Not for Profit enews - January 2012
Voluntary Sector Finance
Regulator expresses concern over business rate relief arrangements
The Charity Commission has expressed concern that some charities may find themselves party to what local authorities consider to be business rates avoidance by landlords. If a charity occupies a commercial property, the landlord qualifies for a mandatory 80% discount on business rates, with the rest subject to discretionary relief. If found guilty of improper practice, charities could potentially lose their discretionary discount, and be required to pay 20% of the business rates. This can be the case if proper and reasonable decision making procedures have not been adhered to, or the charity does not physically occupy the premises.
Interest on industrial and provident society shares may be compatible with charity status
The Charity Commission has set out its position in relation to industrial and provident societies (IPS) - also known as community benefit societies - and the payment of interest on share capital. Any charity registered as an IPS is currently considered an ‘exempt charity’ which means that it cannot register with the Charity Commission, but is otherwise subject to charity law. New guidance from the Commission clarifies that an industrial and provident society set up for the benefit of the community can receive tax benefits as a charity but still retain the power to pay interest on share capital. Previously it considered being able to distribute profits to shareholders to be fundamentally incompatible with the charitable status.
After discussions with the Financial Services Authority and HM Revenue & Customs, the Commission has updated its position to allow a community benefit society to pay interest on its shares, subject to certain conditions being met. If you would like further advice on how this may affect your organisation, please contact Simon Erskine.
Voluntary Sector Governance
Winding up of Charity Business
Around 200 small and medium sized charities have been left in the lurch, after Charity Business, which provided outsourced financial back-office services, recently ceased trading. Of the 200 charities the agency dealt with, around 50 outsourced the entirety of their finance function, with a further 150 outsourcing vital services like payroll. The business development director of the National Council of Voluntary Organisations (NCVO), Richard Williams, said that Charity Business had been removed from the 'approved supplier' list in the summer of 2010, after having been on it for at least four years.
Any sized charity can benefit from a bespoke outsourcing service, whether it is taking advantage of considerable knowledge and expertise at a fraction of the cost of employing someone in a full time role or benefitting from economies of scale. At MHA MacIntyre Hudson we have been providing charities with a range of outsourced finance and HR services for a number of years. For more information contact Chris Harris.
Consolidating charity law
The Charities Act 2011, which replaces the Recreational Charities Act 1958, the Charities Act 1993 and many of the provisions of the Charities Act 2006, has received Royal Assent and will come into force in March 2012. As a consolidation exercise, it has no impact on the legal basis of the Charity Commission's guidance, but references will have to be updated to reflect the introduction of the new Act. This will have no effect on the planned review of the Charities Act 2006 by Lord Hodgson.
For the Charity Commission’s update bulletin, please visit here.
Legal update website
If you find yourself struggling to keep up with legal changes, Sandy Adirondack’s legal update website for voluntary organisations might help. The website, intended primarily for small and medium organisations covers a wide range of topics, including charity law, company and industrial and provident society law, governance, employment, equality, data protection, intellectual property, marketing and much more.
Sandy is a well known trainer and consultant on governance and legal issues for voluntary organisations, and is author of ‘Just About Managing? Effective management for voluntary organisations and community groups’ (now in its 4th edition) and co-author of ‘The Russell-Cooke Voluntary Sector Legal Handbook’ (now in its 3rd edition).
Advice line and support for mutual model of public service delivery
The government has launched an advice helpline for anyone interested in the mutual model of public service delivery, alongside a complementary website. According to a paper published by Mutuals Taskforce, mutuals often benefit public sector staff, tax payers, and service users by increasing innovation, enhancing productivity, and providing better customer satisfaction.
“As I write this, news has arrived that Wikipedia would be unavailable for the whole of Wednesday, 18 January. I am shocked because it is a site I use often; where would I get my misinformation now? I may have to use a paid-for site instead and this raises the whole issue of how I have managed to avoid the regular pleas for donations from Wikipedia. I am a freeloader, enjoying access to a free service and giving nothing back. And I am not alone!
Many publishing companies have begun to introduce pay walls for their website rather than rely on a free model. Presumably, this will reduce the traffic considerably, but introduces a subscription stream and ensures that advertisers have access to relatively well heeled subscribers. It seems to work for the FT, but I am not sure about the Third Sector! Most charities have always had a mixed funding model, where the service user normally receives a free or subsidised service and a third party donor or funder makes up the difference. The charity, as the agent, has to ensure that it can deliver the desired service and cover all of the costs of doing so from the income received.
The funding landscape is changing considerably with government cuts biting ever further across society. While some charities will find grant resources cut back, others may be able to access new income streams such as Social Investment. The change is an ideal opportunity to review the funding methods of your charity. If you are interested in exploring this possibility, please contact Chris Harris to talk it through.
As you may be aware, we offer our clients FREE training courses for their staff, volunteers and trustees. In March, we’re looking to run courses on the following topics at our London City Office:
Understanding charity accounts
Statutory accounts can be complex at the best of times, but this is doubly true for Charities who have complex additional requirements. This course explains what to look out for when reading a set of Charity accounts and is particularly useful for anyone who would like to understand charity accounts better.
Date: Wednesday 15 February
Time: 2-5 pm
Location: New Bridge Street House, 30-34 New Bridge Street, EC4V 6BJ
Coordinator: James Gare, Not-for-Profit partner
Making the most of QuickBooks from a charity’s perspective (intermediate level)
This course considers how not-for-profit organisations can tailor QuickBooks to their specific requirements. It will cover recording grants and donations; keeping track of restricted and unrestricted funds; reporting funding streams to donors; and creating and reporting on budgets. The course will also cover general hints and tips and some of the oft neglected functions of QuickBooks.
Date: Wednesday 21 March
Location: New Bridge Street House, 30-34 New Bridge Street, EC4V 6BJ
If you would like to register interest for any of these courses, please email Julia Jankowska with your name, position, organisation, and which course you’re interested in.