Collaborative working (CC34)
Guidance about working in collaboration with other charities.
Applies to England and Wales
Introduction
What is this guidance about?
This guidance is about collaborative working, which describes joint working by two or more charities on a project or venture in order to fulfil their purposes, whilst remaining as separate organisations.
The project or venture may relate to any aspect of the charities’ activity, including administration, resource sharing and streamlining of costs, service delivery and fundraising activity, or advertising and raising public profiles.
Sometimes a decision to work together can lead to the formal merger of two or more charities.
A merger of charities means two or more legally separate charities coming together to form one charity under one governing document and one body of trustees. It involves the transfer of assets and liabilities from charities to the charity they are merging with. Read the Commission’s guidance about mergers.
‘Must’ and ‘should’: what the Commission means
The word ‘must’ is used where there is a specific legal or regulatory requirement that you must comply with. ‘Should’ is used for minimum good practice guidance you should follow unless there’s a good reason not to.
Technical terms used in this guidance
Duty of care: all trustees have a duty of care towards their charity. For the trustees of unincorporated charities, the Trustee Act 2000 defines the level of care and the particular circumstances in which it must be used. This standard means that a trustee is expected to use their knowledge and experience reasonably and in the interests of the charity. If they do so, they are unlikely to breach charity law. Where a trustee has professional or business expertise then they are expected to make use of this in running the charity.
Although, strictly, this duty of care only applies in certain situations defined in the Act, legal precedent and good practice mean that the duty of care should be considered as applying to all aspects of trustees’ work.
Although the Act does not apply to charitable companies, the general principles of charity law mean that similar duties and principles apply to trustees who are directors as well.
Duty of prudence: trustees must:
- ensure that the charity is and will remain solvent
- use charitable funds and assets wisely, and only in furtherance of the charity’s purposes
- avoid undertaking activities that might place the charity’s funds, endowments or other assets, or reputation, at undue risk
- take special care when investing the funds of the charity, or borrowing funds for the charity to use
Governing document: means any document which sets out the charity’s purposes and, usually, how it is to be administered. It may be a trust deed, constitution, memorandum and articles of association, conveyance, will, Royal Charter, scheme of the Commission or other formal document.
Trustees means charity trustees: charity trustees are the people who serve on the governing body of a charity. They may be known as trustees, directors, board members, governors, or committee members or some other title. They are responsible for the general control and management of the administration of the charity.
Collaborative working
What does the term collaborative working cover?
The short answer
Collaborative working describes joint working by two or more charities in order to fulfil their purposes, whilst remaining as separate organisations. This may relate to any aspect of the charities’ activity, including administration, fundraising, raising public profiles, resource sharing and streamlining of costs and service delivery.
In more detail
Collaborative working can cover a wide range of activities. At the informal end of the spectrum it can include networking, sharing of information and membership of associations, groups or federations. While these examples of informal collaboration have an important role to play, this guidance focuses principally on more formal partnership projects and other collaborative ventures. Examples include:
- outsourcing functions such as finance, information systems support and payroll services
- sharing resources such as training or transport
- co-locating and sharing accommodation and premises
- working arrangements which increase access and participation and enable charities to develop diversity in their services
- formal partnerships between organisations in which resources are pooled to secure staff or services that none could afford on their own
- joint projects or programmes for aspects of service delivery or campaigning
What general points should be considered when thinking of working collaboratively?
The short answer (legal requirement)
Trustees must act prudently in the interests of their charity. In practice this means that the benefits of collaborative working should be clearly established at the outset.
Usually, collaborative working does not require the Commission to be involved as the arrangements are likely to fall within the trustees’ existing powers. However, depending on the nature of the collaboration, trustees may need to consider whether to take specialist professional advice.
