Charities & public sector benefit.
On 16 January 2008, the Charity Commission produced its general guidance on "public benefit" which sets out what charities (and those organisations that want to become charities) need to think about in showing their aims and activities are for the public benefit.
This is important guidance for the Charities' Trustees and we highlight the following key points:
Why is guidance on public benefit needed?
Because if an organisation does not provide public benefit then it cannot be charitable. This is reflected in the definition of a "charity" under the 2006 Charities Act.
What has changed?
In the past many charities (those relieving poverty, advancing education or religion) were presumed to deliver public benefit unless it could be shown that they did not. Now it is up to all existing charities and those institutions that want to be charities to demonstrate that pursuing their aims will produce public benefit.
What is behind the concept of "public benefit"?
There are two key principles:
•· There must be an identifiable benefit or benefits;
•· The benefit must be to the public or section of the public.
Can you not be more specific?
There are a number of factors that must be considered in all cases. In particular:
•o the benefits must be related to the charity's aims;
•o where the benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted by ability to pay any fees charged; and
•o people in poverty must not be excluded from the opportunity to benefit.
Benefits relating to the aims?
So, for example, an independent school would not be able to demonstrate public benefit by opening up its facilities to local adults if that school's purpose was the advancement and education of children.
Similarly, it will not be enough if all an organisation can point to is relieving the state sector of the burden of providing the relevant service.
Opportunity to benefit must not be unreasonably restricted by ability to pay
The guidance makes clear that an organisation that excluded people from the opportunity to benefit because of their inability to pay any fees charged would not have aims that are for the public benefit.
Also, "not excluding" people who are unable to pay the fees from the opportunity to benefit does not mean just providing token benefit.
Must not exclude people in poverty.
Although this does not mean that people in poverty must actually benefit.
Will charity trustees have to do things differently?
Charity trustees have a new duty to report on the charity's public benefit, in the Trustees' Annual Report. The level of detail will depend upon the size of the charity: the bigger the charity, the more detail will be required.
As charities must already summarise their main activities and achievements in relation to their objects, hopefully, in most cases it should be just a case of showing in the report how a charity delivers public benefit through its activities and achievements. Charities are challenged to raise awareness of the good work they are doing by focusing upon communicating the public benefit they provide.
Trustees also have a duty to have regard to the guidance produced by the Charity Commission when deciding upon their activities and should confirm in their Annual Report that they have taken into account this guidance.
Can charities/ aspiring charities challenge decisions made by the Charity Commission on public benefit?
Yes. Initially, by means of the Commission's internal review procedure, then through the newly established Charity Tribunal (to be up and running from February) and, ultimately, through the courts.
Where can we learn more?
See the detailed guidance together with a four-page summary posted on the Charity Commission's website: http://www.charity-commission.gov.uk/publicbenefit/default.asp
The detailed guidance includes a checklist for charities to "self-assess" their level of public benefit and is a useful tool to help charities stay focussed on what they are trying to achieve.
Robert Nieri
Senior Associate
Freeth Cartwright LLP
robert.nieri@freethcartwright.co.uk
0115 936 9324
22 January 2008
Whilst every effort has been made to ensure the accuracy of this review, it does not provide complete coverage of the subject matter (which is yet to be finalised) and it is not a substitute for professional legal advice and should not be relied upon as such.