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Establishing and Running a Bursary Campaign

January 2014

What are the main legal issues a school should consider when establishing or running a bursary campaign?

The following is an updated extract from an article written by Claris D'cruz, Charities Consultant at Wrigleys  for the Bursar's Review

 

Whilst providing bursaries may not be the only way to pass the public benefit test, many schools are focussing upon what they can do to introduce or extend bursary provision. Some schools may be able to generate sufficient funds from fee income or existing funds to subsidise bursary places. However many schools will need to solicit funds from external sources such as individual donors, corporate donors and perhaps other educational grant-making bodies.

Whilst providing bursaries may not be the only way to pass the public benefit test, many schools are focussing upon what they can do to introduce or extend bursary provision. Some schools may be able to generate sufficient funds from fee income or existing funds to subsidise bursary places. However many schools will need to solicit funds from external sources such as individual donors, corporate donors and perhaps other educational grant-making bodies.

So what preliminary legal issues do governors need to consider before embarking upon a bursary campaign? The main legal considerations are:-

Does the school have the necessary powers?

A school should review its governing documents to ensure it has the necessary powers to undertake the bursary campaign and, once the money has been raised, to award bursaries. This may mean updating the governing documents to ensure that its powers are broad enough to encompass what is being proposed both in terms of any fundraising and subsequently how any monies raised are to be held and utilised. For an independent school incorporated as a company limited by guarantee, it is important to consider whether it has the requisite power to hold any monies raised upon special trust rather than as part of the corporate assets.

 

How should any monies raised be held?

If any monies are raised from external sources for the express purpose of funding bursaries then those monies will be restricted funds which must be applied solely for the purposes for which they were given. There are a number of different ways in which such funds can be held:-

 

1.       The bursary fund could be held by the school directly as a restricted fund. Donations given for the specific purpose of paying for bursaries would have to be held, accounted and applied for this specific purpose. By contrast, bursary monies generated from fee income or other general funds could be held as designated funds, and theoretically undesignated at some future point, if the need arose.

The major advantage of the bursary fund being held by the school directly is that it is relatively straightforward to set up and administer. The major disadvantage is donor perception that if the school holds the bursary funds directly, albeit as a restricted fund, this does not give the same long-term protection as the options below provide to ensure any monies raised will only be used for bursaries. There is a perceived risk that the bursary funds could potentially be subsumed within a school's other funds and inadvertently used for purposes other than bursaries.

2.       If the school has the power to hold funds on special trust it would be possible to set up a subsidiary special "bursary" trust. Given the likely sums involved, once set up, the subsidiary trust may need to register with the Charity Commission as a subsidiary charity. However, it may be possible to get a "linking direction" under section 12 of the Charities Act 2011 to enable the main charity and subsidiary trust to file consolidated accounts and reports.

3.       Some schools have chosen to promote and establish a separate grant-making charity to deal with bursary funds. The school should ensure it has the usual standard power to promote and/or establish a separate grant-making charity. A new charity would need to be established and registered with the Charity Commission. It is advisable for the new charity to be established as a charitable company limited by guarantee in order to limit any personal liability of directors/charity trustees of the new charity.  It is important to ensure that the new company has directors/charity trustees that understand the ethos of the school.  What some schools have done, where they have had a large enough governing body, is to move across some of their existing governors, i.e., some governors resign from the governing body of the school and take up post as the directors/charity trustees of the new grant-making charity.

If a school chooses this option its governors would need to be comfortable with the fact that the school is handing over the responsibility for deciding which pupils should be awarded bursaries to a new independent charity.  Where other schools have done this, their experience is that in practice the directors/charity trustees of the new charity are generally guided by the recommendations made to them by the headmaster.

When determining which option to choose, the governors need to bear in mind the thorny issue of how the Charity Commission will approach this issue and whether they might adopt a 'best practice position'.  Whilst the Charity Commission cannot, as a matter of law, prescribe which approach should be adoption they may well try to steer schools towards either option 2 or 3 as a matter of good practice.  Once the governors have decided which course they want to follow, it would be prudent for them to check that their plans are in keeping with the any guidelines the Charity Commission may have.

Delegation and/or logistical arrangements

If either option 1 or 2 above were adopted the governors would need to ensure that decisions about who gets a bursary are either taken by governors themselves or that there are proper delegation arrangements in place to enable this to be done by a sub-committee.

If option 3 were to be adopted, it would be important to ensure decisions about who should be awarded bursaries are made in good time to enable offers to be made to prospective pupils.

Moreover, whichever option the governors choose they need to ensure that there are sufficient delegation arrangements in place to enable any decisions to be made between their meetings.

How should the terms of any appeal(s) be framed?

It is essential to ensure that the terms of the appeal are consistent with the existing objects and broad enough to allow any monies raised to be used as the school would envisage.  The school needs to consider whether it wants any monies raised to be applied solely for the purposes of giving bursaries to cover the costs of tuition fees, or whether it also wants to use any monies raised to cover the costs of extras, such as school uniforms, music lessons or school trips.

In this context it is important to consider the impact upon potential donors.  The issue is whether some donors might be dissuaded from giving if the money is used to benefit a lesser number because it is in part used to fund extras such as school trips rather than being concentrated upon tuition fees and essentials which would enable a larger number of bursaries to be awarded.  For this reason some schools have a designated 'Headmasters' Fund' or 'Hardship Fund' built up from fee-income, held by the school itself and used to pay for non-essential extras.

Conclusions

Governors are under a statutory duty to report how their school carries out its charitable purposes for the public benefit.

In addition to looking at bursary provision, independent schools should also consider other ways in which they deliver public benefit.  Some schools may have to think about opening up their facilities to the local community or delivering public benefit overseas.  One independent school, as part of a global citizenship project, has re-cycled computers, laptops, sewing machines, books, toys, sports equipment classroom whiteboards, clothes, shoes and blankets to a township school in Lesotho.  However the Charity Commission guidance states that 'to count' towards public benefit any benefits must relate to a charity's purpose.  Many schools have geographical or other restrictions in their objects.  So for all benefits to count it may be necessary for a school to revise its objects and for this it will need to seek Charity Commission approval.

Schools should be identifying the benefits they already provide and exploring ways in which they may be able to boost or augment the public benefit they deliver.

 

The information in this extract is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please contact Claris D'cruz

 

Claris D'cruz View Biography

Claris D'cruz

Consultant
Leeds

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