Consequences for PTA not registered as charity or filing reports

[Lamamama]

Any experienced PTA trustees or treasures here? I desperately need advice. I joined a PTA committee about two years ago. It is all very clique and political, but very successful with fundraising (£20,000-£26,000 per year, possibly more). I always assumed that two Co-Chairs and Treasurer (all involved in PTA for many years) handled the financial reporting. Over time, I noticed multiple issues with record keeping e.g. Constitution missing, meeting minutes not taken or shared, list of committee members not kept or updated as people resigned or joined, projects funded without vote, etc. A former co-chair who resigned was "co-opted" back as committee member without any vote (in spite of objections from four committee members), the Treasurer (her spouse!) was one of those who didn't allow us to vote. I tried to implement some basic good practices but they were usually dismissed as "bureaucracy". I managed to get hold of the Constitution eventually, it says PTA must appoint two independent auditors to sign accounts, We never appointed them, to the best of my knowledge. This year I also established that PTA was never registered as a charity with Charity Commission, so it's unlikely that we filed all due report and accounts. I reviewed the Charity Act 2011 and Charity Commission requirements and shared my concerns with the headteacher. He had a word with the school business manager (who has been on PTA committee for many years) who now promised to register PTA as a charity. I have no reasons to think any funds were misappropriated, I suspect the people were just ignorant of requirements and/or negligent. Obviously, there is no way to be 100% certain unless accounts get audited. My questions are: 1) Is Charity Commission likely to apply any penalties or fines for failure to register and submit reports for years?; 2) As we didn't have formally appointed trustees, are all committee members considered as trustees, or only Co-Chairs, Treasurer and Secretary?; 3) I assume we would need to file accounts for previous years retroactively. How many years back do we have to go?; 4) Constitution requires we run AGM in Autumn term. How do we handle elections? I think it is our duty to tell the truth, on the other side it would be bad for morale and will put people off from helping PTA or joining the committee. I really don't want to hurt the school reputation or morale, but equally I don't want to be complicit in this murky affair. Thank you

I think you need, urgently, to register as a charity. Ideally the officers of the PTA should do this along with the Business Manager. In other words the PTA needs full ownership of the process and the responsibilities that go with being a charity.

I doubt very much that the CC will be interested in you before you register. I’m
amazed the business manager didn’t say anything about registering much earlier though. All LAs give advice about this.

You need to agree who will be trustees. The Charity Commission gives advice on this. Sometimes it is all the committee and sometimes just the officers. The second is preferable in my view as you don’t want too many changes.

When you become a charity, I suggest you adopt a new constitution. This is because you need to identify the trustees and ensure you have a constitution that meets the requirements of being a charity. What are you set up to do? Who are you benefitting? How are you going to raise funds and spend the money? What accounting arrangements are there? Hiw are officers elected? How will the charity be wound up if it needs to be? Who is the membership of the charity? What are the agm requirements? There are plenty of examples of constitutions that would work. I would also suggest you adopt financial regulations. These clarify how money is accounted for, who can agree to expenditure and banking arrangements etc. If safeguards everyone from accusations.

If you become a charity, I don’t think you submit previous accounts. You submit them in the future as required by the CC. Previous accounts won’t be of interest because you had nothing to do with the CC. However I accept I could be wrong. You can call a special meeting for the parents to agree to the changes such as the new constitution and I would elect officers at the agm. Ask for nominations then ask parents to vote/agree to the appointments.

I do think your school/parent body has a cavalier approach to the pta though and it needs to be far more accountable and professional in the way it is run. If the parents won’t change, I would walk.

Agree with what has been said, you needed to be registered as your turnover is way over the minimum and the PTA as a whole needs to get "bureaucratic" so that they do meet the minimum standards expected. I wonder whether it needs to be spelt out to the people running the PTA that they are leaving themselves wide open for all sorts of accusations which may or may not be true but if they mismanaging the association could be the way it can be suggested.

