SANDY ADIRONDACK
Legal and governance training and consultancy
for the voluntary sector
OTHER CHAPTERS
I. THE ORGANISATION

Ch.1: Setting up an organisation
Ch.2: Unincorporated organisations
Ch.3: Incorporated organisations
Ch.4: Charitable status, charity law & regulation
Ch.5: The organisation's objects
Ch.6: The organisation's name
Ch.7: The governing document
Ch.8: Registering as a charity
Ch.9: Branches, subsidiaries & group structures
Ch.10: Changing legal form
Ch.11: Collaborative working, partnerships and mergers
II. GOVERNANCE
Ch.12: Members of the organisation
Ch.13: Members of the governing body
Ch.14: Officers, committees & sub-committees
Ch.15: Duties & powers of the governing body
Ch.16: Restrictions on payments & benefits
Ch.17: The registered office & other premises
Ch.18: Communication & paperwork
Ch.19: Meetings, resolutions & decision making
Ch.20: Assets & agency
Ch.21: Contracts & contract law
Ch.22: Risk & liability
Ch.23: Insurance
Ch.24: Financial difficulties & winding up
III. EMPLOYEES, WORKERS, VOLUNTEERS & OTHER STAFF
Ch.25: Employees & other workers
Ch.26: Rights, duties & the contract of employment
Ch.27: Model contract of employment
Ch.28: Equal opportunities in employment
Ch.29: Taking on new employees
Ch.30: Pay & pensions
Ch.31: Working time, time off & leave
Ch.32: Rights of parents & carers
Ch.33: Disciplinary matters, grievances & whistleblowing
Ch.34: Termination of employment
Ch.35: Redundancy
Ch.36: Employer-employee relations
Ch.37: Employment claims & settlement
Ch.38: Self employed & other contractors
Ch.39: Volunteers
IV. SERVICES & ACTIVITIES
Ch.40: Health & safety
Ch.41: Safeguarding children & vulnerable adults
Ch.42: Equal opportunities: goods, services & facilities
Ch.43: Data protection & use of information
Ch.44: Intellectual property
Ch.45: Publications, publicity & the internet
Ch.46: Campaigning & political activities
Ch.47: Public events, entertainment & licensing
V. FUNDING & FUNDRAISING
Ch.49: Fundraising activities
Ch.50: Tax-effective giving
Ch.51: Trading & social enterprise
Ch.52: Contracts & service agreements
VI. FINANCE
Ch.53: Financial procedures & security
Ch.54: Annual accounts, reports & returns
Ch.55: Auditors & independent examiners
Ch.56: Corporation tax, income tax & capital gains tax
Ch.57: Value added tax
Ch.58: Investment & reserves
Ch.59: Borrowing
VII. PROPERTY
Ch.60: Land ownership & tenure
Ch.61: Acquiring & disposing of property
Ch.62: Business leases
Ch.63: Property management & the environment
VIII. BACKGROUND TO THE LAW
Ch.64: How the law works
Ch.65: Dispute resolution & litigation
UPDATED INFORMATION FOR CHAPTER 48:
THE RUSSELL-COOKE
VOLUNTARY SECTOR LEGAL HANDBOOK

This page contains information that has appeared on Sandy Adirondack's legal update website for voluntary organisations at www.sandy-a.co.uk/legal.htm. For current updates, including potential changes that are in the pipeline, see the legal update website.

These websites for each chapter update the 3rd edition of The Russell-Cooke Voluntary Sector Legal Handbook by James Sinclair Taylor and the Charity Team at Russell-Cooke Solicitors, edited by Sandy Adirondack (Directory of Social Change, 2009). The websites are not intended as a comprehensive update and should not be treated as such.

To order a copy of The Russell-Cooke Voluntary Sector Legal Handbook, print out the order form at www.sandy-a.co.uk/bookserv.htm or send an email order by clicking . It costs £60 for voluntary organisations or £90 for others, plus 10% p&p.

To avoid spamming, an email address is not given on screen. If you can't see the word 'here' or have trouble sending an email by clicking on it, the address is bookservice at sandy-a.co.uk, with the spaces and 'at' replaced by the @ symbol.

The information here covers the law applicable to England and Wales. It may not apply in Northern Ireland and/or Scotland. These news items are not a full or definitive statement of the law and are not intended as a substitute for professional legal advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be taken by the author.


Chapter 48
FUNDING AND FUNDRAISING: GENERAL RULES


The items below formerly appeared on the legal update website for voluntary organisations and are archived here. The content may be out of date and links may not work. For current updates to the chapter, see the legal update website for voluntary organisations at www.sandy-a.co.uk/finance.htm.


