Regulation of universities as charities: one step forward, two steps back

Mary Synge

doi:10.1017/lst.2020.39

Abstract

AbstractMost universities (bar profit-making institutions) are charities as a matter of law but, historically, have been exempt from charity law regulation. This paper considers the statutory reforms of 2006, which sought to level the regulatory playing field by appointing ‘Principal Regulators’ of such ‘exempt charities’ to promote compliance with charity law. Focusing on the university sector – where some universities are now registered charities (and regulated by the Charity Commission) whilst others remain exempt – it will note how the reforms have resulted in the application of significantly different degrees of scrutiny and accountability, both between individual universities and between universities and other charities. In part, this is due to the statutory framework itself but, significantly, is also attributable to the radically different approach taken by the Office for Students, which replaced HEFCE as Principal Regulator in 2018. Possible improvements in regulatory practice and statutory reform are offered.

Highlights

There are at least three little-known facts about universities
As exempt charities –so called because, historically, they were exempt from the regulatory jurisdiction of the Charity Commissioners and, later, from the need to register publicly – universities are, and have always been, as much charities and subject to the fundamental principles of charity law as any other charity
Significant changes were made to the legislative framework for charities in 2006 that were designed, in part, to level the playing field between universities and other charities and to promote compliance with charity law by the former through increased regulation

Summary

Introduction

There are at least three little-known facts about universities. First, generally speaking and as a matter of law, they are charities and most are described as ‘exempt charities’. One wonders whether concerns about possible effects on students, or about the reputation of an institution or the sector generally, might influence the OfS in discussions with the Commission regarding a possible statutory warning or disqualification of a governing body member, for example.99 Since it is the Principal Regulator who monitors information supplied by exempt charities and has the sector-specific knowledge and expertise, the likelihood of the Commission seeking to employ its investigative or regulatory powers on its own initiative seems remote. There is scope for promoting compliance with charity law more effectively, by both registered and exempt universities They could, for example, be required to publish an ‘explanation and justification’ of how levels of pay, including incentive schemes and termination packages, are in the best interests of the charity, echoing the NCVO’s guidance for large charities.159. With doing all it reasonably can to promote compliance with charity law, this would seem to be an effective and efficient tool at its disposal.184

The statutory duty of the Principal Regulator to do ‘all it reasonably can’

A case for reform

Conclusion