Keep it legal: Independence

The issue of independence in the charity sector has come to the fore recently in the light of the Charity Commission's report Stand and Deliver: The Future of Charities Providing Public Services.

The report, which was based on a survey of almost 4,000 charities, found that almost half the charities delivering public services admitted they could not agree with the statement "our activities are determined by our mission rather than by funding opportunities". And only 26 per cent of charities surveyed could agree that they are always free to make decisions without pressure to conform to the wishes of funders.

The commission recommends as best practice that organisations diversify their funding sources. Charities' missions and all of their activities must be within their objects - in other words, the purposes for which the charities have been set up - and should be independent of government and other funders. If charities are found not to be independent, they risk losing their charitable status. Trustees have ultimate responsibility for directing the affairs of their charities. In doing so, they should ensure that they are involved in all decisions concerning the activities their charities undertake. It is the trustees who face the consequences if a drift from charities' missions becomes a breach of trust. Charities' missions will change over time, and trustees should regularly review their charities' objects and missions to ensure that they remain appropriate.

It follows that the terms of any contracts made by charities must be in their own interests and contribute to achieving the charities' objects. Whether or not a contract is in the best interests of a charity is determined by the whole contract and not by specific clauses. If there is a choice between entering into a contract with some unfavourable terms and rejecting the contract, which means being unable to provide a service to beneficiaries, trustees will need to think about whether the contract will be in the best interests of the charity.

Charities should not feel obliged or compelled by their funders to deliver a particular service. It is for the trustees to decide what activities their charities should undertake, and decisions must be based on the interests of their charities and the needs of beneficiaries.

- Simon Leney is a partner at Cripps Harries Hall LLP

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