Running a charity is not exactly like running a business. However, there are certain similarities. In particular, running a charity is probably at least as complex as running a business of the same kind of size. There are almost certainly as many similarities between running large businesses and charities as between running a large charity and a small one.

However, there are also some important differences. There is, for a start, the charity’s social purpose—the fact that it exists to support or help people in need, rather than to make a profit. There is also the charity’s obligation to make good use of its money, because most of it is likely to come from donations. This section of Skills You Need explains some of the issues involved in running a charity and points you towards further information.

What is a Charity?

Broadly speaking, a charity is an organization that is set up to raise funds, or provide help and support, for people in need.

Governments and regulators may provide their own definitions, often more precise. For example, in England and Wales, the government defines a charity as an organisation that is established for charitable purposes and that is subject to charity law.

This definition is similar to that used in the US, where the Internal Revenue Service lists the possible ‘charitable purposes’. These include activities like “relief of the poor” and “advancement of education or science”. These are old-fashioned terms, but then charitable work and purposes have been around for a long time.

Charities are also generally required to be non-profit organisations. This means that they cannot make a profit for the benefit of those running them. Instead, all the money that they make must go back into the work of the charity, either to fund its services or operations.

Getting Started

There are many charities in the world. In fact, estimates suggest that there are nearly two million in the US, and possibly around 200,000 in the UK.

Why on earth would anyone want to set up another?

The answer might be because no charity does quite what you want to achieve, or in quite the way that you want to do it. It might be because you feel that you have unique skills, or because there is nothing suitable in your local area. Whatever the answer, around 5,000 new charities are established each year in the UK, so clearly there is considerable activity in this area.

Our page on Setting up a Charity provides more information about the broad definition of a charity. It also explains what you need to consider if you are thinking about setting up a charity, including defining the purpose, considering how the charity will be governed, and what it will be called.

Running a Charity: Aspects to Consider

Running a charity is a complex task, but the responsibility and accountability are clear.

The people with overall responsibility for the way that a charity is run are the trustees or directors.

Generally, charity regulators set out the required minimum number of trustees, although it is possible to have more. The trustees or directors are likely to meet formally as a board to make decisions about the charity. Their role is to make sure that the charity is able to meet its purposes and aims—basically that it does what it was set up to do.

Our page on Being a Trustee or Director explains the duties and responsibilities of charity trustees and directors. It also explains some principles that should govern how they work, including acting in the charity’s best interests.

There are many issues that trustees or directors must consider in running the charity. These include:

• Financial issues

  Financially, charities are like any other organisations in many ways. For example, they need to have sufficient funds to run their operations and meet their liabilities, such as paying rent or salaries. However, there are also some important differences.

  In particular, charities do not and cannot make a profit. Money raised must go to support the charity’s purposes. The trustees must also consider the sources of funds, because this may affect how they can be spent, and even whether they can be spent under particular circumstances. They must account for their funding sources and spending to the regulator and other stakeholders. Some legal processes may vary for charities, including insolvency proceedings.

  There is more about these issues in our page on Running a Charity: Financial Issues.

  One financial issue that is specific to charities is how they raise funds. Of course, businesses must consider this too—but generally their operations are designed to make money in some way. Charities, by contrast, are often designed to spend money by providing services and support to people in need. They therefore need a way to raise money to provide those services.

  This might be from several possible sources. These include grant applications, asking for donations, running events and selling goods or services. Charities also need to decide who will carry out their fundraising operations, including professional fundraising companies, employed staff, or volunteers.

  There is more about this in our pages on Running a Charity: Fundraising and Running a Charity: Methods of Fundraising.

• Governance issues

  Governance means the way that an organisation is run at the highest levels to ensure that it delivers its objectives. It includes the systems that are put in place to do so.

  Governance is not necessarily more important in a charity than in any other organisation, but it is certainly equally important. The UK membership organisation for charities, the National Council for Voluntary Organisations, says that there are four key aspects of governance in a charity: direction, effectiveness, supervision, and accountability. The charity’s trustees or directors are responsible for putting in place systems to ensure that they can deliver these four.

  Our page on Running a Charity: Governance Issues explains more about how trustees can go about this work.

• Ethical issues

  Charities are generally considered to be ‘good’ organisations. They are set up to provide help and support for those in need. This means that we perhaps tend to hold charities to higher standards than other organisations—and some would say that this is entirely appropriate. However, not all those involved in providing services or working for the charity will be motivated purely by the desire to help others.

  This has the potential to raise some ethical issues related to the charity’s delivery of services and more general activities—and indeed this has been seen in practice in the past.

  Charity trustees or directors are responsible for ensuring that—as far as possible—safeguards and frameworks are put in place to ensure that the charity works ethically.

  The National Council for Voluntary Organisations, a membership organisation for voluntary bodies in the UK has set out four principles for charities. These principles—beneficiaries first, integrity, openness and right to be safe—provide a foundation for ethical working in charities.

  Our page on Running a Charity – Ethical Issues explains more about these principles and other ethical issues.

• Operational issues

  Charity trustees and directors will need to make strategic and tactical choices about how the charity achieves its purposes.

  For example, the trustees are responsible for deciding whether the charity should work closely with other organisations, which may be either other charities or non-charitable operations. Charities might choose to work with another charity, for example, to share office resources, or provide joint training to their employees or volunteers. They might also work with other organisations such as professional fundraising organisations, grant-making bodies, or service providers. These relationships must all be managed in such a way that they do not pose a risk to the charity, including to its reputation.

  There is more about this in our page on Running a Charity: Working with Other Organisations.

  One decision that may need to be taken from time to time is whether to get involved in campaigning or political activity. Many charities campaign, and within that, some carry out political activity such as attempting to influence government policy. For this to be legitimate, the trustees must consider that campaigning will further the charity’s purposes, and also be in its best interests.

  There is more about this in our page on Charities and Campaigning.

Closing a Charity

Around 5,000 new charities are registered each year in the UK. However, similar numbers are also deregistered.

An important function of charity trustees is therefore understanding when this might be necessary, and what to do. Charities may be deregistered for several reasons. For example:

• A charity may merge with another, and a new charity be set up;

• A charity may take on a new organisational form, and require formal deregistration, even though the new organisation will do fundamentally the same thing; or

• The charity may be finding it hard to raise sufficient funding to continue to operate; or

• The charity may no longer be needed, and it may therefore stop operating.

There are certain actions required to deregister and close down a charity. These may vary depending on the reason for deregistration.

Our page on Closing a Charity explains more about this.

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A Final Thought

Helping to run a charity may be hard, but it is also a way to do some good in the world.

Charity trustees and other people involved in running a charity can feel that they have genuinely made a difference, through the decisions that they have made about how the charity should work. It may be hard, but it is undoubtedly rewarding.

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