I think the other thing that needs to be said is that the PTA is a different organisation than the school and that officially the PTA do not have to spend the money raised on the school, it is entirely their decision. I wonder reading your post what the relationship is between the school and the PTA as it reads as though the money is just handed over to the school business manager. It is in the school's best interest to ensure this is all sorted out correctly because otherwise it could come back to bite them at some stage with bad publicity for the school.

What standing does the PTA have? Is it a separate legal entity? If not, are the committee members aware that they may well be personally liable for any losses of the PTA. Usually, there won't be any but if someone is injured at an event, then it would be soemthting to know about.

I have always understood that if an event is on the school premises, that the school/LA would cover liability. However there might be some exclusions such as fireworks (don’t do them!) where the insurance is an extra cost due to the high level of compensation that could be incurred. I cannot remember taking out separate insurance for the summer fete or the school disco for example. However the school bursar should be clear about the situation for individual schools. It is my understanding that because teachers are involved (PTA) plus the children and parents, that use of the school premises for fund raising is classed as a standard community activity.

Regarding what a PTA can spend money on: I have seen this set out in the constitution. It can specify that it must be on goods and services that enhance the education and wellbeing of the children in the school. I have found it good practice to liaise with a school representative on what the school would like but also for the committee to have ideas as well. Sometimes schools have a major project and all funds go towards that. However if that’s a long term one, current children can be left with no extras so there needs to be a balance.

As a charity, the trustees are responsible for the charity. Charities are governed by the rules of the Charities Commission. Therefore they are separate from the school.

If there is a loss, it would be down to the trustees who could be removed by the parents when the losses are reported at the agm. However if it’s short term expenditure for an event that makes money, that’s ok. If the event is lossmaking, they must find a way to make the money up in the near future if there are no reserves to cover the loss. Or pay it themselves. It is the responsibility of the trustees to run it efficiently and make decisions that are financially sound. The constitution should make it clear that one function of the PTA is to raise money but there are usually social benefits mentioned too. These could make a loss. However, usually PTAs stick with tried and tested events so making a loss doesn’t arise. Eg: you might charge for teas and coffees but you could offer them for no charge as a social benefit. Spending lots of money to try and make money isn’t good practice unless you are certain of the outcome.

When you register as a charity, you will need to submit your constitution. I'd highly recommend being members of Parentkind (if not already), and using their constitution. This membership also gives you insurance.

Once registered as a charity, register for Gift Aid. And inform your bank, as it may require some changes to your account in the background.

I wouldn't expect the CC to be interested in past accounts, but they should be in good order from this point on. The CC has forms to complete for end of year which are pretty straightforward. You don't need your accounts audited, but they do need an independent inspection - not as detailed as an audit, does have to be someone not on the committee though. We have a lovely parent who's a former accountant and does it for free each year.

We have a simple AGM. Run through last year's activities, funds raised and what the school want. Quick show of hands that we're happy to spend that. Then onto positions - Chair, Vice Chair, Secretary and Treasurer voted in. Usually if someone is happy to take on the role, another person proposes them and someone else seconds. If no-one objects, they're voted in. Never had a situation in 5 years where someone wasn't voted in but a couple of years with empty positions for a couple of months!

I was Treasurer for 4 years, stepped down this year. We raised £35k last year, so a lot of pressure to abide by the rules and I was frequently steering other committee members when they'd go off-piste not realising they needed a particular licence (despite extensive handover notes!!)

Just for clarity, the PTA does not have to be a charity. If they do not represent themselves as a charity and pay tax on any income they receive from members they would not have to register with the Charities Commission. However, I suspect they claim Gift Aid and have not been paying tax. They therefore need to register as a charity as quickly as possible to get themselves in order.

Not true @prh47bridge. When the income is over £5k, you should register as a charity. OP indicated income was well over this threshold.

Not true @prh47bridge**

It absolutely is true. An organisation is not compelled to be a charity. It can remain as an unincorporated association regardless of size. If you do not want to be a charity you must not represent yourselves as a charity (preferably, you should make it clear that you are not a charity at every opportunity), you must not use Gift Aid and you must pay tax on your income. However, if an organisation wants to take advantage of the tax breaks available to charities (such as not paying tax) it must register once its income exceeds the threshold.

