Military Charities – ‘Danger Close'?

As an active supporter of military charities, whose donations have been severely impeded by the pandemic, I genuinely hope the Treasury’s positive economic forecasts come to fruition and that we see funding levels return to pre pandemic levels. However, I fear that in the longer-term, charities face another significant and possibly reputationally damaging threat, one that is close to home, because it results from the growing proliferation of non-charity organisations entering the traditional charity space.??

The Charity Commission provide the following guidance - ‘Don’t assume that an organisation with similar purposes or activities to your charity is a charity’; wise counsel indeed. In my experience far too many people are making this fundamentally incorrect assumption, which is problematic and which should be a matter of concern for those with an interest in charities.???

Charities benefit from substantial concessions, not least in terms of taxation, to reflect the nature of the work that they do and how they obtain funds and patronage, but with that comes considerable legal obligation.??To ensure that funds and resources are deployed for Public Benefit*, avoiding the creation of Personal Benefit*, a stringent Governance & Reporting regime and a general prohibition on the remuneration of Directors/Trustees are but a few.

There is good reason for the existence of such obligations for charities, but for non-charity organisations, however altruistic, these legal requirements simply do not exist.??In respect of Community Interest Companies (“CIC’s”), of which there were 18,904 in March 2020, and may be incorporated with shares, owned and be ‘for profit’, the Charity Commission provides the following guidance to grant-giving charities - ‘Some organisations, for example community interest companies, are not charities, and you should follow this guidance if making grants to them. Although there are restrictions on how their assets can be used, these restrictions do not guarantee that their assets will only be used compatibly with your charity’s purposes’.??Consequently, and as you can read from published eligibility criteria, many charities will only fund other charities, or more infrequently, ‘not for profit’ non-charities.??Where some regulation of non-charities does apply, for example from the CIC Regulator, it is an extremely light touch when compared to the Charities Act.

This does not mean that the services of these non-charities are unwanted, far from it, as many have a valuable part to play, although some appear to simply treat military service leavers as a marketplace, and I have had the privilege to work with and promote a number. But after more than 20 years’ operating in private equity & equity capital markets I have gained some insight into both the technical and practical aspects of how organisations operate, and I can see what I am dealing with.??I understand corporate structure, the applicable governance, and the elected reasons for not being a charity and where self-imposed factors exist, their validity in enforcing a philanthropic motive.??However, many people, through no fault of their own, do not have this insight and as a result incorrectly and falsely believe the non-charities are charities.??The frequency with which this happens is concerning.

This matters for a variety of reasons.??If you intend to donate or have donated funds, your time or other free resources to an organisation believing that you have the assurance that they can only be used for the Public Benefit you intended, you might be concerned, or even alarmed, to subsequently find that this was not the case. Equally, and contrary to your understanding, you find that the officers of that entity have legally obtained an improper Personal Benefit*, which could simply be paying themselves, from your donation you may be left equally unhappy and disappointed.??Such an experience might leave you untrusting, unsure and may even prevent you from supporting good causes in the future and in those circumstances, it is charities generally that will lose out.

Where the public wrongly believe a non-charity is a charity, and that non-charity then goes on to behave in ways that demonstrate commercial attributes and practices that are inconsistent with the philanthropic motives, legal obligations and governance of a charity, even where the non-charity is legitimately undertaking its business activities, it is the reputation of charities as a whole that will likely suffer damage.?

So, what can we do?

·???????Where we expect or require the assurances that come from the legal obligations imposed by the Charities Act; engage with a charity.

·???????Where we want to ensure our donated funds, time or other resource are legally protected from a profit motive; engage with a charity.

?·???????Never assume, ask.??A charity will always be willing, and able, to prove that it is a charity.

·???????If we see someone making an incorrect assumption, step up and point out the error.

·???????Use our networks to promote, and protect, the virtues and benefits of the charity.

There are some fabulous non-charity organisations supporting the military and service leaver community, but to believe that they are legally obligated like charities is incorrect. To assume that they are charities is not only incorrect, but dangerous, and risks being reputationally damaging to charities, impacting on their ability to raise funds and most importantly provide their profit free services to the Armed Forces Community.??To those passionate about the probity of charities, please be alert to the issue and be prepared to act to protect them.

*See Charity Commission website for definitions