Charities must be for the public benefit. This means that they must benefit the general community.
An organisation cannot be a charity if it exists for private benefit. Private benefit is a significant issue for charities, and is where the resources of the charity are used for the benefit of those close to or related to the charity, rather than for the charity’s beneficiaries, and for its charitable purpose.
And private benefit does not just have to be money – it could be a service or goods or anything else the charity has or provides.
Private benefit is also directly linked to the concept of related party transactions. Related party transactions are those between the charity and ‘related parties’. These can be people or organisations, such as:
- those with a significant influence over the charity’s strategy and finances (including board members or executive officers, rather than operational managers), and close members of their families (such as a parent, partner, sibling, or child), and
- organisations with a significant influence over the charity (for example, an organisation that appoints one of the members of the board of the charity).
Charities need to be aware of the standards required of them, and be aware of the problems of private benefit and implement policies and procedures to prevent and manage them.