Accounting and Finance in Voluntary Sector
Essay Preview: Accounting and Finance in Voluntary Sector
Report this essay
[pic 1][pic 2][pic 3]Public BenefitCharity is an organization that set up to provide help and raise money for those in need. According to the Charities Act 2006, charity means an organisation which is established for charitable purposes only and it is subject to the control of the high court (Legislation.gov.uk, 2016). In the law of England and Wales, the charitable purpose is the one that need to falls within one or more of the 13 descriptions of purposes that listed in the Charities Act, it is for the public benefit, while the Charities Act call it as ‘public benefit requirement’ (Gov.uk, 2013). Public benefit requirement has two aspects – benefit aspect and public aspect. To satisfy the benefit aspect, the purpose must be beneficial, as it’s a way that identifiable and able to prove by evidence which is necessary but not based on personal views. Therefore, it must be clear what the benefits to the public arise from carrying out a charity’s aims, and all the benefits must be related to the purpose. The benefits also must be balanced against any harm or detriment. Therefore, any harm or detriment that cause from the purpose (to people, property or the environment) is not allowed to overtake the benefit and it is based on the evidence but personal views. At the same time, to satisfy the public aspect, the purpose has to reward the public in general or an adequate section of the public and the beneficiaries must be appropriate to the aims (Leather and Hind, 2013). Where benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted by geographical or other restrictions. People in poverty must not be excluded from the opportunity to benefit. Moreover, the private benefits must be incidental and the purpose also not increases to more than the incidental personal benefit. Generally, for the purpose to be a charitable purpose, it has to satisfy both of the public aspects and benefit, while charities for the relief of poverty just have to satisfy the benefit aspect (Gov.uk, 2014). Simultaneously, trustee have the responsibility to run the charity in a way to develop its purposes for the public benefit, this means that the trustee need to make decision and confirm the purpose offers benefit as the charity’s purposes must be for the public benefit. Every charity also has to prove its purpose for the public benefit, it also known as public benefit test (User, 2016). Furthermore, the trustees need to identify the risks of harm and minimise it. They also have to know who can potentially benefit from the purpose and giving appropriate consideration to the comprehensive ways which could take along the charity’s purpose. Lastly, trustees also need to confirm that the personal benefits are not more than the incidental (Gov.uk, 2014). Charity is able to reclaim tax if the incomes have been deducted by tax, such as gift aid, since the charity can get certain tax reliefs, as the income or gains of the charity are used for charitable purposes, and it must be recognised by HMRC (Gov.uk, 2016). Charitable status is the most suitable juridical form for schools to operate with non-profit basis which focus on public benefit of the education they provide. The trustees of school must take action to assure that the school doesn’t just benefit those who pay full fees (Isc.co.uk, 2016). Most of the independent schools are charities and have charitable status, and they have to share their facilities and experiences in their schools to other local schools, some of the private schools have achieved but many of them are failing to share their facilities with those in state sector. Due to the Independent Schools Council take the government to court for a long battle, so the rules are stripping down in 2011. Therefore, the private schools have to show their facilities are used for charitable purposes and benefits to the local community now, just can get the 80% relief on rates (Hughes, 2015).

In conclusion, to be a charity in England and Wales, an organisation must have charitable aims that are for the public benefit. Under the Charities Act 2006, the charity must have at a least a purpose that is listed, and it must be public benefit. Furthermore, there is no presumption that any of the purposes listed in Charities Act pass the public benefit test.  Risk ManagementRisk is something that uncertain, therefore charity trustees have the responsibility to review, assess and manage the risks that faced by their charity. As the SORP (2005) stated that the trustee’s annual report should provide a statement to confirm the major risks which charity is exposed. The purpose of risk management is to determine the potential problems and safeguarding the assets of charity and make sure the charity is effectively fulfilling the objectives (Charities and risk management, 2010).  The recognition and management of risks is important in charity as the charity may face a lot of possible risks over the working life, and it’s a key part of effective to control for all sizes and complexity charities. Through the effective risk management, trustees can help to make sure the major risks are known, so the trustees can make right decisions and take timely action. Other than that, they also can ensure that the improvement of forward and strategic planning and the aims of charity are achieved successfully (Charities and risk management, 2010). Furthermore, there are some major risks may have major impact and a probable likelihood of happening such as government risk, operational risks, financial risks and more. Governance risk means that a charity lack of direction, forward planning and strategic which can harm the charity’s sustainability. It can manage easily through the performance of financial planning, strategic planning and continuing monitoring the operational and financial performance. Moreover, lack of appropriate trustee skills and oversight, loss of the main staff and trustee conflicts of interest are also part of government risks. Moreover, the majority of operational risks are internal risks and it is predictable. The risks probably will happened when lack of beneficiary or safety, poor in contract pricing, poor in staff training and recruitment and doubt about security of assets. Therefore, trustees have to evaluate the main risks areas together with policies, procedures and controls (Civil Society | Finance, 2016). Since, the trustees have to reduce the occurrence and likelihood, and then make sure that management actions are achieved and effective (Vincent, 2015). It can be avoided by prior research into planned major appeals and choosing another date. Next, financial risks are caused by poor in budgeting control and financial reporting, dependency on limited income and fraud. Since most of the charities are dependent on single source of income. No matter is it fundraising, allowance from a single trading or funder, any problem with this income source will have notable consequences for the sustainability of the charity. Other than that, financial risks also may cause by inaccurate financial information and inadequate investment management policies. Therefore, to mitigate the risks, trustees can evaluate the major dependencies achieving a sufficient reserves policy and thinking a diversification plan (Charities and Fundraising, 2016).

Get Your Essay

Cite this page

Charities Act And Risks Of Harm. (June 28, 2021). Retrieved from https://www.freeessays.education/charities-act-and-risks-of-harm-essay/