Accusations of Gift Aid manipulation unfounded – but funders need to be vigilant, says Charity Commission
March 2011
Now that the Charity Commission has published its regulatory case report of on the Politics and Economics Trust (the Charity), there are lessons that funders need to learn about where grant funding goes
The problem here was that the charity funded a commercial organisation, The Taxpayers’ Alliance (the Alliance), which is not a charity with grants to carry out research specifically on its behalf. The Commission investigated the relationship between the Charity and the Alliance and, in particular, whether the Charity had been used as a vehicle to channel funds enhanced with Gift Aid back to the Alliance.
Back in December 2009, the Guardian ran a story: ‘Taxpayers' Alliance accused of using charitable arm to claim gift aid on donations from wealthy backers’
[i], which understandably caused the Commission some concern. Particularly damningly, it said:
“The Conservative-linked Taxpayers' Alliance, which campaigns against the misuse of public funds, has set up a charity under a different name which can secure subsidies from the taxman worth up to 40% on individuals' donations. In one example, Midlands businessmen said they channelled funds through the Politics and Economics Research Trust at the request of the Taxpayers' Alliance after they asked the campaign group to undertake research into policies which stood to damage their business interests. The arrangement allowed the Taxpayers' Alliance to benefit from Gift Aid on the donations, a spokesman for the donors said.”
While absolutely no evidence was found to support the allegation that the charity had been used to channel funds enhanced with Gift Aid through to the Alliance, there were some learning points for the wider sector on how grants are made and the risks to a charity’s reputation if ‘all or a majority of’ its grants all go to ‘one organisation’. The Commission makes the point that if trustees do this they must ‘be able to demonstrate…they have acted in the best interests of the charity.’
The other important point, particularly in a climate where joint working and partnerships are being encouraged, is that ‘charities may work with other charities and/or non-charitable organisations providing that doing so is in furtherance of their objects. This means trustees have to assess the risks of working with non-charitable organisations, in particular, and make notes of the decision making as they go along. In addition, they need to ‘be aware of the objectives and the purpose of the non-charitable organisation and whether association with the organisation could impact negatively on the charity’s independence or perceptions of its independence.
Sarah Clune a solicitor from Stone King told Caritas:
“Whilst the Commission’s investigation in this instance found no evidence that PERT had been used as a means to pass funds enhanced with gift aid to the Taxpayers Alliance, it nonetheless highlights that charities undertaking research projects or other work with non-charitable organisations must undertake a thorough risk assessment (including consideration of reputational risks) prior to entering into any agreement and clearly record the decision making process to ensure transparency. Charities should ensure appropriate dissemination of the results of any joint research and acknowledgment of the charity’s role. The report also highlights how important it is for corporate foundations set up by businesses, possibly as part of their CSR programme, to be able to show their absolute independence.”
The full report can be read
here.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from Cass Business School. She has been one of the judges for the non-profit category of the Chartered Institute of Marketing's Excellence in Marketing Awards for the second year running.
She has also acted as clerk to the trustees of a small almshouses charity and as a member nominated trustee to a pension scheme of a multinational publishing company.
Click here for other articles written by Clarissa Dann
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