Unregistered charities reminded of need for compliance

Small unregistered charities are reminded of their duty to comply with charity law and that they could become subject to investigation by the Charity Commission, even though they are not required to register with the Commission. This reminder is being issued following publication of a report by the Charity Commission into the charity “House the Homeless”.

House the Homeless is exempt from registration because its annual income falls below £5000, but it was recently investigated by the Commission after the Commission received reports of conflicts of interest in the way the charity was conducting its business.

Charities are not required to register with the Charity Commission if their gross annual income is below £5000 or if they are ‘excepted’ or ‘exempt’ from registration. ‘Excepted’ charities are a designated group of charities – including churches and chapels, scout and guide groups, and service funds of the armed forces – with a gross annual income below £100,000. ‘Exempt’ charities include universities, some museums, and co-operative and community benefit societies – they are exempt from regulation by the Charity Commission as they have their own designated regulators, but still have a duty to comply with charity law.

The main concerns raised about House the Homeless were that:

• The charity operated from premises owned by the founder and did not pay rent;
• The founder was named as a co-ordinator on the charity’s website but had since stepped down; and
• The charity had referred beneficiaries to the founder’s privately-owned estate agency.

The Commission subsequently found that the trustees had “little experience of running a charity” and “had not fully appreciated the conflict of interest in relation to the founder’s previous involvement with the charity.” Since the Commission became involved, the charity has moved to new offices, removed the founder’s name from the website, no longer refers beneficiaries to the founder’s agency and is looking at providing support to homeless people in other ways. It will report back to the Commission and provide accounts by March 2015.

This case report serves as an effective reminder that even if a charity is small, unregistered, excepted or exempt, the trustees “carry important legal duties which mean that they must balance their attention on the charity’s beneficiaries with an oversight of its governance and reputation”. Trustees must act collectively and take all decisions reasonably and prudently, acting always in the best interests of the charity.

To read the Charity Commission’s report into House the Homeless, please click here.

All charity trustees need to understand their duties, and all charities should have a trustee induction (and regular refresher) programme in place to assist with this. For small charities, costs of training are always a particular concern. We can help with these training needs in an affordable way, as we provide regular Trustee Training (suitable for new trustees and also for trustees in need of a refresher) in London, Southampton and Oxford.

If your charity, whether registered or unregistered, requires more specific or detailed advice on governance, conflicts of interest or any other aspects of compliance with charity law, please contact Ben Brice.