Dundee FC in the Community Association provides football coaching in schools and coaching camps, and runs youth teams. When it applied for charitable status in August 2009, it was clear about its intentions. "The income will be used to offset the net cost of youth development incurred directly by the club," it said.
The Office of the Scottish Charity Regulator was supportive of the coaching work, but concerned about the youth teams. In March last year, after a lengthy correspondence, it decided that it would not grant charitable status.
The OSCR used the episode as an anonymous case study in its 2009/10 annual review and released the full correspondence to Third Sector after a request under the Freedom of Information Act. These edited excerpts show how the applicant pursued its application with determination and was reluctant to take no for an answer, but finally accepted the regulator's ruling.
KEY QUESTIONS - 29 September 2009
My understanding is that the club currently pays for a range of youth development activities, and it is intended that the association will take over these costs and responsibilities from the club.
Can you provide a more detailed explanation as to what is meant by youth development, and who the beneficiaries of the different activities are? For example, are all youth development activities open to all young people or do some require a certain level of skill in order to participate?
'WE'RE NOT FOR PROFIT' - 29 October 2009
There is no financial benefit to the club in setting up the charity. Currently, the club is paying for the cost of youth development, but this aspect of the organisation is not for profit and is for public benefit. We hope that this will eventually become self funding via fundraising activities ...
The youth development activities are, in general, open to all irrespective of skill level. However, the under-age teams will, to a certain extent, be selected on the basis of ability. The public are not supplementing the income of Dundee FC, if that is the concern.
PRIVATE BENEFIT? - 25 November 2009
There remain concerns over some of the proposed activities, which should be to further the charitable purpose "the advancement of public participation in sport". Bodies applying under this purpose must demonstrate that their activities provide benefit in terms of providing opportunities for public participation.
The concern with these teams is that participation may well be subject to the likes of ability and gender, which makes it difficult to argue that the teams meet the criteria ... There may be private benefit for the club and some of the players as a result of the activities of the under-age teams. Can you let me know if players in the under-age and/or youth teams are contracted to, or employed by, the club? Do any of the under-age teams' players receive remuneration from it?
You will need to provide evidence that the youth development of the club is for public benefit. The fact that the activities are "not for profit" does not necessarily mean they provide public benefit.
A MINOR ELEMENT' - (date not given)
After consultation with other potential trustee officers, it was decided we should put our case to you one final time to see if we can convince you that our application should be treated favourably.
As youngsters progress through under-age teams and their talent is nurtured, it is possible that some may be offered employment with the club. Approximately 17 youths are taken on each year. In the past two years, only one has been accepted as a professional first-team player by Dundee FC. It would be unusual for the club to offer three such contracts. This leads me to the conclusion that there is a high drop-out rate and, therefore, an overriding public, compared to private, benefit.
I understand that other bodies have been granted charitable status where there is a minor element of private benefit. OSCR are, therefore, mindful of proportionality and that is the point I now wish you to consider.
IT'S A 'NO' - 17 February 2010
It is our view that the association fails the charity test on grounds of unduly restrictive conditions and private benefit.
The work in the community is clearly likely to provide public benefit in furtherance of a public participation in sport purpose. But it is not so clear that the youth development work will provide public benefit.
It is our understanding that participation in the youth teams will be based on ability, is subject to a contractual relationship with Dundee FC, is only available to male players and is, therefore, not available to the public at large.
It appears that one motive underlying the establishment of the association is the club's desire to offset or transfer to the association the youth development costs it currently meets. In our view, there is private benefit to the club from this.
It does not appear that benefit is incidental to the establishment of the association; rather, this would seem to be a primary motive. There is also the possibility of private benefit to the club from the youth team's activities in developing players who will be under contract and who may in the long term provide potential value in the transfer market.
LAST-DITCH APPEAL - 9 March 2010
I wish to request a review of your decision. We have no females because none have progressed beyond expressing basic interest, then dropping out. Should any express interest and have skills, we would enable them to take part. I agree that a level of skill is required and that level of skill will be more challenging as participants progress. All sport requires a level of skill, and to state that we discriminate on the basis of skills is untrue.
Dundee FC has been funding its own youth development and community work out of its own resources. The club is finding it increasingly difficult to do so in the current economic climate. Previous avenues of funding have been closed to many bodies that are not registered as charities via OSCR. Public donations and fundraising are difficult given the perception that a body must be registered with OSCR to satisfy the public confidence that any funds are correctly attributed. Hence the reason we applied for registration with OSCR is to raise funds and apply to the Scottish government to help with our coaching and education programmes.
The youth teams are a vehicle for progression from the coaching schools into mainstream sport at both junior level and, very possibly, professional level. OSCR grants charitable status based on an intention to provide public benefit, yet with no guarantee that any public benefit will be provided. The trustees feel that the association is being denied the opportunity to prove our intentions and demonstrate that we will operate our constitution within the terms of the Charities Act.
FINAL VERDICT - 31 March 2010
OSCR is unable to conclude that the association has only charitable purposes and cannot enter it in the register. It appears to us that the club is likely to benefit from the youth team's activities in developing players who will be under contract to the club and may, in the long term, provide potential value in the transfer market.
While we accept that the number of players who reach this level is small, the financial value of these players can be significant. In addition it is intended that the association will assume the costs of developing the youth teams currently met by the club.
Again, this is not incidental; rather, it appears that this transfer of cost may be one of the main motivators for the establishment of the association as a charity. The players in the youth teams are obliged to engage in a contractual relationship with the club and at least some of these are remunerated. This amounts to private benefit to the players.