In April 2007 the Government published the draft Charities Bill 2007 (the “Bill”), which introduced a new Charities Regulatory Authority (the “Authority”), created Ireland’s first Register of Charities (the “Register”), and introduced numerous charity law offences, which could be pursued and enforced by the new Authority.
After nearly two years of advocacy by interested parties and debate in the Dáil and Seanad, the Bill was passed by the Oireachtas on 28 February 2009. The final version of the Act, which will shortly be available for download at www.oireachtas.ie, is largely similar to the Bill first introduced in 2007 and reviewed in our Client Update of January 2008. However, key amendments were introduced in both Houses of the Oireachtas, many of which will directly impact the regulatory obligations of charities operating in Ireland.
KEY FEATURES OF THE ACT
Definition of charitable purpose introduced The Act establishes the first statutory definition of charitable purpose in Ireland. The categories of charitable purpose are the prevention or relief of poverty or economic hardship, the advancement of education, the advancement of religion or any other purpose of benefit to the community. The Act then details in a non-exhaustive list those purposes of benefit to the community. The definition attempts to mirror those purposes which the Revenue Commissioners currently deem to be charitable when determining charitable tax status.
Additionally, charities will be able to promote a political cause in furtherance of and ancillary to their charitable objects, without risking a loss of their charitable status.
While many lobbied for its inclusion, and it was proposed in both Houses, the promotion of human rights is not included in the list of purposes of benefit to the community.
Register of Charities created
All charities carrying out activities in the State (including those with centres of business outside of Ireland) will require to be included on the Register of Charities. The list of materials which must be presented to the Authority on applying is set out in the legislation.
Importantly, charities currently holding CHY numbers from the Revenue Commissioners will be automatically included on the Register and do not have to make a first registration. New charities seeking registration after the implementation of the Register will have to apply for registration.
Additionally, the Authority has been given the discretion to reduce the volume of registration materials for certain charities where “it would be unduly burdensome on them”. As the list of application materials is quite comprehensive, this will be a welcome amendment for smaller charities with few resources for preparing the materials.
Annual reporting, accounting and auditing requirements introduced
The Act introduces an annual reporting requirement, under which charities must submit annual returns to the Authority, detailing the activities carried out in the year. The Act also requires charities to prepare annual statements of accounts, and, in certain cases, to have these accounts audited.
Under the Act, if a charity’s gross annual income or total expenditure exceeds €100,000, that charity must submit a full set of accounts to the Authority with its annual return. Charities falling under this threshold need only submit an income and expenditure account and a balance sheet.
A threshold has also been established in relation to the requirement to have accounts audited. That threshold, however, will be established by Ministerial Order, and cannot exceed an annual gross income or expenditure of €500,000. Charities falling under the threshold may have their accounts either audited by an auditor or examined by an independent person who is to be approved by the Authority and has the requisite skills to carry out an examination of the accounts.
There is an important exception to the accounting and auditing requirements for small charities. Charities whose annual gross income or total expenditure is less than €10,000 (or such greater amount as the Minister may determine, but not exceeding €50,000) do not have to prepare annual statements of account, which would normally be submitted with the annual returns, nor do they have to have their annual accounts audited. The same exemption applies to education bodies, who are defined in the Act and include most institutions of education in the State. Importantly, however, all charities in the State are required to keep proper books of account, without exception.
Charity law enforcement regime created
The Act introduces a number of charity law offences and empowers the Authority to pursue breaches of the law and enforce the prescribed punishments. For example, failure to keep proper books of account is an offence under the Act, as is the failure to comply with any order of the Authority in relation to an inspection of a charity’s books or records.
Carrying on the activities of a charity in the State without being registered on the Register is an offence, as is falsely holding out a body as a charity. The Authority may bring summary proceedings in respect of all offences, the punishment for which is a fine up to €5,000 and/or 12 months imprisonment. Indictable offences, brought by the Director of Public Prosecutions, are punishable by a fine up to €300,000 and/or 10 years imprisonment.
Fundraising provisions updated
The Act largely leaves untouched the current permit regime for public collections of money, but brings the fundraising practices of selling tokens and badges in public and collecting standing orders in public within the remit of the permit regime. Additional requirements regarding the identification of fundraisers and rules about collection boxes are also introduced.
WHAT DOES THE ADOPTION OF THE ACT MEAN FOR YOUR CHARITY?
The adoption into law of the Charities Act is welcomed as a step towards creating a comprehensive regulatory system in Ireland.
However, while the Act has been signed into law, none of its provisions are automatically operative. Rather, the Minister for Community, Rural and Gaeltacht Affairs must declare by Ministerial Order when each of the sections becomes operative. Best estimates suggest that the establishment of the Authority will take at least two years.
Therefore, the practical impact on your charity at present will likely be minimal, but a knowledge of the Act’s provisions is important for all officers of charities and their advisors, who will be required to work within the new regime.