Sixth form colleges - exempt charity status and trustee responsibilities

This article explains the legal requirements that come with exempt charity status.

Sixth form colleges operate either under the direction of a statutory corporation or are run by an academy trust as a 16-19 academy. A common feature of all sixth form colleges though is that the legal entity operating them – the corporation or the academy trust – is an exempt charity. Operating one or more sixth form colleges and academies is the means through which the corporation or academy trust, as an exempt charity, carries out its charitable purposes.

It is therefore important for those in key roles to understand the legal requirements that come with exempt charity status.

The first point to note is that ultimate responsibility for ensuring compliance with charity law lies with the 'charity trustees'. For a sixth form college run by a corporation the charity trustees are those who sit on the board of the statutory corporation, usually referred to as 'governors'. For a sixth form college operated by an academy trust, the charity trustees are those who sit on the board or governing body of the academy trust, usually referred to as ‘trustees’.

On a day-to-day basis operational matters are delegated to the senior leadership team of the corporation or academy trust. In the case of academy trusts which operate more than one sixth form college or other academies oversight may also be delegated to a local governing body. Therefore, although the buck stops with the governors or trustees (as charity trustees), others involved through the chain of delegation need to understand the charity law requirements to ensure compliance.

Eligibility and propriety checks

It is important to ensure that a governor or trustee is eligible to act before they take on the role. An individual cannot act as a charity trustee if they are 'disqualified' unless they are specifically authorised to do so by the Charity Commission. Disqualification reasons include being bankrupt, having an individual voluntary arrangement, being disqualified from acting as a company director, having unspent convictions for certain criminal offences and being on the sex offenders' register.

As charities, corporations and academy trusts that claim UK charity tax reliefs and exemptions must also meet management conditions in schedule 6 of the Finance Act 2010, which require governors and trustees to be 'fit and proper persons': see HMRC's Guidance on the fit and proper persons test. In addition, as public office holders, governors and trustees must uphold the 'Nolan' ethical standards of integrity, objectivity, selflessness, accountability, openness, honesty and leadership.

As well as carrying out Disclosure Barring Service (DBS) checks, the corporation or trust should therefore get every prospective governor or trustee to sign a declaration, before they are appointed, to confirm that they are eligible to take on the role.  

Trustees' main duties

As charity trustees, governors and trustees have six core duties, namely, to:

•  Ensure that the corporation or academy trust, through operating its sixth form college(s) and academies (as applicable), is carrying out its purposes for the public benefit.
•  Comply with the governing document of the corporation or academy trust and with the law. For a corporation its governing document will be its Instrument and Articles of Government. For an academy trust it will be its Articles of Association.
•  Act in the corporation or academy trust's best interests. It is particularly important to ensure that any conflicts of interest are properly managed.
•  Manage the resources of the corporation or academy trust responsibly including by protecting the property of its sixth form college(s) and academies (as applicable), only applying the property and income of the sixth form college(s) and academies (as applicable) for the charitable purposes, not taking inappropriate risks and taking particular care when investing or borrowing.
•  Act with reasonable care and skill and take appropriate advice when necessary. Governors and trustees must be able to give enough time to their role by preparing for, attending and taking an active part in board meetings and in the meetings of any committees they sit on.
•  Ensure that the corporation or academy trust and its sixth form college(s) and academies (as applicable) are accountable. This includes ensuring accountability through the chain of delegation, when operational matters, tasks or decisions have been delegated.

When dealing with land disposals or mortgages, in addition to fulfilling the general duties above, governors and trustees must include certain statements required by the Charities Act 2011 in the disposal or mortgage documents.

Furthermore, proper accounting records and accounts must be kept. Under charity law, this includes the need to prepare consecutive statements of account and keep records and statements for at least 6 years. 

Strategic oversight

Governors and trustees should set the educational vision, ethos, strategy and goals of the corporation or academy trust. They are also responsible for holding the principal or chief executive (as appropriate) and senior leadership team to account for the educational performance of  each and every sixth form college or academy operated by the corporation or academy trust (as applicable), as well as overseeing financial performance and ensuring that money is well spent.

Good governance

There are three key governance codes available to corporations: the Charity Governance Code, the UK Corporate Governance Code and the Association of Colleges Code of Good Governance for English Colleges. SCFA has published a comparative guide on the three Governance Codes so that each corporation and academy trust can assess which code to adopt.  Corporations must adopt one of the three codes whilst academy trusts can decide whether to adopt a code and, if so, which code to go for. Adopting one of these codes can assist governors and trustees to ensure compliance with legal requirements and achieve good governance in practice. For corporations, following a code can be a useful tool for evidencing good governance requirements imposed by their funding agreement.

Regulation

Exempt charity status means that a corporation or academy trust is not directly regulated by the Charity Commission. Instead the Secretary of State for Education is the principal regulator of corporations and academy trusts. There is a Memorandum of Understanding (MoU) in place between the Department for Education (DfE) and the Charity Commission to facilitate the effective regulation of corporations and academy trusts and a mutual commitment to ensure that these exempt charities comply with their charity law obligations and adopt best practice in governance and accountability. The Charity Commission therefore retains significant protective powers over corporations and academy trusts including to remove a governor or trustee, to institute a statutory inquiry or direct that documents be produced, but in accordance with the MoU will only exercise its powers at the request of or having first consulted the DfE.

Conclusions

Governors and trustees must be cognisant that exempt charity status imposes additional trustee responsibilities under charity law and that complying with these legal obligations and ensuring good governance will promote the long term success of the sixth form college(s) and academies operated by their corporation or academy trust.