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Part 2: charities RELEVANT to papers f1, f5, f7, f8, p2, p3 and p5
The term ‘charity’ refers to the ¤ the advancement of the arts, activities. For example, Oxfam
Several papers in the ACCA Qualification may feature questions
these include Papers F1, F5, F7 and F8. At the Professional level
organisations
FORMATION, CONSTITUTION Objectives may change over may, of course, be inherently
expanded or varied over time, originally founded as Doctor the extent to which they can rely
provided the underlying purpose Barnado’s Homes, to provide for on continued support, as well
remains. For example, Oxfam orphans who could not rely on as problems of internal control.
was originally formed as the family support. For example, many charities
Oxford Committee for Famine The development of welfare staff their shops with the help of
Relief in 1942, and its original services after World War II and unpaid retired people, but there is
purpose was to relieve the the increasing willingness of some debate as to whether future
famine in Greece brought about families to adopt and foster generations of retired people will
by the Allied blockade. Oxfam children resulted in less be as willing to do this for nothing.
now provides famine relief on a reliance on the provision of As many charities have to
worldwide basis. residential homes for children contain operating expenses
The governing constitution of but greater reliance on other in order to ensure that their
a charity is normally set down support services. As a result, objectives can be met, it is
in its rules, which expand on the the Barnardos charity had to often difficult or impossible
purposes of the business. Quite change the way in which it looked for them to employ full-time or
often, the constitution dictates at maximising the welfare of part-time paid staff to replace
what the organisation cannot do, orphaned children. volunteer workers.
as well as what it can do. Local charities are dependent Risks also arise from the
Charities plan and control on the support of a more limited social environment, particularly
their activities with reference population and therefore have to in times of recession, when
to measures of effectiveness, consider whether their supporters members of the public may be
economy and efficiency. will continue to provide the finance less disposed to give to benefit
They often publish their necessary to operate continuously. others as their discretionary
performance outcomes in order For example, a local charity household income is reduced.
to convince the giving public supporting disabled sports could There is some evidence of
that the good causes that they be profoundly affected by the ‘charity fatigue’ in the UK. This
support ultimately benefit from development of facilities funded by arises when the public feel
charitable activities. central or local government. pressurised by so many different
Every charity is confronted competing charities that they feel
MANAGEMENT by distinctive strategic and ill disposed to give anything to
Most charities are managed by operational risks, of which the anyone at all.
a Council, made up entirely of Council must take account in
volunteers. These are broadly developing and implementing Robert Souster is examiner for
equivalent to non-executive its plans. International aid Paper F1
directors in limited companies. charities are vulnerable to
It is the responsibility of the country risk and currency Test how much of this article,
Council to chart the medium to risk, so plans have to take and Part 1 of the article
long-term strategy of the charity account of local conditions in published in the September 2009
and to ensure that objectives countries whose populations issue of Student Accountant, you
are met. they serve. Many such countries have understood on the next page
Answer 3 Answer 2 Answer 1
The council would wish to There are many motives for The measures that might be
ensure that: giving to charities. In relation to used include:
¤ the commercial value of charities that finance research ¤ income in donations and
the premises/business has into illnesses and diseases, changes in income over time
been assessed by a suitably such as cancer research, many ¤ income by source – personal
qualified valuer people give because they or donations, corporate
¤ an appropriate rent would be their families have been affected donations etc
included in the lease to ensure personally by the illnesses and ¤ responses to campaign
that income would be at least diseases. They may give to initiatives such as television
that received under existing similar charities such as Marie adverts, newspaper coupon
arrangements, and that Curie nurses (who provide help advertising, appeals relating
appropriate steps would have for those affected by cancer) in to specific crises, and
been taken to secure the order to give something back to collection envelopes
highest possible rent those who have supported them. ¤ cost containment measures,
¤ the lessee would sign a Some give to charities because such as management costs
covenant to be bound by the they have a deep‑seated belief and other operating expenses
rules of the charity, as well as in what the charity does. (this is a particularly important
any covenants applicable to the A good example of this is factor, as some charities are
title to the land Amnesty International. criticised if administration
¤ the property belonging to A purely financial motive for costs absorb a high proportion
the charity could not be used giving is to avail oneself of of income)
in any manner inconsistent tax breaks, as most charitable ¤ income from
with the aims and objectives of donations can be set against commercial activities
the charity tax liabilities. ¤ numbers of
¤ any conditions applicable Some give because they regard volunteers attracted
to the lease would it as an expectation of society, or ¤ changes in mortality and
be applicable to any because they follow the example sickness in areas where relief
subsequent sub-lease, or of family and friends. has been provided.
that sub‑letting would be Another motive for giving is
prohibited/restricted simply that it makes some people
¤ the tenant would be a fit and feel good, or raises their profile
proper person. with others.
council of XYZ Charity?
might be imposed by the governing
organisation. What conditions
premises and land to a specialist
outsource the operation of its club
they support ultimately benefit from charitable activities.
outcomes in order to convince the giving public that the good causes that
effectiveness, economy and efficiency. They often publish their performance
technical 03