HODGSON RECOMMENDATIONS ON SELF-REGULATION OF FUNDRAISING

Updated 18/8/13. This information updates s.48.1 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
In his review of the Charities Act presented to Parliament on 16 July 2012, Lord Hodgson made the following recommendations in relation to self-regulation of fundraising, and the government commented on some of them in its interim response on 3 November 2013. The government's full response will include consideration of the Public Administration Select Committee's report on its inquiry into the Charities Act 2006 and the regulation of charities, which was published on 6 June 2013.

  • The Fundraising Standards Board (FRSB) and sector umbrella bodies, assisted by the Cabinet Office and Charity Commission, need to address the confused self-regulatory landscape, and agree a division of responsibilities which provides clarity and simplicity to the public, and removes duplication. This is a key challenge for the sector, which within six months of the acceptance of this recommendation should work up and agree firm proposals to deliver the next stage of a sector-funded, public-facing, central self-regulatory body covering all aspects of fundraising. [Chapter 8 recommendation i)1]
    Sandy's comment: This recommendation is about clarifying the roles and remits of the FRSB, Institute of Fundraising and Public Fundraising Regulatory Association (PFRA).

  • The Charity Commission should do more to support self-regulation — for example including the FRSB tick logo on member charities' public register pages, asking at registration whether organisations are members of the FRSB, promoting the FRSB in communications to charities, and publicising for the public the FRSB as the complaints handler in relation to fundraising. [Chapter 8 recommendation i)2]

  • The FRSB tick logo and branding should be retained. Members of the self-regulatory scheme must use the tick logo on fundraising materials — there should be a "comply or explain" approach to this. Sector umbrella bodies also need to do much more to support and promote the FRSB and self-regulation among their membership. [Chapter 8 recommendation i)3]

  • Government, the regulator, umbrella bodies and the FRSB should work together on levers that would promote membership of the FRSB. For example: explore the potential for waivers from certain regulatory requirements on the grounds that FRSB members are following best practice and are properly self-regulated; encourage grant funders to consider membership of the FRSB as a sign the organisation is committed to best practice and good complaints handling, and include it in their risk indicators or funding criteria. [Chapter 8 recommendation i)4]

  • More should be done to promote the rulings of the FRSB in relation to both members and non-members. Where members persistently fail to meet the standards they should be ejected from the scheme. Where non-members persistently follow poor or illegal practices, the FRSB should develop formal referral mechanisms to the relevant statutory regulators or enforcement agencies including a commitment to take action on such referrals. [Chapter 8 recommendation i)5]

  • As it grows, the FRSB should audit its members' compliance, moving away from a system that relies on self-certification. New members should be given a transitional or probationary period during which they can develop their compliance with the codes, but could have complaints judged solely against the fundraising promise. Likewise the FRSB should consider how to regulate fundraising by small (£25,000) member charities, who may struggle to meet all aspects of the IoF's codes. Instead, small charities should have their complaints assessed only against the fundraising promise. [Chapter 8 recommendation i)6]

  • Membership of the FRSB should not be compulsory at this stage — neither the sector nor the FRSB would be ready for such a significant shift. Instead, there should be an initial "expectation" that all fundraising charities with an income over 1 million ("large" charities) should be members of the FRSB. Over time this expectation should expand to capture more charities. [Chapter 8 recommendation i)7]

  • The government should review the progress of the FRSB in another five years' time to determine whether it has made the step change required in terms of coverage, and public awareness. The reserve power for Government to regulate or require membership of the self-regulatory scheme should remain a serious option if self-regulation stalls or fails to make sufficient progress. [Chapter 8 recommendation i)8]. The Public Administration Select Committee supported this recommendation..

  • A standing committee should be formed to drive forward these changes and monitor progress. Initially this should be chaired by the Cabinet Office and its core membership should include the Charity Commission, FRSB, and Institute of Fundraising. Wider membership should be brought in for public charitable collections. [Chapter 8 recommendation iii)1]
Lord Hodgson's report and recommendations can be accessed on the Cabinet Office website via tinyurl.com/c2azftb. The government's interim response is on the Cabinet Office website via tinyurl.com/poqqqr6.

HODGSON RECOMMENDATIONS ON CY PRÈS USE OF RESTRICTED FUNDS AND PROPERTY

Added 21/8/12. This information updates s.48.2.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
If funds (including property of any type) raised for a charity or for charitable purposes cannot be used as originally intended, because too much or too little was received by the charity or because the purpose is no longer necessary or realistic, the original appeal, donation or purpose is said to have failed. Unless donors or funders give consent for an alternative use, the Charity Commission has to authorise alternative use through a cy près scheme. Cy près means for another purpose close to the original.

In his review of the Charities Act presented to Parliament on 16 July 2012, Lord Hodgson made the following recommendations in relation to cy près, and the government commented on some of them in its interim response on 3 November 2013. The government's full response will include consideration of the Public Administration Select Committee's report on its inquiry into the Charities Act 2006 and the regulation of charities, which was published on 6 June 2013.

