Passing the “Public Benefit” test - June 08
Background
As a result of changes introduced under the Charities Act 2006 all independent schools that are registered charities are now required to demonstrate that they benefit the public and to report on this within their annual report.
The Charity Commission has published guidance which sets out their understanding of “public benefit”. All charitable trustees are legally obliged to have regard to this.
In addition the Commission has now released draft supplementary guidance on how these principles will apply both in the education sector and to fee charging charities. These two supplementary guidance documents are currently subject to consultation, with the consultation period ending on 11 July 2008. Once finalised these documents will also have statutory authority.
We strongly recommend that all boards of governors and trustees of schools read both the general and supplementary guidance. Should schools like to input into the consultation process, we are happy to assist with this.
It should be noted that there are legitimate questions over whether the Charity Commission guidance is a correct interpretation of the statutory framework and established case law, or whether the Commission has overreached its powers. As a result the current guidance may be subject to challenge through the courts in due course. This could potentially result in a further review of the relevant legislation.
Having said this it is our view that the concept of having to prove public benefit is one that is here to stay and the principles set out in the Charity Commission guidance are unlikely to change fundamentally. Accordingly all independent schools should be preparing to meet these requirements.
The purpose of this note is to address the practicalities.
What steps should schools be taking?
1. An essential first step is to identify and understand the objects/aims of the school as set out within the current governing documentation (Trust Deed, Memorandum and Articles, Royal Charter etc.). The Charity Commission guidance clearly states that only activities which relate to the same objects/aims of the charity will count when assessing public benefit. For example, allowing a local state school to utilise your swimming pool is likely to count in your favour whereas allowing an adult club to do so may not. As an aside it is essential to establish that your current activities do reflect the objects/aims set out in your governing documentation. If not, it would be necessary either to cease such activities or obtain Charity Commission consent to change your objects.
2. When setting fees these must accurately reflect the cost of providing the service. If not the Charity Commission may view the fees as unreasonably restricting access to sections of the public. The logic is that the lower the fees are, the more people there will be who can afford to use the service. Therefore schools should carefully minute decisions over fee levels and how these are assessed in line with the costs of the school. Where fees are set at a higher rate in order to fund bursaries then this should be clear from the minutes.
3. It is essential to identify and document everything the school is doing which provides benefit to the public. Schools should assess whether further steps could or should be taken to increase access, how these might be actioned and in turn how budgets might be tailored to achieve this. (This may well include reviewing all fundraising activities, their focus and implementation.) We would recommend this “audit” of public benefit issues is reviewed by governors/trustees on at least an annual basis and the process and results clearly documented. Schools may wish to consider steps such as lending facilities, equipment or staff to other schools, but there is no hard or fast rule, which will guarantee success in satisfying the test. On the basis of the existing published guidance we feel that it will be hard to satisfy the Charity Commission unless the school has, or is making, some provision for means tested bursaries and ensuring that some of these are for at least 100% of the entire fees (and potentially other costs of joining the school such as uniform etc).
An important point to note is that it is essential for charities to give opportunities for the public to benefit, not necessarily that these opportunities are taken up. On this basis all offers to widen access (whether successful or not) and offers of bursaries (whether or not they are taken up) should be documented. However where opportunities are repeatedly not utilised then schools may be required to review their approach.
4. Schools should review and update policies on admissions and bursaries. Schools need to distinguish between scholarships and staff fee remissions (which are unlikely to count towards meeting the public benefit requirement) and means tested bursaries (which are).
5. Schools should promote the work they are doing for the public both internally to staff, pupils and parents and externally as well. Schools should ensure that promotional materials such as the prospectus and website all clearly highlight the opportunities which the School makes available for members of the public to benefit.
6. Schools are required to include a statement in their annual report summarising the ways in which they meet the “public benefit” test. Rather than just acting as a “rubber stamp” this should be embraced as an opportunity to demonstrate how the school genuinely benefits the community and wider public.
Summary
We believe that many independent schools are already undertaking activities, which go a considerable way towards satisfying the “public benefit” requirements. However it is important not to ignore the change of emphasis required by the Charity Commission guidance. Schools should review their activities on a regular basis, and ensure that the focus is on activities, which reflect a school’s charitable purpose and so count for the purposes of the public benefit requirement. It is for the school to demonstrate that they are benefiting the public and so there should be increased emphasis on properly documenting and reporting on all these activities.
As an aid to the process we have prepared a checklist, which reflects the current Charity Commission guidance and which can be used for governors and trustees to as the basis for demonstrating they have properly addressed the issues. This should be supplemented by full minutes of meetings where the issue has been discussed. View checklist: 
We are happy to advise schools further on these issues or review any relevant policies. Anyone who requires further assistance should get in touch with Alice Reeve on 01242 246431 or alice.reeve@rickerbys.com. Our education team is running sessions to talk to governors about the public benefit requirements as well as corporate structures. If this is of interest please contact us.
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