Have you ever wondered why your setting is a charity?  Gloucestershire has one of the highest number of charitable preschools in the country and at times you might be wondering why you bother!  At PATA we are passionate about the benefits of charitable settings but sometimes that gets lost in the day to day difficulties.  We thought we’d remind you!

• Being a charity means that you are there for the benefit of the community.  All money goes directly back into the community for the benefit of the children – you aren’t paying shareholders or directors.
• Being a membership charity means that parents are directly involved in the care and education of their children.  This could be by serving as a trustee on the committee, volunteering in setting or fundraising for you.
• You can raise funds for the setting both locally and by applying for grants.

We’ve had a few queries recently about settings that are thinking about changing from unincorporated charities (which most PATA Charitable Members are currently) to a Charitable Incorporated Organisation (CIO) charitable structure.  On the back of this we’ve been doing some research to see if we think the benefits outweigh the amount of work involved.

 

There are two models of CIO structure, association and foundation.  According to the Charities Commission (CC) guidance you should chose the model which is closest to the current structure of your charity, which for groups using our constitution is the association model.  We have investigated two different approved CIO constitutions which have been specifically written for Early Years settings.  One of these is under the foundation model and one under the association structure. We would urge caution on following the foundation model as not only does this go against the CC guidance but also against the ethos of the community group.

The main benefit of becoming a CIO is that it reduces the personal liability of the trustees.  In short, with the current structure, the trustees are the employers and are in theory liable for any financial shortfalls that the group has (e.g. if you closed and needed to pay out redundancies or had debts, the creditors could chase the trustees for that money). Under a CIO, the charity itself is a legal ‘person’ and so that is the employer/debtor and not the individual trustees. In an unincorporated charity (most groups current structure) the liability can be mitigated with Trustee Insurance which we have always recommended that you have.  However, in both scenarios if the trustees have made unsound, reckless or illegal decisions they may still be personally liable. 

Many groups are looking at the CIO structure in the belief that it will reduce the number of trustees required, therefore making it easier to recruit and to retain a trustee board.  Under the foundation model that we have looked at, the requirement is still for there to be a minimum of five trustees, which is the same as our own constitution.  In fact, under our new constitution in extreme circumstances we can give permission to reduce this number further because the Charities Commission have given PATA authority to make changes where required.   Under the association model that we have looked at, the number is reduced to three, but the requirement is still that there is a majority of parent members.  This would require at least 2 parents and then one additional person, who could be a member of staff.  There is a further complication that the member of staff could only join as a trustee once the new CIO has been set up and approved by Ofsted, so this would in reality give you 4 trustees, at least for a cross over period. 

Another attraction for the CIO model is that there aren’t fixed officer roles.  However, you still need someone to act as Chair for each meeting, someone to act as secretary and someone to act as treasurer.  These could in theory change each meeting, but in reality it is likely that you will settle into roles as is the case currently.  We often see that the Chair carries the burden of the setting, but actually in our current constitution the Chair has no more or no less responsibility than anyone else.  The only specific roles for them are the chairing of meetings and holding a casting vote in the event of a tie.

A further issue with the association model is that parents must ‘opt in’ to membership.  In the current model parents with children at your setting are automatically members (one per family).  We feel that requiring parents to actively opt in may present problems and it isn’t clear what happens if the parents choose not to do this.

If you are interested in becoming a CIO you would need to register the CIO with the Charities Commission (having found a suitable constitution to adopt), and also register your provision with Ofsted.  Because it has a new legal ‘owner’ the Ofsted registration starts from scratch.  This means that you lose your current grading (e.g. if you are Outstanding you are no longer permitted to advertise that).  If someone searches for your setting it does link previous reports at the same postcode.  Ofsted will not necessarily come out straight away to inspect the setting (they can do the registration checks by phone), but you will be due an inspection within the first 30 months of operation. 

You will also need to consider that you must change the name on your bank account and with any suppliers.  You will also need to do this with your lease, or with the land registry if you own your property.  Some types of lease also require registration with the land registry which you are likely to need to pay a solicitor to execute.

If you have adopted our new constitution you should remember that it allows the following:

• 5 trustees minimum, of which 60% can be non-parents.
• Maximum service of 9 years (extended from 6)
• Ability for staff members to join the committee (but not be officers).  This means that your Manager can be the Nominated Individual for Ofsted, although there must be sufficient checks and balances in place if this is the case.

You have probably gathered from reading this that we aren’t really convinced that the benefits of becoming a CIO outweigh the work and time involved.  Our new constitution has been written/amended in response to the issues that we know you, our members, face.  We firmly believe that it is a strong constitution for you to have in place, and if you use it, along with the guidance notes, you will have a strong committee in place to support your setting.

Do get in touch if you want to discuss this further!