In more detail
Before entering into a collaborative arrangement with another organisation, as good practice trustees are recommended to:
- satisfy themselves that there will be adequate benefits to their users and beneficiaries, which could include:
- cost benefits
- improvements to the quality of service
- the ability to reach more beneficiaries, thus ensuring improved access to the services the charity provides
- identify the key success factors for the collaboration, which could include:
- arrangements which value each party’s independence
- compatible activities and organisational structures
- a clear definition of, and accounting for, what each of the relevant charities is responsible and liable for
- agreements which are proportionate to the relative risks and complexity of the collaboration
- a termination clause in any formal contract
Whatever the size and complexity of the proposed arrangement, trustees should assess the risks involved to ensure that these have been sufficiently addressed.
What sort of legal issues might arise?
The short answer (legal requirement)
There are unlikely to be any legal barriers for charities working collaboratively, providing they are all furthering their charitable purposes. However, depending upon the nature of the collaboration, charities may need to draw up legal agreements or contracts that protect each charity’s interests. In all circumstances, trustees must comply with the provisions of their charity’s governing document.
In more detail
When considering a collaborative working proposal, the trustees should be able to show that:
- the collaboration furthers their charity’s purposes: as long as the charities can justify the collaboration as furthering their own purposes, there is scope for collaborative working.
- it is an appropriate use of charitable funds: resources used for the collaboration must be reasonable in relation to the extent to which the purposes are furthered
- any private benefit is incidental: private benefits are benefits that people or organisations may receive other than as a beneficiary. Where people or organisations benefit from a charity in this way, then those sorts of ‘private’ benefits must be incidental, which means they are a necessary result, or by-product, of carrying out the charity’s aims. For further information on this subject see Charitable purposes and public benefit
Trustees must properly exercise their duty of care. This means that they should thoroughly consider the possible risks involved in collaborative working. In particular, when considering using charity property or assets in a collaboration, trustees should properly assess the likely risks as well as the potential benefits. Where there is a question about the proposed use of, and likely risks to, any type of charity property (for example, giving a loan to a joint venture), charities should take their own independent professional advice.
In all collaborations charities should consider what would happen if one of the parties was suddenly unable to meet its obligations. It is important to consider whether the remaining party or parties would be able to continue in the working arrangement. Should anything go wrong, issues of liability can have wider implications for the charities involved, with repercussions for their assets and reputation. For these reasons it is important to have a clear formal agreement proportionate to the potential risks.
When does the Commission need to be involved?
The answer
Usually, there are no legal barriers to charities working collaboratively in furtherance of their purposes.
Usually, charities collaborate with other charities. However, charities will sometimes work with public and private sector partners. In all cases, trustees must be confident that the collaboration furthers their charity’s purposes, is an appropriate use of charitable funds and that any private benefit is incidental to the furtherance of the charity’s purposes. Read our guidance about working with organisations that are not charities. Take professional advice if you need it.
What types of structures are available for charities working collaboratively in a formal way?
The short answer
There is a variety of formal or informal structures that can be used.
Three common structures are:
- the ‘group structure’, a formal association of separate organisations
- the ‘affiliated or federal structure’ where a parent body offers support and strategic and central services to its members or affiliated bodies
- the ‘coalition structure’ where a group of charities works together for a common purpose
Some of the reasons for choosing one of these structures might include;
- the provision of a wider and better range of services for beneficiaries
- the creation of a well-known and trusted group ‘brand’
- financial savings
- increased purchasing power
- the advantage of working with similar organisations while retaining individual cultures and identities
In more detail
Group structures
Group structures are a distinct form of working together, enabling charities to fulfil common purposes over a wide area, or deliver a complex range of related services to their beneficiaries.
A group structure is a formal association of separate organisations. This could involve, for example, a parent charity setting up other charities and non-charitable subsidiaries.
