The Charity Commission has begun to publish sector-specific guidance (and assessment reports) on satisfying the public benefit requirement. Guidance on education and public benefit has already been published along with guidance on public benefit and fee-charging. In addition to schools, colleges and universities, organisations capable of advancing education include museums, galleries, libraries and scientific institutes, as well as information media such as the internet, radio and television. In December 2009 the Charity Commission announced plans for public benefit assessments of charities in the arts, health and sports/recreation sectors. Questions remain about the implications, if any, for cultural and arts organisations, especially theatres, galleries and museums.

Charity trustees must have regard to any guidance when exercising powers or duties to which the guidance is relevant. In practice this means that, although trustees are not obliged to follow guidance, they should document good reasons if they decide not to follow it. Trustees now have to make a public benefit statement in their annual reports and, as a result, cultural and arts charities must take public benefit seriously and plan for it in future strategy.

Cultural and arts organisations often charge entrance fees for access to the events they organise. Sometimes these fees comprise a flat fee, such as an entrance fee to a museum or gallery; at other times there could be a range of fees, for instance varying ticket prices to a theatrical performance.

The Commission has distilled a number of principles of public benefit which must be addressed by charities. Of these, the principles most at issue for charities that charge is that any benefit arising from an organisation's activities must be to the public or a section of the public, in respect of which the opportunity to benefit must not be unduly restricted by ability to pay any fees charged; and that people in poverty must not be excluded from the opportunity to benefit. The result of this is that if fees tend to exclude people in poverty from the opportunity to benefit, then there may not be sufficient public benefit to mean that the organisation is acting charitably and indeed the trustees may be in breach of trust as a result.

This issue is most at large in the arena of independent schools and private hospitals, some of which are implementing enhanced bursary and other schemes to try to counter the problem. Furthermore, the Commission advocates the adoption by trustees of imaginative approaches to maximise the benefits to those who cannot afford the fees.

As a result, some independent schools are forging groundbreaking alliances with local state schools to help provide them with educational outputs from the school.

But what does this mean for the cultural and arts sector? Many cultural and arts charities will charge relatively low fees, so that the fee-charging issue never becomes a fundamental factor.

The problem is likely to be more acute for, say, opera houses, where ticket prices will be higher, or even perhaps for exhibitions where tickets are priced at the higher end. One solution might be to offer a proportion of tickets at concessionary rates; but there is a problem in offering means tested concessionary rates because there is a difficulty in means testing in an easy and proportionate way. In its guidance, the Commission suggests various other ways in which arts charities might be able to develop public benefit.

Conclusion

Trustees of cultural and arts charities must pay heed to their individual circumstances and consider the impact of the public benefit test on their operations in the light of the Commission's guidance. Larger charities now need to include a detailed explanation of the way they satisfy public benefit requirements in their annual accounts. In most cases the impact of the new regime will probably be easily accommodated. Most cultural and arts charities already have programmes outside their fee-charging events which help show public benefit. Only in rare cases will the guidance present serious difficulty. All charities, particularly those which are in the form of charitable companies, should consider reviewing their constitutions in the light of these and other recent changes in the law.

David Scott, Head of Charities

4 August 2010