Guidance on funding non-charities will inhibit vital capacity building

A coalition of sector bodies led by the Association of Charitable Foundations (ACF) have expressed serious concern that draft Charity Commission guidance on the funding of non-charities risks inhibiting vital capacity building of social purpose organisations.

In a joint consultation response, ACF, Charity Finance Group (CFG) and the National Council for Voluntary Organisations (NCVO) have outlined a number of issues, focusing on the Commission’s attempt to draw tight boundaries around how grants may be used to cover the running costs of organisations that are not charities.

As it stands, the guidance states that an organisation must not fund the ‘core costs (or overheads) of a non-charity.’ In this present form the guidance risks fettering the discretion of trustees in their ability to build the capacity of organisations that have a vital role to play in civil society such as social enterprises, start-ups and international NGOs.

The joint submission argues that it is both important and appropriate that funders are able to build the core capacity of such organisations so that they are resilient, able to respond flexibly to changing needs and have the ability bid for other funding streams to support their activity.

It warns that without trustees having discretion to offer flexible funding for ‘core’ essentials such as accommodation, ICT, salaries for leadership and the costs of growth and adaptation, many socially beneficial organisations would cease to exist, to the great detriment of their beneficiaries and the frustration of the charitable objectives of the UK based funder.

ACF Chief executive, David Emerson CBE said:

“Charitable funders are increasingly finding themselves working in pioneering ways to deliver public benefit, often in collaboration with other and emerging sectors which may include non-charities.

“Funding such organisations may not be the most frequent use of a charitable grant, but it is an important tool in supporting innovation in civil society.

“We call on the Commission to take on board our concerns and ensure that trustees are enabled and informed by the guidance rather than being inhibited in delivering the vital funding which organisations may otherwise be unable to access.” 

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