What are the duties of colleges as exempt charities?

The Department for Business Innovation and Skills (BIS) has recently published its information note to FE colleges – Appointment of the Secretary of State as Principal Regulator of FE Colleges as exempt to charities. As exempt charities, FE corporations should ensure they are fully aware of their statutory obligations as a charity, including understanding what actions would call into question whether the corporation is complying with charity law.

Under the Charities Act 2006, FE colleges are required to have a Principal Regulator or lose their exempt charitable status, forcing them to register with the Charity Commission and the commensurate duties and obligations that stem from that. The Secretary of State for BIS became the Principal Regulator on 1 September 2013. As the Principal Regulator, the Secretary of State has a duty to do all he/she reasonably can to promote compliance by the Governors with their legal obligations in exercising control and management of the administration of the charity.

The general duties of a corporation as an exempt charity include

• Acting reasonably and responsibly in all matters

• Acting in the best interests of the college and managing any conflicts of interest

• Applying the income and property of the college only for the purposes set out in the constitutional documents

• Protecting all property of the corporation

• Investing the funds of the charity only accordance with their powers of investment

• Regularly reviewing the effectiveness of the college

Specifically in relation to FE, this also typically means compliance with the Instrument and Articles of Government, having regard to the Charity Commission’s guidance on public benefit, and ensuring that the funds and assets of the corporation are only used for the purposes set out in the Further and Higher Education Act 1992 and the governing documents of the college.

The guidance describes the overall aims of the Principal Regulator as ensuring that charity trustees meet their legal duties as referred to above that will in turn increase public confidence in charities and promote awareness and understanding of the public benefit of having those resources.

The guidance has also issued five principles of good regulation, namely proportionality, accountability, consistency, transparency and targeting. These principles are designed to ensure the corporations act appropriately and in accordance with charity law. The guidance has stated that by following the above aims this will ensure that FE corporations do not notice any difference in the way they are regulated. Given that this guidance has only just been released, it will be interesting to see how this will affect governance within FE colleges.

One of the key issues with any form of charity is to ensure that serious wrongdoing can be reported swiftly and taken seriously. The guidance has set out how to report serious incidents and complaints to the Principal Regulator. Serious incidents will include but be not limited to fraud, theft, links with terrorism or the college having no policy to protect vulnerable students.

Rather than issuing any form of sanction at the initial stage, the Principal Regulator will be keen to see how the college manages the incident, including how it has reviewed its systems and put in place adequate protection so that the incident never occurs again. However, if the Principal Regulator considers that further action is necessary then it may work with the Skills Funding Agency to open an investigation.

The guidance will undoubtedly be helpful to FE colleges although the proof will be very much in the pudding as to what, if any, changes are made as a result of the guidance being issued. However, it is noteworthy that paragraph 11 of the guidance states that “…on a day to day basis, Corporations will not notice any difference in the way that they are regulated”.

Matt Kelly is a partner at Thomas Eggar, the law firm