21/07/2022

During times of crisis, as we observe the devastation play out in real time, it is common to ask ‘what can I do to help?’ While many charities play a direct role in responding to these events through relief and recovery efforts through the furtherance of their stated charitable purposes, charities with different charitable purposes may also wish to financially support these efforts or those negatively affected by the natural disaster or catastrophic event.

This article examines what charities should think about when considering using their fundraising licences and networks to raise and distribute much needed funds to communities in need or organisations on the ground providing this support.

Am I fulfilling my charity’s purpose?

To register as a charity under the Charities Act 2013 (Cth) (the Charities Act) the purposes of a charity must all be charitable and for the public benefit. A charitable purpose requires the purpose(s) of the charity, or its mission, to align with one or more of the twelve subtypes listed under the Charities Act. Any non-charitable purposes must be incidental or ancillary to, and in aid of, its charitable purpose(s).

A charity’s activities, or the work it undertakes, must help to advance or fulfil its purpose(s). As such, it is acceptable for most charities to give funds to other organisations (or even to individuals in certain circumstances), provided doing so furthers its charitable purpose. Such giving must also be consistent with any representations made by the charity about the intent and use of donations, as part of any fundraising activities. This is particularly important where certain charity tax concessions or a charity’s ability to give tax deductible receipts are linked to its designated charity subtype.

For example, a charity may be registered under the subtype of advancing social or public welfare with the purpose of relieving the poverty, distress or disadvantage of people with disability and their families. This charity may be justified in donating funds to organisations with initiatives targeting people with disability affected by the 2022 floods in NSW or Queensland. It would be more difficult for a charity with the subtype of advancing education to donate to the same organisational initiative, unless a clear and justifiable link can be established to the advancement of education through this donation (such as providing assistance for the rebuilding or renovation of classrooms damaged by a flood or bushfire).

We note, however, that any specific Government or philanthropic funding given to a charity under an agreement will need to be deployed in the manner specified under that agreement, meaning charities wanting to provide financial support to another organisation should take great care to ensure the source of funds from which it is drawing to do so can be used for that purpose.

How can I ensure the funds will be used in line with my charity’s purpose(s)?

Giving to individuals

To help ensure the giving of funds to individuals does not jeopardise charity registration or deductible gift recipient (DGR) endorsement, a charity will need to be satisfied:

  • the person receiving the funds is in need;
  • the giving of the funds will help relieve the need;
  • the giving of the funds to the person aligns with the purpose of your charity; and
  • the person will (or is likely to) properly apply the funds.

To be sure that the giving of funds to individuals consistently meets these requirements, charities should include these indicators (or something similarly adapted to the needs of your charity) in policies and procedures which can be used when assessing whether to provide such funding, particularly in future crisis situations. A similar checklist can be implemented when considering whether to donate to other organisations.

While probably not practical during the initial crisis response phase, it may be appropriate in the longer-term recovery phase to require a person receiving funds to sign a short form letter of agreement covering these points. Again, this template can be drafted and included with your policies and procedures. This can be used to demonstrate that the organisation understood the donation was to further its charitable purpose in the event any questions are asked down the track.

Giving to organisations

If a charity wishes to give funds to aid agencies or other organisations, whether to support the relief of an immediate crisis or generally, it is best to do so by way of a formalised grant agreement, rather than a donation. A grant agreement would, among other things, contain explicit provisions relating to how the funds are to be deployed.

Along with these strategies, a good sense check is to ask yourself whether your charity would be compliant with its own charity registration and DGR obligations if it were to undertake the activities itself for which the funds are being given.

Any decision made by a charity to provide funding to another organisation should also ensure that the provision of funding does not detract from the givers ability to continue its own work.

Additional considerations for public and private ancillary funds

Public and private ancillary funds registered as charities cannot give funds to individuals, nor can they give funds to organisations which are not DGRs. Ancillary funds should be mindful of these restrictions in times of crisis, particularly if there is heightened public expectation on the fund to give.

What else should my charity consider when fundraising during a natural disaster?

If partaking in charitable fundraising in response to a natural disaster or other crisis, charities need to be not only be aware of their legal and reporting obligations, but also the heightened public expectations (not only during the time of crisis but also the aftermath).

Open and regular communication with donors and the community about the intent and use of donations is crucial, and the importance of maintaining documentation to substantiate the actions of the charity cannot be overstated. These measures will help to ensure transparency and will give the public a better understanding of how their donations are being put to work in accordance with the purpose(s) of the charity.

For guidance, please read our previous article, ‘New reporting standards for charitable fundraising during natural disasters’.

How can we help?

If you would like help on preparing a funding or grant agreement, please get in touch with our specialist Charities + Social Sector Lawyers.

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