  • Charities themselves should be able to apply property cy près in most cases without the need for Charity Commission approval. [Appendix A recommendation 3]

  • Proceeds of a failed appeal should be applied for the charity's general purposes unless the donor expressly requests otherwise or, where the appeal is not for a specific charity, proceeds should be applied cy près. [Appendix A recommendation 4]
    Sandy's comment: These proposals could make it too easy for charities to override a donor's intentions, and could deter donors from giving to a particular appeal if they fear their donations could end up being used for something else.
Lord Hodgson's report and recommendations can be accessed on the Cabinet Office website via tinyurl.com/c2azftb. The government's interim response is on the Cabinet Office website via tinyurl.com/poqqqr6.

WHO OWNS GOODS LEFT OUTSIDE A CHARITY SHOP?

Added 21/11/10. This information adds to s.48.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
Most charity shops discourage goods being left outside the shop. But if goods are left, do they belong to the donor or to the shop, or have they been abandoned?

This was considered in the high court in July 2010, in an application for judicial review by a man who had taken goods left in front of a British Heart Foundation (BHF) shop, as well as goods from bins at the back of an Oxfam shop, with the intention of selling them at a boot fair.

Theft involves dishonestly taking property belonging to someone else with the intention of permanently depriving that person of it. Under the Theft Act 1968, property belongs to a person if they have possession or control of it, or have a proprietary right or interest in it.

The high court found that although it was possible to infer that the goods would in due course belong to BHF, they did not belong to BHF at the time of the theft. But neither had they been abandoned, because it could be inferred that the donor had intended to give them to BHF, and delivery would be complete only when BHF took possession of them. So although the donor no longer possessed the items, he or she had not abandoned the items and still owned them.

In relation to goods taken from bins behind the Oxfam shop, the judge said that if the bins belonged to Oxfam — which was not disputed — it could be inferred either that a donor had put the goods in Oxfam's bins for Oxfam to receive [seems to me a weird place to leave donated goods], or that Oxfam had received the goods and put them in the bins for disposal. In either case, Oxfam was in possession of the goods at the time they had been taken.

The application for judicial review was dismissed.

The decision in Rickets v Basildon Magistrates' Court is at www.bailii.org/ew/cases/EWHC/Admin/2010/2358.html.

For summaries and articles about cases, do a Google search on key words in the case name or content.


THE COMPACT: REFRESHED, REVIEWED, REDUCED, RENEWED...

Updated 20/11/10. This information updates s.48.4.1 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
Originally published in 1998, the Compact (full title The Compact on relations between government and the third sector in England) and its five codes, totalling 160 pages, were cut to 22 pages and re-issued by the Commission for the Compact in December 2009 as a "refreshed" Compact.

Following the change of government the refreshed Compact was reviewed by Compact Voice and the Office for Civil Society, and re-issued as a draft "renewed" Compact on 20 September 2010. Following a consultation until 29 October, the final renewed version is expected to be published in November.

The refreshed Compact's 95 key principles have been reduced to 37 in the renewed version — including the loss of commitments to protect small organisations, support voluntary sector infrastructure, and build the Compact into sub-contracting and European funding arrangements; and lack of clear links to local Compacts. A clear framework for implementation and accountability is also lacking — not least because the OCS and Compact Voice did not issue the draft accountability mechanisms before the end of the consultation period, and still haven't, three weeks later.

On the positive side the draft renewed version retains the government's commitment to retain free criminal record checks and Independent Safeguarding Authority registration for volunteers, provide three-year finding for voluntary organisations (now all referred to as civil society organisations), give three months' notice when changing or ending a funding agreement, and consult for 12 weeks on issues affecting the sector.

Compact Voice's key points from the consultation can be accessed via tinyurl.com/2g8cwey.

Compact Voice (www.compactvoice.org.uk) represents the voluntary sector in discussions with the government and the Commission. Compact Advocacy (www.ncvo-vol.org.uk/compactadvocacy) takes up cases for individual organisations where a public sector body is not complying with Compact principles.

Go back to contents
Go to archived items about fundraising (VSLH3 chapter 49)


GUIDANCE ON STATE AID

Added 11/7/10. This information updates s.48.4.2 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
EU rules on state aid are intended to prevent preferential public sector support which could distort competition within the EU. Some grants, subsidies or preferential loans from public sector bodies could fall within the rules, as could asset transfers at below market price. There are, however, exemptions which allow such support to be provided to voluntary sector and other organisations, and even where support is not exempt, the public sector body can apply for consent from the European Commission.

Getting it wrong can be costly. If a public sector body provides state aid which is not allowed, the body can at any time in the next 10 years be required to recover it from the recipient, along with interest at a punitive rate. Such recovery cannot take account of the effect on the recipient.

