Charity Profits

Question

The Council is a sole trustee of a charitable trust.  The trust is making a profit.  Can those profits be used to boost the Council's financial reserves, or do the profits need to be banked into a separate trust account?  I think the answer is that the trust is a separate legal entity and any profits must be used to further the aims and objectives of the trust, i.e. must not be used to bolster the Council's finances.

Must we have an independent audit of the Trust's accounts i.e. separate from the audit of the Council?  What role should the Council's external auditor play? What role does the Charity Commission play?

What happens if the correct process isn't followed?  Who should intervene?

Sorry about the multiple questions but I thought better to include all the related aspects.

Answer 1

The charitable trust must comply with its governing document and charity law. It cannot support the Parish Council's finances, as the money belongs to the trust and not the Council. It must be kept seperate from the Council's finances and will need to have its accounts examined/audited in accordance with the Charity Commission's requirements, which vary according to the legal structure and annual turnover. Details on the Charity Commission's website.

The Charity Commission and the Local Government Association have published a simple guide to the key issues likely to arise in this situation. Search for "Councillors' guide to a council's role as charity trustee."

Depending upon the aims and objectives of the trust, it may be possible for the trust to pay for things for which the Council would otherwise be obliged to make provision.

Comments

As Dave knows I am going through the pains of a problem Charity, Any money raised can only be used in furtherance of the Charities objects. I have an issue with trusts/charities run by PC appointed trustees who once appointed are a law unto themselves and the PC is powerless to act should "unacceptable behaviour" be noted (except to report matters to the CC). In my case the PC seems reticent to act as it will reflect badly on them. I much prefer charities that are members based and trustees are therefore more accountable