Here is a recent report entitled “The impact of the public benefit requirement in the Charities Act 2006: perceptions, knowledge and experience”. It has been interesting to watch the public benefit discussion in the UK. It would not be a shock to me if in the next 5-10 years that the Canadian Department of Finance decides that there should no longer be a presumption of public benefit for Canadian registered charities and that registered charities should be able to demonstrate their public benefit. Currently there is a presumption (which is rebuttable) in Canada that with the first three heads of charity, there is a public benefit (ie. charities involved with relief of poverty, advancement of religion and advancement of education). Only charities whose objects are under the 4th head of charity, which deals with other purposes that are beneficial to the public and that are recognized by law as being charitable need to demonstrate public benefit.
“The impact of the public benefit requirement in the Charities Act 2006: perceptions, knowledge and experience
In the forward from the Charity Commission of England and Wales they note:
“We welcome the report’s findings, in particular the evidence it provides that the public benefit requirement has helped to sharpen charities’ focus and acted as a spur to strategic thinking.
However, there is room for improvement, both for the Commission and for charities themselves. We need to help charities understand that far from being an irrelevant distraction, the public benefit requirement is about core questions of mission. It is about charities being clear what their aims are, who they serve, and how they serve.
It is vital that trustees use the opportunities presented by the public benefit requirement as a welcome opportunity to tell their charity’s story and celebrate its success.”
Some of the key findings of the report:
Knowledge and experience of the public benefit requirement
• In relation to the charity sector as a whole, the public benefit requirement was perceived as a potential opportunity to develop and maintain confidence in the ‘charity brand’.
• Reactions to the public benefit requirement are diverse, and range from the view that it is not a high priority, particularly given the current financial climate; to feelings of anger and anxiety, especially on the part of those charities that feel they are under scrutiny.
• Large charities are perceived as better informed about the public benefit requirement than smaller charities, which may lack awareness, understanding or capacity to engage with the requirement. The latter could be associated with a weak board lacking the necessary skills or experience to fulfil their role.
Perceptions of the impact of the public benefit requirement
• The study found examples of charities changing the way they work in response to the renewed emphasis on the public benefit requirement. These fell into three categories: re-examination of charitable objects; adjustments to the target beneficiary group; and changes in the services provided.
• Study participants saw the renewed emphasis as an important component of the ‘modernisation’ of the charity sector. As such, it was seen as drawing positive attention to governance, private benefit (as distinct from public benefit) and commissioning.
• Three kinds of charity were perceived as especially affected by the renewed emphasis on the public benefit requirement: religious and faith organisations, fee charging charities and membership organisations.
• The public benefit requirement was generally seen as having had limited impact so far, with the requirement mainly affecting charities at two stages: charity registration and public benefit reporting.
Views about Charity Commission support and guidance
• Charity trustees and their advisers valued the support and guidance provided by the Charity Commission and appreciated the thorough approach taken by the Commission in preparing guidance.
• Study participants raised a variety of concerns about the likely consequences of the Charity Commission having reduced resources to respond to and advise charities. These included diminished capacity to support and also to regulate in relation to public benefit. Charity infrastructure and membership organisations were not thought capable of assuming this role.
If you want to read the Charity Commission of England and Wales guidance on public benefit see:
Do you require legal advice with respect to Canadian or Ontario non-profits or charities?
Mark Blumberg is a partner at the law firm of Blumberg Segal LLP in Toronto and works almost exclusively in the areas of non-profit and charity law.