Case study: Charity begins at home for green group
Already established as a successful social enterprise, furniture recycling group Green-Works decided to apply for charitable status.
Green-Works had established itself over four years as a successful social enterprise, distributing revamped office furniture obtained from large companies and ministries to schools, start-ups and community groups at very low cost. Registered as a traditional company limited by guarantee, the organisation realised that it could benefit financially if it registered as a charity.
Applying for charitable status involved minimal paperwork and the Charity Commission approved the application within weeks. Because Green-Works already operated as a social enterprise, the only change necessary to its constitution was a slight amendment to the wording of its mission statement to include an explicit reference to public benefit.
Crooks describes the new structure of his organisation as a “trading charity, by which we mean that all of our trading activities are consistent with our status and so we don't need a separate trading arm.”
However, becoming a charity did entail a different approach to accounting and what Crooks calls “a bit more bureaucracy”. Finance manager Alan Giess, who had more than 10 years of experience in charity accounting, configured the existing accounting software to cater for the fund accounting and additional reporting requirements.
Registered charities must set up separate funds based on regulations, restrictions and limitations. As a result, Green-Works now places its income in various separately accountable funds - either restricted, designated or unrestricted. By law, each of these funds carries its own revenue, expense, income and balance-sheet report.
The organisation also had to take into consideration the reporting requirements set out in the Statement of Recommended Practice, or Sorp, issued by the Charity Commission. According to Crooks, this requires charities to “perform risk assessments, establish a policy for reserves and a number of other very sensible and wise processes. As we've grown we've recognised the needs to be more professional and these requirements fit well in this process.”
Charitable status has given Green-Works relief from business rates, which Crooks describes as a “huge benefit”. It has also meant the organisation is eligible for more funding streams. “And it makes it easier to make bids as our charity registration suggest that we are well regulated,” adds Crooks.
Indeed, the “credibility” of being a registered charity has benefited Green-Works “across the board”, according to Crooks. “Our major corporate clients are pleased as it boosts their claims to support charities,” he says. “It also makes it easier sometimes to negotiate deals as people don't want to be seen to be damaging a charity.”
One other benefit is empathy with client groups. "Our main customers are non-profits, charities and community groups," says Crooks. "Dual status has made us feel we can identify with them all the more."
"Much is said about the goal for charities of operating as self-sustaining businesses," says Julian Blake of law firm Bates, Wells
& Braithwaite, who advised Green-Works on its application for charitable status. Green-Works established itself as a successful example of such an enterprise before recognising that it could also benefit from charitable status. In fact, it's a model example of a charitable social enterprise, and similar organisations might benefit from an early consideration of the possibility of charitable registration."
Crooks concurs: “I would certainly recommend charity status as it is not too painful, saves money and adds credence,” he says. “That said it needs to be looked at very carefully as every organisation is different.”
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