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Public benefit of fee-charging and education charities under the spotlight

By David Ainsworth and Emma Maier, Third Sector Online, 12 March 2008

Charities that charge high fees may need to begin fundraising so that they can subsidise costs for people who can't afford to pay, suggests draft guidance published today by the Charity Commission.

Under the 2006 Charities Act, charities must show that their aims are carried out for the public benefit. The commission’s draft guidance, Public Benefit and Fee-charging, advises charities how to ensure that those who can’t afford fees and those living in poverty have an opportunity to benefit.

This might include offering ways of accessing the service that is charged for, such as:

• Fundraising to cover fee reductions
• Charging more to those who can afford the fees to subsidise others
• Tiered membership/sliding fee scales/concessionary tickets
• Lottery/ballot systems to allocate cheaper tickets or free places or access to facilities
• Bursaries/assisted places

It could also involve providing other opportunities to access the charity’s benefits in way related to the charity’s aims, such as:

• Working in collaboration with other charities – for example an independent school might share skills and expertise with state schools as part of a non-financial sponsorship
• Seconding staff or lending facilities or equipment – for example a charitable hospital could provide specialised medical equipment or training to an NHS hospital

When assessing the provision of public benefit, the Charity Commission will generally give more weight to the former than the latter, the guidance says. It does not give a suggested number or proportion of subsidised tickets or places, but it states that “token, minimal or nominal access will not be enough”. Measures designed to help people who cannot afford the charges (such as bursaries) are likely to be more sufficient  in meeting the requirement than other measures, such as scholarships open to all on merit, the guidance says.

Higher fees: size matters

Small, local charities that charge a fee that most people can afford — such as a small subscription fee to join the Guides or Scouts, or a small annual library card fee — are unlikely to have to provide additional opportunities for those who can’t afford the fees.

But the guidance says that charities that charge a relatively high fee for a service that requires on-going financial commitment, such as educating a child, are more likely to have to do more.

Affordability will be judged according to the nature of the service and the commission will consider whether fees are at cost price, whether they are subsidised, and the use of any profit generated.

Fee reductions must be sufficient, the guidance warns: “If would not be enough to reduce very high fees slightly to enable more ‘middle income’ people to benefit, it people in poverty were still excluded.”

Advancement of Education

Guidance on how the public benefit test applies to education charities, also out today, says that education does not have to be neutral and value-free, but must be structured and deliberate and those being educated must be free to come to their own conclusions on controversial topics.

Public Benefit and the Advancement of Education says that the public benefits of the education must be clear, for example the creation of a skilled workforce, promotion of innovation that benefits society or equipping people to be part of society. The activities will not be deemed to be for the public benefit if access is restricted to employees of a particular employer or members of a specific family.

Consultation

Responses to the two documents can be submitted to the Charity Commission until 11 July. Draft guidance for religious and poverty-relieving charities, produced last month (Third Sector Online, 29 February ) is also out for consultation.