Public Benefit Guidance June 2009

What does public benefit mean?

The Charity Commission has laid out two basic principles that must be met in order to show that an organisation’s activities are for the public benefit. These are: 

  • There must be an identifiable benefit(s)
  • These benefit(s) must be to the public or a section of the public 

One significant change is that the new public benefit test has removed the presumption that poverty, religious or educational charities benefit the public – this must now be demonstrated. 

What do these principles mean and how do I think about them in the context of my organisation? 

Principle 1: There must be an identifiable benefit and,

  • It must be clear what these benefits are

  • The benefits must relate to the aims of your charity

  • The benefits must be balanced against any detriment or harm

Issues to consider:

What benefits does our organisation provide to the public and are these benefits consistent with our charitable aims? You may find that your objects need to be updated to be consistent with the public benefit you offer (in which case you will need to agree this with the Charity Commission). 

Do the services we offer give rise to any harm? If so, do the benefits outweigh the harm done? 

Example: A drugs charity may hand out clean needles to users to reduce the spread of harmful diseases. This clearly provides a benefit. However, it would be important to consider the potential harm of such a service – for example, could this encourage further drugs use?

Principle 2: These benefit(s) must be to the public or a section of the public and,

  • The beneficiaries must be appropriate to the aims
  • Where the benefit is to a section of the public, the opportunity to benefit must not be unreasonably restricted
  • People in poverty must not be excluded from the opportunity to benefit
  • Any private benefits must be incidental.

Who must comply and when?

For financial years beginning on or after 1 April 2008, all charities must include in their Trustees’ Annual Report details of activities undertaken to further their charitable purposes for the public benefit. This is required under the Charities Act 2006. 

Many charities have already started reporting on public benefit but generally, charities with a year-end of 31 March 2009 will be the first having to comply with the new regulations.

I have identified our charity’s public benefit, how should it be reported?

Public benefit will be reported on in the Trustees’ Annual Report. Currently, Trustees use this to report on the objects and activities of the organisation for the year under review (amongst other things). The concept of “public benefit” should simply be woven throughout these topics as currently reported – for example a charity should discuss the activities carried out to achieve its objects as usual, but then extend this discussion to include a description of how the activities are for the benefit of the public. 

The Charity Commission does not believe there is a ‘one size fits all’ way to report public benefit and does not expect it to significantly alter the structure of the Trustees’ Annual Report, but does expect the report to show that the Trustees have considered the issue of public benefit when examining the aims and activities of their organisation. 

Reporting for smaller charities

Small charities (under the audit threshold - normally income over £500,000 p.a.) are not required to give a detailed report of how the activities are for the public benefit. Simply explaining how they benefited the public in the year and confirming in writing that the Trustees have paid regard to the Charity Commission’s guidance on public benefit in deciding on their activities should suffice (the Charity Commission suggests wording such as “When planning our activities for the year, the trustees have considered the Charity Commission’s guidance on public benefit”; where there is specific guidance for charity sectors you could add “and, in particular, the specific guidance on charities for the…”).

Of course, more detailed information may be included if you wish.

Reporting for larger charities

Reporting requirements for larger charities (over the audit threshold - normally income over £500,000 p.a.) are similar to those for smaller charities, except that more detail is required – for example, a closer examination of key activities during the year along with a detailed explanation of how they benefit the public would be necessary. 

Examples of reporting

The Charity Commission has provided examples of Trustees’ reports which include public benefit reporting. The various elements suggested by the Charity Commission include:

Reporting on principle 1

A statement that the Trustees have paid due regard to the Charity Commission’s guidance on public benefit when examining their aims, objectives and future plans of the organisation (see above for example wording). The report should go on to demonstrate the identifiable benefits provided during the year. 

A statement of the objects and aims of the Charity and a brief description of how these are in the public benefit. The aim of a charity would encompass both what they see as the purpose, and what they hope to achieve. 

Reporting on principle 2

A description of the beneficiaries of the charity’s activities that demonstrates there are no unreasonable restrictions on who may benefit. 

A description of the main activities that took place during the year to further its charitable purposes for the public benefit.

Contact us

To discuss your charity accounting needs, please contact a member of our Not for Profit sector team, email charities@mhllp.co.uk or send us an enquiry online.