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Dear Vice-Chancellor or Principal

1.   This letter asks English higher education institutions (HEIs) that are exempt charities to review and confirm some details regarding subsidiary, associated or linked charitable entities, to ensure that all such entities are appropriately regulated. It also asks for comments on proposals intended to improve the consistency of reporting about those entities.

2.   On 1 June 2010, HEFCE became principal regulator of English HEIs that are exempt charities. HEFCE’s remit extends to those exempt charities that are administered by or on behalf of an exempt charity HEI and fall within paragraph (w) of Schedule 2 of the Charities Act 1993 ('paragraph (w) charities').

3. When we consulted about our information requirements as principal regulator ('Regulating higher education institutions as charities: Consultation on HEFCE's information requirements as principal regulator', HEFCE 2009/45) we suggested that there are inconsistencies in the identification of and accounting for paragraph (w) charities. We proposed – and 94 per cent of respondents agreed to – a one-off exercise by exempt charity HEIs to ensure that all charitable entities with which an HEI is associated are appropriately regulated, either by HEFCE or by the Charity Commission.

4.   Accordingly, we now ask exempt charity HEIs:

  1. To confirm to HEFCE that they have reviewed the relationship with their subsidiary, associated or linked charitable entities, and that those entities are paragraph (w) charities and therefore within HEFCE's remit as principal regulator.
  2. To confirm that core information (see paragraph 8) about the institution's paragraph (w) charities is complete and up to date.
  3. To comment on proposals in this letter designed to improve the consistency of reporting about paragraph (w) charities in HEIs' financial statements (see paragraphs 10 and 11).
  4. To make any consequential changes in the financial statements for 2010-11.

As far as possible, tasks a, b and d should be completed by the time the 2010-11 financial statements are approved. Comments on the reporting proposals (task c) should be sent to us by Wednesday 15 December 2010.

The review

5.   We assume that HEIs are already able to identify their paragraph (w) charities and provide core information about them. However, confirming the classification of paragraph (w) charities may not be straightforward in all cases. Annex A provides guidance to help HEIs determine the charitable status of entities with which they are associated.

6.   Annex A has been written with input from the Charity Commission, and interprets for HEIs the Commission's operational guidance on paragraph (w) charities and the regulation of 'linked' registered charities. The latter is not directly applicable to exempt charities, but the sections dealing with 'distinct' (or separate) charities are relevant.

7.   In carrying out the review, we expect some HEIs will find anomalies or will be uncertain about the classification of some entities. It is possible that some entities will need to apply for registration with the Charity Commission. We would ask HEIs to raise these issues with us as they arise. Where necessary, we will discuss the circumstances with the Charity Commission. HEFCE and the Commission wish to resolve issues by negotiation with the HEI concerned, with a view to ensuring appropriate future regulation.

Core information

8.   For each paragraph (w) charity, we would expect the HEI to record:

  • name
  • constitutional form/documents
  • charitable objects
  • trustees (and their connections to the HEI)
  • year end
  • income for the most recent year
  • balance sheet size at the most recent year end.

9.   HEFCE's Financial Memorandum with HEIssee note 1 requires that, by 31 January 2011, each exempt charity HEI will have created on its web-site a 'gateway' page through which there is ready public access to information about itself as a charity. We suggest, but do not require, that HEIs use the same gateway to enable access to the above core information about those paragraph (w) charities whose details are separately disclosed in the annual financial statements (see paragraph 11).

Disclosure in financial statements

10.   Ideally, HEIs would report in the notes to their consolidated financial statements on the performance of all of their paragraph (w) charities. For some HEIs, this might be possible. But there are many HEIs with large numbers of paragraph (w) charities, for whom that level of reporting would be disproportionate.

11.   Accordingly, we propose the following information should be disclosed in HEIs' financial statements from 2010-11:

  1. For each paragraph (w) charity that has income in the year of £100,000 or more:
    1. The name and charitable purpose.
    2. The opening balance, income and expenditure for the year, and closing balance.
  2. For all other paragraph (w) charities:
    1. An analysis into appropriate groups (for example: prize funds, bursary/scholarship funds, research support funds) stating the number of entities in each group.
    2. For each group: the aggregate opening balances, income and expenditure for the year, and closing balances. (Note: the terms 'opening' and 'closing' balance should be interpreted as total reserves where the paragraph (w) charity is an operating charity.)

Action by institutions

12.   When it has completed its review, the accountable officer should write to confirm that the institution has accurate and up-to-date records of all of its paragraph (w) charities and would be in a position to provide details to HEFCE as principal regulator, on request. The letter should also indicate whether those records are or will be accessible on the institution's web-site.

13.   If an HEI has no paragraph (w) charities the accountable officer should write to us accordingly.

14.   By Wednesday 15 December 2010, institutions should send us any comments on the proposed disclosures of information about paragraph (w) charities in annual consolidated financial statements.

15.   In both cases, letters should be sent to Andrew Malin at HEFCE, Northavon House, Coldharbour Lane, BRISTOL BS16 1QD. Any questions about this circular letter should be e-mailed to charityreg@hefce.ac.uk.

Yours sincerely

Sir Alan Langlands
Chief Executive


Notes

  1. 'Model Financial Memorandum between HEFCE and institutions' (HEFCE 2010/19).

Date: 7 September 2010

Ref: Circular letter 23/2010

To: Heads of HEFCE-funded higher education institutions

Enquiries should be directed to:

Andrew Malin (tel 0117 931 7332, e-mail charityreg@hefce.ac.uk)