Public Benefit, an issue for all charities

The passing of the Charities Act 2006 would probably have gone largely unnoticed outside of the charity sector were it not for the requirement contained within it that all charities should have aims which are for the public benefit. The national press has reported extensively on the implications of this new legal requirement - although focus has tended to be on independent schools. However, the recent publication by the Charity Commission of its findings from the first twelve public benefit assessments carried out show clearly that no charity can afford to be complacent about this issue.

For financial years beginning on or after 1 April 2008, trustees must have regard to the guidance published by the Charity Commission and report on their charity’s public benefit in their annual trustees’ report. 

The main visible impact of the requirements is the insertion into the report of a statement confirming that the trustees have “paid due regard” to the Commission’s guidance. The view is widely held that the demonstration that the charity’s aims are for the public benefit is addressed already by a trustees’ report that complies with the requirements of the Statement of Recommended Practice “Accounting and Reporting by Charities” (SORP).

From our experience to date, this view holds true for most charities. However, one aspect of reporting that many charities will have to give greater consideration to is the establishment of the link between the aims pursued by the charity and the benefit provided. For charities working with individuals and providing services this may not be a significant challenge. It is those charities that achieve benefit indirectly – for example, grant making organisations, “second tier” charities (i.e. those that provide resources for frontline charities, such as umbrella bodies) and membership organisations that are most likely to have a need to revise their reporting to meet the requirements. For these charities, identifying the benefits that the charity’s work delivers and the causal chain between the charity’s activities and those who benefit is essential. 

For example, take a professional body which trains, accredits and provides ongoing support to medical practitioners. For such a charity, it is important to establish that the charitable purposes are the advancement education in the particular medical field and the advancement of health. Whilst the body’s members may benefit personally from membership (in that they are able to earn a living in that area of medicine), such benefit is incidental to the benefit that the public at large receives from the existence of appropriately skilled medical practitioners.

Similarly, it is important for grant making charities to detail the impact their funding has had on the “final” beneficiary of the money – perhaps through the use of case studies and/or quotes from recipients explaining the affect the grant has had on their lives or work.

As long as the section of the trustees’ report which sets out the charity’s aims and objectives makes the identity of the beneficiaries, and the linkage between the charity’s actions and those beneficiaries clear, a well presented annual report which follows the SORP should need little further amendment.

It is clear though that charities will need to give greater thought to the transparency of their reports and to how they “tell their story” in future. Good practice beyond bare compliance with the new requirements is developing. We look forward to working with our clients over the coming year to build on this experience.