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These frequently asked questions relate to HEFCE's role as principal regulator of those English higher education institutions (HEIs) that are exempt charities. But some of the questions are also relevant to English HEIs that are registered charities.
The answers aim to help, but may not apply to particular situations. In particular, charity law and regulation are different in Scotland and Northern Ireland, and in Wales all HEIs will be regulated by the Charity Commission.
If you have other questions about HEIs as charities and HEFCE's role as principal regulator please e-mail the Council.
Last updated 8 August 2011
The reason that some higher education institutions (HEIs) are exempt charities and some are registered charities is largely a reflection of their history.
Typically, institutions that were already on the register of charities have retained their status as registered charities when first designated as fundable HEIs by the Secretary of State.
On the other hand, when the Charities Act 1960 was passed, a number of named universities and colleges were given exempt charity status by their inclusion in the equivalent of what is now Schedule 2 of the Charities Act 1993.
HEIs that are constitutionally higher education corporations were made exempt charities in the Education Reform Act 1988.
Some HEIs have been made exempt charities by Order in Council, including some that have sought the change of charity status (from registered to exempt) after they were awarded university or university college title.
Yes. Under section 23 of the Charities Act 2011, the Minister for the Cabinet Office may make a statutory order that individual charities or groups of charities should become exempt charities. Technically, this involves amending Schedule 3 of the Act.
There is no specified process for registered charity HEIs to follow if they wish to be made exempt charities. In the first instance, they should contact the Cabinet Office.
The charitable objects of higher education institutions (HEIs) – except for those that are higher education corporations (see next question) – are set out in their individual constitutional (governing) documents. The constitutional document may be a royal charter, memorandum and articles of association or trust deed.
There is no prescribed or standard wording for the charitable objects of HEIs, and each year a number of HEIs seek Privy Council approval of changes.
Typical wording of an HEI’s charitable objects could be:
'The object of [the HEI] is, for the public benefit, ...
...to advance education, learning and research.
...to advance education, knowledge, and learning by teaching and research.
...to advance education and learning through the conduct and support of teaching and research.'
It is possible for an HEI to have other charitable objects, possibly relating to a particular aspect of its work or to its location.
The objects of a higher education corporation (HEC) can be inferred from the Education Reform Act 1988, section 124 of which sets out the powers of an HEC. These include powers 'to provide higher education', 'to provide further education' and 'to carry out research and to publish the results of the research'.
Section 124 refers to 'powers' rather than 'objects'. But it is reasonable to infer that they are powers in the nature of objects. They can be distinguished from other powers of HECs – also set out in section 124 – that enable them, for example, to provide facilities and enter into contracts.
Paragraph 1 of Schedule 12 of the same Act made HECs exempt charities. So the objects set out in section 124 are the charitable objects of HECs.
HEIs will need to consider this question in the light of their own circumstances. Undergraduate and postgraduate students are beneficiaries of higher education institutions (HEIs). In particular they benefit from teaching, assessment, and any financial support provided to them.
Research by HEIs will also benefit a wide range of people. But in many cases it will not be possible to define such beneficiaries precisely – not least because the benefits of research may not be delivered for many years.
Beyond the student population, different HEIs will or may have a range of other beneficiaries. In a few cases, this may depend on whether an HEI’s constitution defines any particular class(es) of beneficiary. All activities that are ancillary to its main charitable purposes may add to the range of an HEI’s beneficiaries.
For example, music and art colleges often present musical events or exhibitions to the general public, as well as to staff and students of the college. The performers or exhibitors may be students gaining practical experience, or may be professionals whose performance or exhibition will add to students' 'classroom' experience. The members of the public who attend the events may be beneficiaries of the HEIs' charitable purposes.
Many students receive part of their education in workplace settings. This is particularly the case for student teachers, students of nursing and other healthcare subjects, and medical or dental students. They will often provide education to pupils or treatment of patients. It is possible to argue that those people are also beneficiaries of an HEI's charitable purposes.
In virtually all cases, the trustees of a higher education institution (HEI) are the members of its governing body. Where the HEI is constituted as a company, the company directors are usually also its trustees.
All of the individual trustees have the same responsibilities to act in the best interest of the HEI. (Their responsibilities as trustees are also known as 'fiduciary duties'.) This applies equally to senior executives, non-executive (independent) members, elected staff representatives, student representatives or any other form of governor or trustee.
For English higher education institutions (HEIs) that are unincorporated organisations the principles of trusteeship are set out in the Trustee Act 2000. For HEIs that are incorporated - by Royal Charter, as a company, or as a higher education corporation - the general principles are similar, but will depend also on the HEI’s governing documents and laws applying to corporations such as the Companies Acts and Insolvency.
