What Trustees Need to Know About Governance and Risk
If your charity or community organisation is considering running a raffle, prize draw or lottery, trustees need to understand one crucial point:
This is regulated gambling activity.
Even small, well-intentioned fundraising draws fall under legal frameworks across the UK. While lotteries can be effective income generators, they also carry governance, financial and reputational risks that sit squarely with the board.
This guide explains the types of lotteries available and what trustees must consider before approving one.
What Legally Counts as a Lottery?
Under the Gambling Act 2005 (in Great Britain), an arrangement is a lottery if it contains:
- Payment to enter
- At least one prize
- Winners selected by chance
If all three elements are present, it is legally a lottery, regardless of whether you call it a raffle, draw, or competition.
Trustees cannot rely on informal naming to reduce risk. Misclassification is one of the most common compliance failures.
The Three Most Common Types of Lottery
1. Incidental Lotteries (Low Governance Burden If Done Properly)
Typically held at:
- School fêtes
- Community festivals
- Charity dinners
- One-off fundraising events
Governance considerations for trustees:
- Tickets must be sold and drawn during the event.
- No advance sales.
- Proceeds (after reasonable expenses) must go to the good cause.
- No rollover of prizes.
No registration is required, which makes this administratively light.
Board question to ask:
Are we absolutely sure tickets won’t be sold before the event or online?
If the answer is uncertain, it may not qualify as incidental.
2. Small Society Lotteries (Most Common for Charities)
This is the structure most charities use when:
- Selling tickets in advance
- Selling online
- Running recurring draws
- Promoting more widely
Registration and Legal Duties
In England, Wales and Scotland, small society lotteries are governed under the Gambling Act 2005 and require registration with the local authority.
Trustees should confirm:
- The organisation qualifies as a “society” (i.e. established for non-commercial purposes)
- Registration is complete before tickets go on sale
- Financial limits are not exceeded
- Statutory returns are filed after each draw
Financial Governance
Current limits in Great Britain include:
- £20,000 maximum per single draw
- £250,000 maximum ticket sales per calendar year
- At least 20% of proceeds must go to the good cause
Trustees must ensure financial reporting distinguishes between:
- Gross ticket sales
- Prizes
- Expenses
- Net proceeds
Failure to file returns or stay within limits is a governance failure, not just an operational oversight.
3. Customer Lotteries (Generally Not Suitable for Charities)
Customer lotteries are designed for commercial businesses and:
- Cannot generate profit
- Are restricted to customers
- Have strict structural rules
- They are rarely appropriate for not-for-profit fundraising
Trustees should avoid assuming commercial promotional models can be adapted for charitable use.
Governance Duties Trustees Must Consider
Running a lottery is a regulated activity with board-level implications.
Trustees have duties under charity law (and company law where applicable) to:
- Act in the charity’s best interests
- Manage risk responsibly
- Protect the charity’s reputation
- Ensure compliance with relevant law
When approving a lottery, trustees should record in board minutes:
- Why the lottery is in the charity’s best interests
- Confirmation that legal structure has been checked
- Oversight arrangements for financial controls
- Named responsible officer (often called the “promoter”)
Key Risk Areas for Boards
1. Regulatory Breach
Common issues include:
- Selling tickets before registration
- Exceeding financial thresholds
- Failing to submit statutory returns
- Inadequate age verification for online sales
- Even small breaches can trigger local authority scrutiny
2. Reputational Risk
Lotteries involve:
- Cash handling
- Public participation
- Random prize allocation
If something goes wrong — lost tickets, unclear rules, delayed prizes — complaints escalate quickly.
3. Financial Controls
Cash-based raffles are vulnerable to:
- Poor reconciliation
- Missing ticket stubs
- Inadequate audit trail
Trustees must ensure:
- Ticket books are tracked
- Unsold tickets are recorded
- Income reconciles to tickets issued
- Prizes are documented
4. Safeguarding and Age Restrictions
Participants must be 16+ in Great Britain for most lotteries.
Online sales introduce additional risk around age verification and data protection.
Trustees must consider:
- GDPR compliance
- Data storage
- Marketing consent
Special Consideration: Northern Ireland
Northern Ireland operates under different gambling legislation and is generally more restrictive.
If your organisation operates there, trustees should seek jurisdiction-specific guidance before proceeding.
Assuming the Great Britain framework applies can create serious compliance issues.
Practical Board Checklist
Before approving a lottery, trustees should be able to answer:
- Have we correctly identified the lottery type?
- Are we registered (if required)?
- Are we within financial limits?
- Who is the named promoter?
- How will income be reconciled?
- How will complaints be handled?
- Have we considered reputational risk?
- Is this proportionate to expected income?
If trustees cannot clearly answer these questions, further work is needed before proceeding.
Why This Matters
Trustees are collectively responsible for compliance failures — even if operational tasks are delegated.
Lotteries can be low risk when well managed.
They become high risk when assumed to be “just a raffle.”
Strong systems and oversight protect:
- The charity
- Its beneficiaries
- Its volunteers
- And its trustees
For a broader overview of governance and regulatory responsibilities affecting UK not-for-profit organisations, see the book Not for Profit Know-How by Kirstie York .
UK-Wide Comparison
| Lottery Type | England & Wales | Scotland | Northern Ireland | Licence Needed? |
| Incidental Lottery | Allowed at events | Allowed at events | Allowed at events | No |
| Small Society Lottery | Register with local council | Register with local council | Register with local council | Yes |
| Customer Lottery | Strict conditions apply | Strict conditions apply | Not permitted | No (but heavily restricted) |
Always check the most current guidance from the Gambling Commission and your local authority before promoting or selling tickets.
