Can we work collaboratively for charitable and commercial gain?

Can we work collaboratively for charitable and commercial gain?

As we emerge from the pandemic, there has never been more pressure on the sector to do as much with the limited funds it has. Collaborating with other not-for-profit organisations with similar objectives feels safe and easy and the sector is good at it. This could be a joint venture, using a consortium for bids or subcontracting parts of a service or project. Such arrangements with a commercial entity may feel less comfortable, but there is merit in such collaborations, providing the circumstances are correct and the relationship is properly managed.

Working with a non-charitable organisation (“NCO”) may:

• Provide funding or contracts or give opportunity to contract out.
• Assist with fundraising – commercial participator arrangements e.g. lottery operators.
• Save money by providing and sharing resource.
• Provide an opportunity to split the risk, such that risk becomes acceptable.
• Provide a tax efficient and risk managed trading structure – forming a subsidiary/group.

Now is a timely reminder of the principles of the 2019 Charity Commission guidance “Guidance for charities with a connection to a non-charity - How to manage and review your charity’s connection to a non-charity” 

Some of the considerations in this guidance are more relevant now than they ever have been.

Recognise the risks

Arrangements with NCOs can help Charites manage risk. But a review of risk v’ benefits is key – for example an outsource (or any form) to a commercial entity may be cost effective, create opportunities and reduce operational risk, but to doubt increases reputational risk through effective loss of control.

Do not further non-charitable purposes

The objectives and purposes of a charity are always charitable and it exists only to deliver public benefit. The relationship with the NCO must provide public benefit, be within the charity’s objectives and any benefit to the NCO must be entirely incidental.

Operate independently

Charities can be set-up by non-charities such as corporate foundations. The charity must manage conflicts and policies to ensure that they are independent and are actively perceived to be independent from their connected organisations, e.g., Trustees make decisions around charitable activity and not the NCO.

Avoid personal benefit and address conflicts of interest

Trustees have a duty to act in the best interests of the charity and avoid actual or perceived conflicts or a duty to another person/body (including the charity’s own trading subsidiary).

Download issue four of our 'Revive, Refocus, Rebuild – The journey back to better' guide to find out more…

Would you like to know more?

If you have any queries regarding what we cover in our guide, please get in touch with your usual contact or email charities@azets.co.uk.