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For up to date information on this topic see the charity regulation section of the HEFCE web-site

20 March 2007 HEFCE logo
To  Heads of HEFCE-funded higher education institutions
Direct Line 0117 931 7300
Direct Fax 0117 931 7203

Circular letter number 10/2007

For further information contact Andrew Malin, tel 0117 931 7332, e-mail a.malin@hefce.ac.uk

Dear Vice-Chancellor or Principal

Implications of the Charities Act 2006

1.   This letter informs institutions of the changes to the arrangements for the oversight of exempt charities in England as a result of the Charities Act 2006. It requires a response.

2.   Under the Act, HEFCE becomes the 'principal regulator' of English higher education institutions to ensure their compliance with charity law. The Government is introducing principal regulators to prevent duplication of regulatory activity and HEFCE will work closely with the Charity Commission to meet this objective. In carrying out our new role we will use existing information and systems wherever possible and will minimise requests for additional information. We will integrate the work as closely as possible with the new accountability framework that we have already started developing.

3.   The rest of this letter sets out the role of a principal regulator, the main changes of the Act, our current understanding of the timescales and processes involved in implementing the changes, upcoming related consultations, and our preliminary assessment of the Act's possible impacts on the sector and HEFCE.

The principal regulator

4.   The Charities Act 2006 extends the Charity Commission's monitoring, investigation and enforcement powers to exempt charities. However, the monitoring and most of the investigation work will be carried out on its behalf by principal regulators. HEFCE will be the principal regulator for all English higher education institutions (HEIs), including those that are currently registered charities but will be given exempt status under powers contained in the Act.

5.   Under the terms of the Act, a principal regulator has one objective:

'… to do all [it] reasonably can… to promote compliance by the charity trustees with their legal obligations in exercising control and management of the administration of the charity'.

This is also one of the Charity Commission's five objectives set out in the Act.

To reiterate, in taking on this new role, HEFCE is committed to using existing information, to limiting requests for additional information, and to the automation of systems. We undertake to minimise the burden of the new regulatory requirement on individual HEIs.

Next steps: secondary legislation

6.   The Office of the Third Sector (part of the Cabinet Office and responsible for implementing the Act) has published a timetable to develop the secondary legislation needed to bring many parts of the Act into force. Those parts of the Act with the most direct impact on exempt charities generally will be addressed in the third and final phase of that work. The timetable suggests that this will happen in late 2007 but we understand that early 2008 is more likely.

7.   HEFCE expects that the relevant secondary legislation for the higher education sector will cover:

  1. The appointment of HEFCE as a principal regulator, including giving HEFCE any additional powers needed to undertake the role.
  2. Granting exempt status (and consequent removal from the Register of Charities) to the HEIs that are currently registered charities.
  3. The arrangements for the charity registration of the colleges of the universities of Cambridge, Durham 1 and Oxford.
  4. The arrangements for the charity registration of autonomous students unions.

HEFCE's new role will not include responsibilities for items c and d above - the colleges and students unions once they are registered. We acknowledge that there may be some transitional issues, but we believe these will relate to particular HEIs and are therefore not appropriate for a circular letter.

Consultations

On the secondary legislation

8.   The Office of the Third Sector will consult on the terms of the secondary legislation needed to appoint and empower principal regulators. HEFCE has yet to receive detailed information about the nature or timing of the consultation, but we will seek to ensure that HEIs are included and that there is sufficient time for considered responses.

On a 'working protocol' with the Charity Commission

9.   It will be important for all parties (including the general public) that there is clarity in the relationship between the Charity Commission and each principal regulator. HEFCE expects to develop and publish a 'working protocol' with the Charity Commission that will explain the respective responsibilities of each. This is likely to include provision for HEFCE to conduct preliminary enquiries of an HEI (short of a full investigation by the Charity Commission) in the event of issues arising. Similarly, the Charity Commission will seek advice from HEFCE before it exercises some of its statutory powers. We will consult the sector on any working protocol before its initial introduction; it will also need periodic review and possible change in the light of practical experience. We are not yet clear whether this consultation will happen in parallel with that on the secondary legislation, or whether it will have to follow the granting of powers.

On any additional information requirements

10.   Finally, it is likely that certain information about HEIs will need to be readily available to the general public and it may be necessary for HEFCE to collect and consider information about HEIs as charities that is not currently collected. Although we may need additional assurances from HEIs about their compliance with charity law, we expect to incorporate this in the new accountability framework. In keeping with our commitment to minimise the regulatory burden, we intend to explain the reason for and consult about any new information and assurance requirements.

Annexes

11.   In advance of these consultations, we attach Annexes A-C with tables that set out our current assessment of how the Act might affect HEIs and HEFCE. Please note that this table is a working document and should not be taken as a definitive statement of the law. It reflects our current understanding of many of the issues that will be of interest to the sector and we welcome any comments, questions or suggestions.

12.   We wish to stay in regular contact with the sector regarding the legislation. To that end, it would be helpful if you could nominate a primary contact for this area in your institution. A fax-back form is attached for this purpose, or please e-mail the details to: charitiesact@hefce.ac.uk

Yours sincerely

Professor David Eastwood
Chief Executive

Download

Annexes A-C

[ MS Word 166K | Zipped Word 30K | Adobe PDF 116K | Zipped PDF 76K ]

Contact details form

[ MS Word 51K | Zipped Word 7K | Adobe PDF 13K | Zipped PDF 6K ]

Note

1.   This applies only to three colleges (St Chad's, St John's and Ushaw). Other 'colleges' at Durham have no separate corporate status.