GUIDANCE ON GOVERNMENT FUNDING RULES

Added 12/9/03. This information adds to s.44.3 in The Voluntary Sector Legal Handbook 2nd edition.
The Treasury published on 8 September 2003 Guidance to Funders, which is intended to make it easier for funders of voluntary and community organisations to understand the implications of government accounting rules. The guidance clarifies government accounting rules on the timing of payments by funders to voluntary and community organisations, and explains the opportunities for moving to more stable funding relationships between funders and VCOs. The guidance is at
www.hm-treasury.gov.uk/spending_review/spend_ccr/spend_ccr_guidance.cfm.

SUCCESSFUL CHALLENGE TO LOCAL AUTHORITY DECISION-MAKING

Added 11/10/04. This information adds to s.44.3.1 in The Voluntary Sector Legal Handbook 2nd edition.
Six organisations in Leicester successfully challenged Leicester City Council's failure to provide adequate information and consultation before cutting their funding in March 2004. The Council's decision to withdraw funding was quashed in the High Court on 15 September 2004, on the basis that the organisations had not been told the criteria the Council would use to make their decision, so they could not put forward an effective case for keeping their funding. The judge made clear that the process was flawed--but not necessarily the decision itself. A new decision-making process had to take place in relation to those six organisations. The Court ruling did not apply to 24 other organisations which had their funding cut at the same time, and because the rules relating to judicial review prevent the same issues being challenged a second time, those organisations were not able to bring a case against the Council.

The High Court judgment is at www.bailii.org/ew/cases/EWHC/Admin/2004/2124.html.

CLAWBACK ON PUBLICLY FUNDED ASSETS

Added 22/8/05. This updates ss.44.3.1 and 55.5 in The Voluntary Sector Legal Handbook 2nd edition.
In the past, public sector funding has often included a requirement that if the organisation earns income as a result of a grant or contract, the income has to be repaid to the public body. There is also often a requirement that if public sector funding has been used to help purchase or refurbish a building, the organisation cannot use the building as collateral for further loans and has to repay the proceeds if the building is sold. The Treasury announced in February 2005 that these clawback rules will eased significantly. It will be possible for assets to be used as collateral, and the public body can allow the organisation can keep income generated through a grant or contract or from the sale of an asset, provided the income will be used to achieve the same general outcomes as originally agreed.

Information is available from the Development Trusts Association www.dta.org.uk and Community Matters www.communitymatters.org.uk.

CHECKING AND REFUSING DONATIONS

Added 2/1/06. This information updates ss.44.3.2 and 49.2 in The Voluntary Sector Legal Handbook 2nd edition.
Governing body members could be prosecuted under the Proceeds of Crime Act 2002 or other money laundering regulations if their organisation accepts a donation or loan which turns out to be the proceeds of a crime, and the governing body member or members knew or suspected that the funds represented the proceeds of crime.

The Charity Commission has made clear that the mere fact that someone is proposing to donate a large amount to the charity is not in itself grounds for suspicion. However its guidance on charities and terrorism states that unsolicited donations could be suspicious, especially if trustees are unable to satisfy themselves about the credentials of the people involved or the propriety of the donation or loan. The guidance states:

• If offered large donations from persons unknown to the trustees, the trustees may wish to make further enquiries before accepting the donation, and may refuse a donation if satisfactory replies to enquiries are not received.
• Donations conditional upon particular individuals or organisations being used to do work for the charity may be refused.
• Offers of donations in cash, for a certain period of time, the charity to receive the interest, but the principal to be returned to the donor at the end of the specified period, may be refused.
• Donations in foreign currencies, with the provision as above, but the principal to be returned to the donor in the form of a sterling cheque, should be refused.

Charities Act 2006: Not yet in effect
PROFESSSIONAL FUNDRAISERS, COMMERCIAL PARTICIPATORS AND OTHERS RAISING FUNDS

Updated 5/12/06. This information updates s.44.5 in The Voluntary Sector Legal Handbook 2nd edition.
When the relevant provisions come into effect (expected second half of 2007), professional fundraisers will have to state the amount of remuneration they are receiving in connection with an appeal, and how the remuneration is decided. If that amount is not known at the time of the appeal, they will have to give as accurate an estimate as possible. At present, professional fundraisers only have to state in general terms the method by which their remuneration is determined.

Commercial participators will have to state the amount (or estimate, if the amount is not known at the time) from their charitable promotion that will be given to charities or used for charitable purposes.

Rules similar to those for professional fundraisers are being extended, and will include officers, employees and trustees of charitable institutions or companies connected with charitable institutions. If such individuals are acting in that capacity as a collector for a public collection, and are remunerated either in their role as officer, employee or trustee or as a collector, they must disclose certain information, including the fact that they are receiving remuneration. There is an exception for people in this category who receive less than £5 per day, £500 per year or £500 for a specific collection.

These provisions are in ss.67-68 of the Charities Act 2006, which amend s.60 & add new ss.60A-60B to the Charities Act 1992. For links to the 2006 Act and guidance, see The Charities Act 2006. The Charities Act 1992 is at www.opsi.gov.uk/acts/acts1992/Ukpga_19920041_en_1.htm.