From PTA UK (because this isn't just an organisation, it is a PTA that has been set up for the purposes of fundraising I.e. it has a charitable purpose)

We aren't currently a charity, should we become one?
It may seem odd, but this isn't really a choice that you have! Whether you are a charity or not is something that is determined by charity law. If your organisation has exclusively charitable purposes and operates for the benefit of the public, then you are a charity in law. It's likely that a PTA is considered a charity whether it is on the register or not.
If your income exceeds £5,000 a year, you must register with us - you can do this online. You can legitimately be a charity but not be registered with us if your income is under £5,000. If your income remains under £5,000, you may wish to register with HMRC to be recognised as a charity for tax purposes.

Interesting. This is not my area of law but this differs from the advice an organisation with which I am heavily involved received from someone who is a leading expert in charity law. He was clear that, even though our purposes are charitable and we raise money for charitable purposes, we could decide not to be a charity (although there are consequences in doing so - no Gift Aid, having to pay tax, etc.). I wonder if this is an area which hasn't been tested in the courts and so isn't entirely clear.

Could you link that PTA info as I agree with PRH - there is NO legal requirement to become a charity.

If a PTA is affiliated to the NCPTA then they have to abide by the national rules

but Charity law is a separate issue

www.pta.co.uk/running-a-pta/managing-your-pta/faqs-charity-registration-and-governance.aspx

www.parentkind.org.uk/Info-sheets/Charity-registration-in-England-and-Wales

Parentkind is the old NCPTA, the full guidelines are members only and I registered last month when I stepped down, but the info you can access on the link above states you must register if income (Not earnings/profit) is over £5k.

Law is not my area of expertise, but my understanding is that is the purpose is SOLELY charitable, then you are a charity. So if you also have non-charitable purposes, you wouldn't be a charity. Given that PTAs are usually created for the purpise of fundraising for the school they are associated with, i don't see how they are anything other than a charity - which also appears to be the view of the two PTA support organisations in the UK.

Whether an organisation is a charity or not is a matter of law by reference to its constitutional purposes. If your PTA is established “for charitable purposes only” it is a charity: Charities Act 2011, s1(1). The Act provides a list of charitable purposes at s3, and imposes a “public benefit” test at s2. Your entity either falls within the statutory definition of a charity, or not.

The provisions as to which charities must register are set out at s30 of the Charities Act 2011.

If you qualify as a charity under s1 then you have to register unless you fall within s30(2). The categories under s30(2) are, in summary: (1) exempt charities dealt with under separate rules (this applies only to a short list of entities such as universities, museums, galleries, Kew Gardens etc), (2) excepted charities (see below) or (3) charities whose gross income is under £5,000.

Here’s a published list of “excepted charities” for the purposes of s30(2)(b) (though I don’t warrant that it is complete or up to date).

I can't see any reason why you wouldn't register as a charity? Helps with frameworks, rules, expectations and clarity of role.

And kudos to the committee - 20-25k is huge! We work hard at ours and make around 12k/yr profit.

Being picky (and drawing on the expertise of my friend who is a leading expert in charity law), the Charities Act s1(1) says that a charity is an institution established for charitable purposes only. It does not say that an institution established for charitable purposes only is a charity. He takes the view that this is the same as saying a dog is an animal with four legs. It does not mean that all animals with four legs are dogs.

Government guidance (CC4) says, "to be a charity your organisation must have charitable purposes only". Again, it doesn't say it the other way around - it does not say that an organisation that has charitable purposes only must be a charity.

Government guidance for charities giving grants to organisations says, "Don’t assume that an organisation with similar purposes or activities to your charity is a charity". Not very definitive but suggests that an organisation may have charitable purposes but still not be a charity.

As I say, this is not my area of law.

I confess I am a bit surprised at your learned friend’s “dog” analogy, prh47bridge

Section 1(1) defines the term “charity” for the purposes of the law of England and Wales. So when s30(1) says “every charity must be registered [subject to s30(2)]” you look back to s1 to understand what is meant by “charity”.