Groups can take many forms and a range of terminology is used to describe the parties involved. However, a group structure is likely to have some or all of the following features:
- the group members act as a collective to deliver a range of services to beneficiaries
- the arrangement is formalised by a contract, service level agreement or memorandum of understanding
- the group will often include a parent organisation with one or more other charities and non-charitable subsidiaries
- the group may consist of organisations which are both charitable and non-charitable
- the group might consist of only incorporated organisations and, as such, be subject to the Companies Act
- all organisations within the group will have their own name and distinct purposes (although it is likely that these will be similar in some way)
- the group will produce consolidated accounts
Some charities will wish to undertake activities that fall outside of their core business. These activities may be specialist or involve some form or risk. Hiving them off to other charities or to non-charitable subsidiaries can enable the parent charity to support and promote those activities while treating them as separate businesses, so not putting the parent charity’s funds and assets at risk.
This situation can also be achieved by a charity becoming the parent body of other already existing charities.
Where charities are separate entities in the group structure, administrative linking (where this is legally possible) can enable the charities to share a registration number and produce one set of accounts. Linking is not a merger; the charities remain separate entities. See our guidance on How to link charities.
Affiliated or federal structures
In an affiliated or federal structure there is usually a national charity which has a formal relationship with local independent charities which are its members (or affiliates). Each local charity will have its own trustees who have responsibility for the general control and management of the local charity.
An example of how an affiliated or federal structure works
A national charity is set up to support and assist people with disabilities. Its members, who are also independent charities, also have purposes to support and assist people with disabilities but limited to a local geographical area.
The members of this affiliated structure are bound together by a common name, brand and purpose.
As a condition of membership the members of the group will usually be asked to use a standard governing document provided by the national body. In addition, the national body may exercise rights to:
- approve any member’s change of name
- approve any member’s change of purposes or area of benefit
- suspend membership for a proper reason
- approve the disposal of assets upon dissolution
The national body typically has an advisory and supportive function. In some cases, it can place conditions on how the member charities operate, in return for using the brand or name. Where the national charity is responsible for the general control and management of the local charities, that may mean the local bodies are not independent charities but merely branches of the main charity. In such a case there is only one charity and it is not an affiliated or federal structure. In this situation, whilst these local branches or committees have no discretion over policies to be adopted (except within limits agreed with the national trustee body) they do have the benefits of working under the umbrella of the national charity.
Coalition structures
For the purposes of this guidance only, the Commission is using the term ‘coalition structure’ to describe a structure that exists where a number of separate charities agree to work together for a common purpose, sometimes described as ‘a partnership of equals’. The agreement may be only a temporary collaboration with a certain aim in mind, or it could be established on a more formal basis with a new association being set up.
What types of formal collaborative arrangements are there?
The short answer (legal requirement)
Formal collaborative arrangements can vary in type. Examples are:
- contracts
- service level agreements
- memoranda of understanding
Trustees must ensure that they properly exercise their duty of prudence when drawing up collaborative agreements. Agreements should be sufficiently robust to protect each party’s interests and take account of the risks, but not so burdensome as to hold back innovation or incur unreasonable administration costs.
In more detail
Informal collaboration will usually be more appropriate where the collaboration involves low risk activities such as sharing knowledge, experience or best practice information. However, even for such informal collaborations the arrangements and procedures should be clearly set out in writing to avoid any confusion.
Formal arrangements, if they are drawn up carefully, enable charity trustees to better identify and manage risks including risks to the charity’s assets and reputation. Depending upon their trustee and staff skills and experience, charity trustees may need to seek specialist professional advice when entering into a formal collaborative working arrangement.
Collaboration may take the form of a joint venture which is operated through the vehicle of a separate company, set up to separate the collaborative working element from the continuing activities of each charity in the arrangement.
Where a formal arrangement is proposed, trustees should ensure that their charity can meet the terms of any contract they enter into throughout the period of its existence.
A key overall message is that it is important to set the ground rules but not to over-complicate the arrangements. It is also important that an agreement for terminating the arrangements is drawn up from the beginning in case circumstances change and the arrangement is no longer viable.