The Charity Commission has published detailed guidance on the role and responsibilities of trustees generally. Governors of HEIs should also be familiar with:
A higher education institution (HEI) can only pay its trustees as trustees, if the institution's governing documents give it the power to do so. A number of HEIs have this power, and some have begun to make payments to their independent trustees. To obtain this power HEIs must justify the need, and the Privy Council will need to approve any change to the governing documents.
The governing documents of most HEIs require the head of the institution and a number of elected or representative members of staff to be members of the governing body (which also makes them trustees - see FAQ 6). The governing bodies of most HEIs have a majority of non-employed, independent trustees and one or more representatives of the student body. The staff members are paid as employees of the HEI, but are not paid as trustees.
In all cases HEIs may pay for or reimburse the reasonable out-of-pocket expenses of their trustees.
Providing they follow proper processes, HEIs may also pay individual trustees for the provision of goods and services.
Our guidance on transactions with trustees provides more information.
We have explained both of these points in a letter asking higher education institutions (HEIs) to review charities and charitable entities associated with them.
In the annex to the letter we describe the characteristics of linked and paragraph 28 charities. The annex also explores some of the factors HEIs need to consider when carrying out that review.
Note: Paragraph 28 of Schedule 3 of the Charities Act 2011 superseded paragraph (w) of Schedule 2 of the Charities Act 1993 (as amended by the Charities Act 2006).
Principal regulators are appointed under the terms of the Charities Act 2011 to promote compliance by the trustees of exempt charities with their responsibilities under charity law.
The Charities Act 2011 gives us the duty 'to promote compliance by the charity trustees [of higher education institutions (HEI) that are exempt charities] with their legal obligations in exercising control and management of the administration of the charity'.
As principal regulator we have only one new power: to require those HEIs that we regulate to provide us the information we need to fulfil our duty.
This is explained in HEFCE's role as principal regulator.
Yes, if the higher education institution (HEI) is a charity.
A small number of English HEIs are registered charities and have always been subject to the Charity Commission and its powers.
Since 1 June 2010 the Commission's powers have been extended to apply to all of the other English HEIs that are exempt charities.
Only one HEI within HEFCE's portfolio of funded HEIs – the Guildhall School of Music and Drama - is not a charity and therefore not subject to the Commission's powers. The School is part of the City of London Corporation.
The Department for Business, Innovation and Skills has also designated as HEIs a number of organisations that we do not fund. Some of them are registered charities subject to the Commission’s powers (for example, the University of Buckingham and the College of Law). Others are not charities (for example, the private HE provider BPP University College).
Since 1 June 2010 the Commission's powers have been extended to apply to all English higher education institutions that are exempt charities. Before using its powers the Commission must consult HEFCE (Section 28, Charities Act 2011).
The relationship between HEFCE and the Commission is set out in a Memorandum of Understanding (Adobe PDF) which we will review periodically.
We have no formal role in the process followed when a higher education institution (HEI) seeks to change its constitution.
The Department for Business, Innovation and Skills and the Privy Council Office are responsible for approving changes to HEI constitutions. They usually consult the Charity Commission about proposed changes to ensure that the proposals are reasonable in terms of charity law. We are sometimes invited to comment, particularly on proposed name changes.
The Charity Commission has always been able and willing to provide advice and guidance to higher education institutions (HEIs), whether they are registered or exempt charities. This remains the case and so HEIs should contact the Commission directly.
In the case of exempt charities, before using its powers – including it advisory powers – the Commission must consult HEFCE (Section 28, Charities Act 2011).
For higher education institutions (HEI) that are registered charities this information is available directly from the HEI. In some cases all of the information can be found on the HEI's web-site. The register of charities on the Charity Commission's web-site also provides most of it (but only an outline of the constitution).
For HEIs that are exempt charities this information is available directly from the institution. Since 31 January 2011 exempt charity HEIs maintain a 'gateway page' on their web-sites to enable easy online access to the information. Our web-site provides links to HEIs' gateway pages.
Most charities are required to prepare their annual financial statements (accounts) in accordance with 'Accounting and Reporting by Charities: Statement of Recommended Practice' (the Charities SORP). The requirement does not apply to any charity that is covered by another SORP.
Higher education institutions prepare their financial statements in accordance with 'Statement of Recommended Practice: accounting for further and higher education' (the F/HE SORP).
A public benefit report should describe the main ways in which, during the year, a charity has delivered its primary charitable purpose(s) for the public benefit.
We have prepared guidance on public benefit reporting for higher education institutions (HEIs). We hope that HEIs will think creatively about how to describe their activities in the context of the general principles of public benefit published by the Charity Commission.
The revised Accounts Direction for 2010-11 sets out the information about their paragraph 28 charities that should be included as a note in the audited financial statements.
We have received a number of requests for a model format that HEIs might use. We have adapted a format originally prepared by an HEI which is one way in which we believe HEIs will be able to meet the new reporting requirement. However, we are not making the format a mandatory requirement at this stage, and HEIs are free to develop their own formats as long as all of the required information is presented.