The Regulator for Charities in England and Wales
(October 2008)
The Charity Commission is starting a programme of public benefit assessments. This information sheet provides further details about this work, and what it means for your charity.
Under the Charities Act 2006, an organisation can only be a charity if it has aims that:
The public benefit requirement is not a new requirement for charities. However, the Charities Act highlights this requirement by including public benefit explicitly in the definition of a charitable purpose. In addition, any presumption that a class of charity is for the public benefit has been removed.
The Commission, as the regulator of charities in England and Wales, has a specific statutory objective to promote awareness and understanding of the operation of the public benefit requirement (Section 7, Charities Act 2006)and to issue guidance in pursuit of this objective, which trustees must have regard to in exercising any powers or duties to which the guidance is relevant. We also have to ensure that registered charities are properly established for charitable purposes, a necessary characteristic of which is that they must be for purposes which are for the public benefit.
The public benefit assessment programme is part of the work we will be doing to fulfil our public benefit objective.
As the independent regulator of charities in England and Wales, we are responsible for registering charities and for promoting their compliance and accountability. In carrying out this role, both at the registration stage and with registered charities, we have to interpret and apply the law on charitable status.
To help explain the requirements introduced by the Charities Act 2006, we have published guidance on Charities and Public Benefit which is available on our website.
We are also in direct contact with charities, and their representative bodies, about the requirement, including, for example, via the assessment programme. The conclusions we reach from the public benefit assessments will enable us to assess whether the public benefit requirement is being met.
In our assessment of your charity, our starting point will be to identify the charity’s aims to ensure they are charitable. We will expect to do this first of all by looking at the charity’s stated objects in its governing document.
The requirement is, however, about more than the stated aims of the charity which will simply show what in theory the charity is established for. A charity must also show that in practice it is furthering these aims for the public benefit. This means that we will also need to look at the charity’s relevant activities to see what benefits arise from the operation of the charity’s aims and what restrictions there are, if any, on who can have the opportunity to benefit.
By building up a picture of the charity’s aims and what the trustees do to achieve them, we will be able to judge whether:
Our publication, Charities and Public Benefit at the following link, sets out in more detail the criteria we will apply, particularly at section H:
How we selected the charities for the first round of assessments.
Our first programme of assessments will look at three groups of charities; independent schools, charities for the advancement of religion and fee charging residential care charities. These have been chosen because charities for the advancement of religion and for the advancement of education are two of the categories of charity which were presumed to be for the public benefit before the changes made by the Charities Act 2006. The third category for which there was previously a presumption is charities for the relief of poverty. We are not looking at charities for the relief of poverty at this time because there has been less concern that they might not meet the public benefit requirement. We have included fee charging residential care charities because of the high level of public interest in how the public benefit requirement may affect fee charging charities. When selecting the final group of charities we used the following selection criteria:
The public benefit assessment process
There will be three phases to the process.
1. Information gathering - this will include:
2.Analysis of the evidence – we will consider the information gathered in order to make decisions about the charity’s aims and whether the organisation is capable of being a charity and whether its trustees are in practice furthering its purposes for the public benefit.
3. Reporting our findings – once we have made our conclusions, we will send you a report of our findings. We expect to make the report public, but only once you have had a reasonable opportunity to comment on the report’s factual accuracy. We aim to issue our report in Spring 2009 so that we can both provide you with a timely decision and also publish further guidance to the wider sector. If we identify any public benefit issues which may need addressing, we will include an action plan for the trustees and agree a timescale for completion. We will support you with advice and guidance to help you carry out the plan.
What if…
…we decide your charity is not capable of being or operating as a charity?
We would reach this decision if we found that the aims of the charity fell outside the definition of “charity” in the Charities Act 2006 either in relation to its purposes or as to whether it can operate for the public benefit. In this case we would need to consider if the charity had never in fact been wholly charitable or whether this had become the position after it was set up. Further information on this is available in our publication The maintenance of an accurate register:
The two main options would be removal from the register or a restructuring to bring the charity fully within the definition of “charity”.
