and Church of Christ the King (Brighton), and at different times I have been a trustee of these and other charities, in some cases as chair.
Recently I have been contacted by several people for advice and opinion about setting up charities, how elders and trustees should relate, and so on. So I felt the time seemed opportune to share my thoughts and experience.
I am neither a lawyer nor an accountant, so I must state clearly that this short series of blogs will be an expression of a personal view and experience. Appropriate professional advice should be sought by anyone setting up a charity. There is also much good resource material on the websites of the Charity Commission (for England and Wales), OSCR (for Scotland) and Stewardship, an independent Christian charity which helps people manage their giving and also provides a service to advise and set up charities etc.
What is a charity?
The Oxford English Dictionary defines a charity as ‘An organisation set up to provide help and raise money for those in need’. This definition carries the three key elements pertinent to most charities:
Goal: To improve the lives of those in need
Purpose: Actively to provide help
Primary resource: Finance.
So, the following summarises the generally recognised characteristics of a charity:
- Must be for Public Benefit
- A vehicle to improve or enrich the life or lives of people, often those who may in some way be at a disadvantage.
- A vehicle for handling funds, but not for profit
The driver for setting up a charity is usually the requirement for finance, although the required governance associated with it also provides a good structure for running a ministry or project, provided the activity does not become clogged with administrative requirements. Indeed, a charity helps the church to take on an appropriately ‘professional’ stance in the way it handles such issues as policies on complaints, conflicts of interest, investment and risk management and, of course, child protection.
Clearly the outworking of charitable activity may be practiced in a multiplicity of ways related to: Health, Education, Religion, Poverty Relief, Crisis Intervention (both personal and corporate), the Arts etc. The remit is wide.
Trusts, Companies and Incorporated Organisations
For hundreds of years charities were set up as Charitable Trusts. In the city where I now live there is a charity that has been operating since 1174. Accountable to the Charity Commission the legal ‘instruments’ under which a charity functions give the trustees of a trust a high level of responsibility and liability, their personal wealth and assets being subject to meeting any liability the charity may not be able to meet out of its own resources.
Over recent years the Charitable Company has become more favoured. This has more of a company structure than a trust, for instance in the way it appoints directors, and is financially accountable to Companies House in the UK, while remaining accountable to the Charity Commission for its activities. One benefit is the limited liability it carries for the trustees (technically they are directors).
Very recently a new structure, the Charitable Incorporated Organisation, has been introduced by the Charity Commission. This combines many of the benefits of both the trust and company while removing the dual accountability of a Charitable Company both to Companies House and to the Charity Commission. It also streamlines many of the procedures and processes associated with the other two structures. There is a very helpful paper (Charitable Incorporated Organisations for church charities) that has been produced by Stewardship which describes the CIO. This is probably now the favoured type of charity, although still relatively untried and untested.
Next time I shall begin to look at the role of trustees/directors (in future I shall use ‘trustee’ to denote this function) including the relationship in a church between the spiritual leadership and the trustees.