If we’re going to deal with it in dog terms then surely the s1 analogy would be along the lines of “for the purposes of the law of England and Wales, “dog” means an organism whose DNA corresponds to [insert dog DNA criteria]” and the s30 analogy is “every dog must be microchipped”.

In each case there is a public-interest purpose behind the legislation. The public interest behind the charities registration rules is to ensure that the public register of charities which the Commission is required to keep (s29 of the Act) is as complete and useful as possible. And, back to dogs, you can’t just say, “it looks like a dog, and barks like a dog, but I have decided it is not a dog so won’t bother with microchipping”.

...or rather “My pet Rover looks like a dog, barks like a dog and has dog-specific DNA, but I don’t want him to be subject to the compulsory microchipping regime so I am going to decree that he is Not A Dog”.

(Caveat: I know precious little about dog law).

I know of LOTS of fundraising / charitable groups that are "unincorporated associations"
it is perfectly legal and still very common.

Its riskier for those involved as there is no legal separation between their property and that of the association
but its legal

For a PTA to not be affiliated and registered does seem rather odd though as Gift Aid is a rather jammy bonus for charities

Thank you everyone for input. At this stage, we are not debating whether to register as a charity, we are going to do it. We never paid taxes on our profit, not operating as a charity and pay taxes wouldn't make sense. As a PTA, we have a Constitution (as mentioned in my original post), although we didn't stick to some of the rules (independent review of accounts). We have had a PTA UK membership and insurance for a few years at least, although I read the insurance might have be invalidated by not registering as a charity. My main concern was really if there are likely to be any penalties for not being registered with Charity Commission and how to break the news to parents at the next AGM.

No penalties that I'm aware of
(I do independent examinations of charity accounts)
NB you do not need an "audit" at that size, you need an "independent examination"

Parents at AGM
"Hey guys, we have done well in the past, we'll do even better now that we are fully compliant with the latest regulations and can claim gift aid on some things to make your money go further"

All positives
no negatives

My LA advises PTAs to become charities if they raise over £5000 pa. It’s good advice I think!

It is a positive move to register as a charity. It will clarify thought processes and the PTA should take ownership of what is required. Therefore following good principles will be easier. I think telling the parents you wish to become a charity won’t be difficult. Just announce it in the agm papers and give the benefits. They must agree a new constitution if you need one. Using a standard one is the best idea because of the necessary clauses. It will make life easier in future.

It's all good news for your AGM. As a registered charity, you'd have access to gift aid and fundraising schemes e.g we were our Co-Ops nominated local charity for the past year, we've earned over £500 and the only work was the initial submission. We get £500 from matched funding, around £800 from gift aid.

You just need to follow best practice in terms of AGM and submitting accounts- no bad thing, and will make the PTA more transparent to all parents.

I would certainly advise a PTA to become a charity. The regulatory requirements for a small charity are pretty light touch and you can use Gift Aid to increase income along with other advantages. A PTA becoming a charity is likely to need to rewrite its constitution and tighten up its governance procedures. It may also need to change its objects - fundraising is not a charitable purpose on its own, regardless of how the money is spent. Most PTAs use an object similar to "advancing the education of pupils at X school".

There are excellent templates available for a PTA constitution that is a charity. You must include how it is to be wound up and lots of other straightforward aspects that I mentioned in an earlier post. The committee needs to go through a draft constitution and make sure they will comply with the requirements. They then agree it and recommend it to the parents at the AGM. Parents are unlikely to query it but your main goal is to get the PTA run properly and abiding by your own constitution is a good start. I would add “well-being” of the pupils to “education”. This gives you a wider remit and means you are not just funding gaps in the school finances. You can be a lot more creative.

Making sure it’s followed can be more of a challenge of course but at least you will have the framework.

You only need to fully register once you hit a certain income level, and you only need an audit for larger charities (under that it's an independent examiner, much less). I'm not experienced in pta, but our church only had to register once income went over £100k and even then we don't need a full audit.