...we decide that your charity is capable of being a charity, but that the trustees are not furthering its aims in a way that is for the public benefit?
This decision would mean that the trustees were, effectively, in breach of their duty to operate their charity in furtherance of its aims. Our role here would be to work with the trustees by agreeing a plan to address areas of difficulty so that they were no longer in breach of duty. We would approach this in a constructive way which provided clarity for the charity, its users, funders, supporters and staff about the way forward. No charity will be expected to make changes to their objects, or the way they carry out their aims, overnight. We will take reasonable account of how much time and resources might be needed by a charity in its particular circumstances to make any necessary changes in order to meet the public benefit requirement. Similarly, we will not take any regulatory action without having first discussed the matter fully with the trustees and their advisers.
We have said publicly and in our guidance that we do not expect many charities to have difficulties in showing that they are for the public benefit. Where they do, we would generally expect to work with them to agree a way forward – we would not expect changes to be made immediately although clearly a credible and timely plan will be called for.
During the course of the assessment we may find other issues that need addressing – for example, it may be that the organisation is operating for charitable aims but that these fall outside those expressed in the governing document, or there may be other governance issues. We would discuss these with the trustees and agree how to address them.
Where we have grounds for believing that the charity is at risk through mismanagement or maladministration (because, for example, the trustees do not act to repair any breach of duty) we can decide to open a formal inquiry under section 8 of the Charities Act 1993 and use our protective powers – these can include issuing directions to the trustees and, in the most serious cases, replacing some or all of the trustees.
The Commission may use its regulatory powers to take action as a result of its conclusion that a charity cannot operate for the public benefit or is not operating for the public benefit.
Where we find that the organisation is not a charity and that it must be removed from the register, the decision can be challenged through the Charity Tribunal.
Where we find that the charity is capable of being operated as a charity but that the trustees are in breach of their duty to carry out its aims for the public benefit our aim will be to work with the trustees on a consensual basis. If this does not resolve the issue the Commission may use its powers to direct how the trustees should administer the charity in the future. This can be challenged through the Charity Tribunal.
Publicity
We will publicly announce this work in early October. Although our statement will largely concentrate on the assessment programme itself, we will also use it to name the first group of charities we will be assessing. We do not expect to provide any further details of the conduct of the case, although under the Freedom of Information Act 2000 we will need to consider requests for such information. We will handle these in accordance with the law and our policy on the matter. We would expect to keep the charity informed of any such disclosures.
When we make our final decision, we will send a report to the trustees which will include a full explanation of our findings. We will publish the report – or a summary of it – after they have been given a reasonable opportunity to confirm factual accuracy.
It is of course for the charity to decide how to approach the question of publicity. The trustees may want to consider how they can use the assessment experience positively to promote their charity.
The Commission is committed to providing high levels of service to the charities it deals with. This assessment will be led by our public benefit review and reporting team (see contact details below) who will:
The team are happy to answer any questions you have about the assessment process.
We recognise that this assessment will place an additional call on your time and on your trustees, and staff. We would like to know, if possible, the approximate cost of the exercise to the charity, in terms of time and resources. We will use this information to inform and develop the assessment process.
We hope that the assessment is helpful in clarifying whether your charity meets the public benefit requirement: where it does not meet the requirements, we would expect that being clear about the solution would also be helpful to the charity so that it could operate confidently in the future.
There should be real benefit to the wider sector in terms of the further guidance we can give, drawing on our findings from our work with the charities involved in this first round of assessments and demonstrating the rich variety of ways in which charities, in their different circumstances, can meet the public benefit requirement and demonstrate this to those who use it and support it.
This is what we expect to flow from this programme and we will be taking soundings with you and others with an interest to assess the extent to which these expectations are realised.
Contact details:
Email: publicbenefitassessments@charitycommission.gsi.gov.uk
General enquiries: 0845 300 0218
Textphone: 0845 300 0219
Website: http://www.charitycommission.gov.uk/