The Department for Business, Innovation and Skills (BIS) published in June 2010 an 8-page beginner's guide to state aid, providing an explanation of state aid, how it can be provided legally, and what happens if it is provided when it is not allowed.

State aid: A beginner's guide can be accessed via tinyurl.com/2wm3vhn.


DEALING WITH CUTS IN PUBLIC SECTOR FUNDING

Updated 20/11/10. This information updates s.48.4.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
Empowering the Voluntary Sector — a joint project of the Public Law Project, the National Council for Voluntary Organisations and the National Association for Voluntary and Community Action — published a special edition of its newsletter on 8 July 2010, called Cuts: To challenge or not to challenge. It gives advice on how the Compact, public law and equalities duties can be used when challenging cuts.

The newsletter emphasises that every situation is different and that quick action is essential because any legal challenge must be raised within three months after the decision was made. Advice on specific situations is available from the EVS advice line on 020 7520 3161 or evsadvice@ncvo-vol.org.uk,

Several organisations have websites devoted specifically to cuts and their impact, including:


CHALLENGING PUBLIC SECTOR CONTRACTS

Added 11/7/10. This information updates s.48.4.3 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
Since 20 December 2009, the EU Remedies Directive (2007/66/EC) has given bidders for public sector contracts new rights to challenge decisions. The procuring body must now issue an "award-decision notice" to all bidders when it notifies them of its decision, rather than issuing such a notice if an unsuccessful bidder requested it as in the past. The notice must set out the award criteria, the reasons for the decision, and the score of the winner and bidder. The contract cannot come into effect during the standstill period (15 days after the award-decision notices are issued).

In addition a new legal remedy means that if a bidder challenges a decision within the tight time limits (generally three months after the award notice is sent), a procuring body which did not publish an OJEU notice as required or observe the standstill period can be stopped from entering into the contract, or can be required to pay damages to a bidder who has suffered. If the contract has already started the court can declare it ineffective and require future obligations not to be performed.

The standstill period does not generally apply to "part B" services such as health care and education, but the remedies apply to these services.

A straightforward explanation of the new rules is on page 16 in the Bates Wells & Braithwaite Public & regulatory law update winter 2009/10, available via tinyurl.com/2cjdwz2.


HODGSON RECOMMENDATIONS ON PROFESSIONAL FUNDRAISERS AND COMMERCIAL PARTICIPATION

Added 21/8/12. This information updates s.48.6 in The Russell-Cooke Voluntary Sector Legal Handbook (VSLH3).
In his review of the Charities Act presented to Parliament on 16 July 2012, Lord Hodgson made the following recommendations in relation to professional fundraisers and commercial participation, and the government commented on some of them in its interim response on 3 November 2013. The government's full response will include consideration of the Public Administration Select Committee's report on its inquiry into the Charities Act 2006 and the regulation of charities, which was published on 6 June 2013.

  • The government should work with the Institute of Fundraising, FRSB and other specialists to produce simple guidance on solicitation statements for professional fundraisers and commercial participators. [Chapter 8 recommendation i)9]

  • The definition of professional fundraiser currently refers to a person who "for reward" solicits money or other property, which may not be readily understood. Elsewhere in the statute and related regulations, reference is made to "remuneration or expenses". It is not clear, therefore, whether "reward" in the definition of professional fundraiser is intended to include both remuneration and expenses or, as the term reward would suggest, remuneration only. This is a small point that could be addressed by defining "reward" in guidance. [Appendix A recommendation 24]

  • If a fundraiser does not receive more than £10 per day or £1000 per year, they are categorised as a "low paid collector" and exempted from the definition of professional fundraiser. There is an anomaly in the current law to the effect that, if a person is paid less than £10 per day but more than £1000 per year, it appears they still fall within the low paid collector exception (although this is likely to catch few people). This should be tidied up and the thresholds for this exception could also be reviewed. [Appendix A recommendation 35]

  • There is the very minor point that, in commercial participator statements to comply with s.60, "donations" should be replaced with "payments". Often some or all of the money paid by the commercial participator is paid to the charity's trading subsidiary, in which case the sums paid are more correctly described as "payments". [Appendix A recommendation 36]

  • Regulation 6 of the Charitable Institutions (Fund-raising) Regulations should be amended to make it clear that references there to payment to the charitable institution include payment to a connected company of the charitable institution where this is agreed with that institution. This reflects the reality that many charities prefer to have sums arising from, in particular, commercial participation arrangements to be paid to the charity's trading company. [Appendix A recommendation 37]
Lord Hodgson's report and recommendations can be accessed on the Cabinet Office website via tinyurl.com/c2azftb. The government's interim response is on the Cabinet Office website via tinyurl.com/poqqqr6.


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