Why you shouldn’t set up a charity

by | May 21, 2021 | Emma Willder

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Most charities are set up with the best of intentions – often in memorial for a loved one, to support a need in the community, or because there’s a specific cause to champion. But what people don’t realise is just how much governance charities need to have in place, and the regulations they must legally abide by.

I’ve had a few clients knock on my door feeling completely overwhelmed at the task they now face. The problem is, at the point I’m asked to get involved, it typically takes a lot of work (and expense) to put it right. 

I hate to see good people reach breaking point. To want to set up a charity is an honourable thing, but I really want people to stop and think: is it the right route?

10 things you need to know before making a decision

  1. You need to form an effective board.
  2. If you set up as an unincorporated charity, your Trustees are personally liable should anything go wrong.
  3. If you set up as a charitablecompany, you must submit accounts to both Companies House and the Charity Commission.
  4. You will need to prepare a comprehensive annual report
  5. When your gross income hits £250k, you must switch to accruals-based accounts.
  6. As a charitable company, you must also prepare accruals-based accounts – regardless of your income.
  7. You will need adequate reserves, which isn’t necessarily 3-6 months operating costs.
  8. If your income exceeds £25k, your charity will require an independent examination.
  9. If your gross income exceeds £1m within the financial year, or it exceeds £250k and you have a balance of aggregated value of assets that exceeds £3.26m, your charity will require an audit.
  10. At a minimum, you will need the following policies in place:
    • Conflict of interest policy, including a Trustees Declaration of Interest form
    • Trustee eligibility declaration
    • Reserves policy
    • Data protection policy
    • Whistleblowing policy
    • Safeguarding policy

There are so many little things to consider that many people don’t realise when they first set up a charity. And without the right systems and processes in place from the beginning, it will become very difficult, very quickly.

To find out more about any of the above, please visit the FAQ section…

The alternative to setting up a charity

Imagine that you decide to set up a charity, but there are several similar smaller charities operating in the same area. From day-one you will compete for resources, and the available funds will be diluted, which is ultimately going to impact the service(s) the beneficiaries receive.

A different option is to work with an existing charity.

Look at the similar charities that are already operating and decide whether you could become a sponsor of that charity to help it achieve more:

  • If you have a specific purpose in mind, you may wish to make a donation but restrict its use. 
  • Help with fundraising so the charity can secure much-needed unrestricted funds.
  • Alternatively, you could volunteer your time/skills to support the charity in other ways. 

What if it’s too late and you’re already up and running?

If you’ve set up a charity and it’s perhaps not the commitment you were looking to make, it’s quite straightforward to merge/collaborate with other charities to help them further their aims. It’s a process that we’ve helped some of our clients through in the past. Or you might like to take a look at great guidance issued by the Charity Commission, which is specifically aimed at trustees and offers some really practical advice.

Take me to the Charity Commission guidance…

How can you best serve your beneficiaries?

It might sound a little harsh, but setting up a charity isn’t about you. It isn’t about a loved one. And it isn’t about doing what the Trustees want. Ultimately a charity exists to support its beneficiaries. 

So before you jump in with both feet, think about how to channel your enthusiasm so you can support them best – which could be donating your time, money or skills, merging or collaborating with an existing charity, or setting up a new one to meet an unfulfilled requirement.

I have sat on, and worked with, charity boards for several years – as well as volunteering as Treasurer of Bolton Cancer Voices and Howfen FC, and sit I as a Trustee of Wood Street Mission.

If you have any questions about the governance involved in setting up a charity, or would like to talk about the reality of running one, send me a message.

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