From March 2009 charities need to confirm in their Trustees Report that they are in fact providing a public benefit. There is an expectation that the report will illustrate how in practice such a benefit has been achieved.

Much information is available both from the Charity Commission and our website www.menzies.co.uk where we have two helpsheets available. However when assisting our clients we are still encountering a considerable level of misunderstanding. It is not sufficient that the trustees have properly ‘protected’ the assets of the charity and continued to do what has been done in the past. The benefits do not need to be measurable (but it helps) but must be identifiable and capable of being explained. The benefit must also be for some or a section of the public.

On too many occasions the trustees want to report on the actions they have taken in the year or the results of fundraising activities, not on the actual public benefit delivered. There is no doubt the Charity Commission is delighted to see details of the public benefit delivered and identification of which parts of the public receive the benefit.

The preservation of a charity and its reserves does not, in itself, provide any benefit to anyone.

In June 2010, the Charity Commission published new guidance to charities on the level of reserves that it holds. Where the trustees have a reserve policy or where no policy has been decided upon, then this should be stated in the Trustees Annual Report.

The guidance looks at how a reserve policy should be developed. Although no definite amount is outlined, any level decided on should reflect the circumstances of a particular charity and its needs, which should be specifically identified and costed. Levels of reserves should be maintained in accordance with the policy.

When a charity’s reserves exceed the determined level, steps should be taken to reduce these reserves. This might include increasing the scope of activities, and amending the purpose to facilitate a wider distribution.

There is little doubt that the trustees of many charities should be looking to reconsider what they do and the public benefit they deliver, the level of reserves they hold and their justification and need.

If you would like further guidance on public benefit then please contact charities@menzies.co.uk and a member of our charities team will get back to you.

This article is taken from the Autumn 2010 issue of the Charities Insight.