Faith in Good Governance: Charity Commission 2009. A summary of the guidance paper.

This paper is a summary of the Charity Commission document Faith in Good Governance. It is intended to help faith based organisations decide if they need to register as a charity, and if so to point them to relevant background documents on the Charity Commission site. Page references relate to Faith in Good Governance:
http://www.charity-commission.gov.uk/Library/about_us/faithgov.pdf
 
Faith in Good Governance provides guidance on aspects of legal and good practice frameworks that will apply to faith based charities, recognising the importance and significance of the particular values from which faith based charities operate. It is aimed at charities whose primary purpose is religious worship and associated activities rather than social action. Basic principles will apply to both.
 
The phrase ‘excepted charities’ appears throughout the guidance and in this document. ‘Excepted charities: These are charities which do not need to register with us (Charity Commission) but in most other respects are fully within our jurisdiction. The normal registration threshold is a gross income of £5,000 per year, unless the charity is otherwise excepted by Order or Regulation or a registered place of worship.’ (p 5)
 
Faith based organisations which were once excepted by the Charity Commission may now need to register as a charity.
Registration brings advantages such as:
tax breaks, receiving gift aid, and the ability to apply for funding
free advice and information on governance and charity law
charity number indicating to partners and funders the organisation is  ‘fit for purpose’
The organisation’s purposes must all be charitable as defined by law, see Charity Commission documents regarding charitable purposes and public benefit:
http://www.charitycommission.gov.uk/Charity_requirements_guidance/Charity_essentials/Public_benefit/default.aspx (scroll down to the ‘purposes’ you want)
http://www.charitycommission.gov.uk/Library/guidance/publicbenefittext.pdf
 
Registration does not make you a charity, the activities and services you provide and the way in which you provide them make you a charity. ‘Being a charity is not a matter of option or of preference, but is a matter of law’ (p 6). Registration recognises this status.
 
An organisation has a duty to apply for registration if they have an annual income of £5,000 and are a company or have the majority of trustees living in England or Wales, or have its asset base in England or Wales. Local places of worship are excepted from registration but with limitations. Do not assume you are excepted or that all of your activities are excepted.
Exception does not include:
charitable funds held in connection with the place of worship
property held through specific trusts ie for maintenance and repair or minister’s stipend
places of worship with an annual income in excess of £5,000 (p8)
 
For excepted charities with an income of between £5,000 and £100,000 the exception rule where it applies has been extended to 2012. Remember this rule does not cover all the activities of a faith based organisation.
 
Some faith based organisations are members of a national charity and held through a branch structure. They have limited use of the national charity number ie if they are a project of the main charity. In most cases it would seem that branches would be classified as charities in their own right (p9).
In some cases the national organisation has produced a governing document that can be used by local groups wanting to register as a charity. This is helpful because it takes into account the particular faith values of the organisation (p11).
 
Trustees of a faith based charity will naturally comprise members of the faith group. However to reflect public benefit and charitable purposes the full trustee board should show a diversity wider that the faith group itself (p12).

Being a Trustee carries legal responsibilities, these and the roles of charitable trustees are clearly laid out in: http://www.charity-commission.gov.uk/library/guidance/cc3text.pdf
 
Care needs to be taken if a minster is also a trustee, for example most governing documents state a trustee cannot be paid. A minister will carry responsibilities greater than those of the charity and so conflict of interest may arise. These situations can be dealt with but need to be considered at the formation stage so difficulties and conflict can be avoided at a later stage (p16).
Trustees have a duty to ensure that new trustees are appointed with the appropriate checks and receive a full induction into their new role and the life of the charity (p19).
 
Charities are required by law to report to the Charity Commission each year. This is called the annual return. The level of reporting is determined by the income of the charity.
Reporting needs to evidence how the charity has met its purposes during the year, including the use of income, and how it intends to do so for the coming year.
The reporting process should also inform members, users and stakeholders of the work of the charity (p23).  Accounts need to be submitted for charities with an income in excess of £25,000. Accounts should be independently examined (in excess of £25,000) or audited (in excess of £50,000)
Accounts and reports must be presented in line with the Charity Commission Statement of Recommended Practice (SORP): http://www.charitycommission.gov.uk/Charity_requirements_guidance/Accounting_and_reporting/Preparing_charity_accounts/sorpfront.aspx templates are available on the commission website.
 
The rest of the document gives advice to trustees on the running of a faith based charity including the securing and use of finances, the management of the property and the activities of the organisation.
 
There is an excellent list of supporting organisations and advice.
 
Jane Winter