Charity Governance

Charities often face challenges in executing their activities, especially in regions where their staff may be unable to operate effectively. In such cases, charities turn to intermediaries who can provide essential resources, skills, and regional knowledge. However, working through an intermediary comes with its own set of considerations and responsibilities to ensure compliance with regulatory frameworks. In this article, we explore the dynamics of charity-intermediary relationships, common types of intermediaries, and the importance of maintaining control over resources.

Understanding Intermediaries:

1. Purposeful Selection and Review: Before engaging with an intermediary, a charity must thoroughly assess the intermediary's capacity, including personnel, experience, and equipment. Regular reviews throughout the partnership ensure ongoing compliance and effectiveness.
2. Direction and Control: To avoid legal consequences, a charity must actively direct and control the use of its resources by the intermediary. Failure to do so can lead to sanctions under the Income Tax Act, including financial penalties or revocation of the charity's registration.

Common Types of Intermediaries:

1. Consultant or Contractor: A consultant or contractor intermediary is engaged to carry out specific activities on behalf of the charity. This could involve hiring a non-profit organization or a for-profit contractor to provide services or expertise. A clear agreement detailing roles, responsibilities, and reporting mechanisms is crucial to maintaining control.

• Example: Using a Consultant

• A charity combating poverty in a developing country engages a foreign non-profit organization as a consultant. A detailed agreement outlines responsibilities, and the charity maintains control by intervening as needed.

• Example: Using a Contractor

• A charity addressing clean water scarcity hires a for-profit contractor to dig a well. A contract is established to ensure the charity's resources are used in line with its purpose.
  
  

2. Joint Venture Participant: In a joint venture, a charity collaborates with other organizations to achieve a shared goal. Unlike a consultant or contractor, the charity actively participates in decision-making through a joint venture agreement.

• Example: Direction and Control in a Joint Venture

• A charity focused on empowering disadvantaged women partners with a foreign organization to provide education and business training. The charity controls a significant portion of the project funding and voting rights on the governing board.

3. Co-operative Participants: Co-operative participants work alongside a charity on specific aspects of a project, with each organization taking responsibility for distinct parts. This differs from a joint venture, where participants pool resources for the project as a whole.

• Example: Co-operative Participant Project

• A charity promoting health collaborates with a foreign organization to build and operate a medical clinic. The charity focuses on providing qualified nursing staff, while the foreign organization handles other aspects like construction and procurement.

Working through intermediaries can be a strategic approach for charities to extend their impact. However, it requires careful consideration, including the selection of suitable partners, maintaining control over resources, and adhering to regulatory guidelines. By understanding the nuances of different intermediary types and incorporating best practices in agreements, charities can navigate these partnerships successfully, ensuring their resources contribute effectively to their mission.