These days, charities are big business in terms of the amount of money they raise and spend each year, yet there is still no effective regulatory regime for the charitable sector. However, as John Olden reports, this is all about to change

Although charities are often described as being ‘registered’, at present that means only that the Revenue Commissioners have agreed that the charity is entitled to be exempt from taxation and have designated, or registered, it as such. Significant changes are under way for charities operating in Ireland when the Charities Bill 2007, which is currently before the Oireachtas, becomes law.

The Charities Act will make provision for a new body, the Charities Regulatory Authority (CRA), and for registration and regulation of charities. Under the Act, it will be an offence for a person to advertise, solicit money for, or accept money on behalf of, a charity or charitable organisation that has not been registered by the CRA. Existing charities will not be automatically registered by the CRA but will be obliged to make application for registration.

Not all organisations that regard themselves as charities will necessarily be eligible for These days, charities are big business in terms of the amount of money they raise and spend each year, yet there is still no effective regulatory regime for the charitable sector. However, as John Olden reports, this is all about to change registration. What the Bill refers to as an ‘excluded body’ will not be eligible. An ‘excluded body’ is defined as a body that promotes purposes that are unlawful, contrary to public morality, in support of terrorism or terrorist activities or for the benefit of an illegal organisation. A political party or a body whose principal object is to promote a political party, candidate or cause will also come within the definition of an excluded body.

While the first category of excluded bodies might be regarded as uncontroversial, the inclusion of organisations that promote a political cause has already occasioned considerable concern among charities. Almost by definition, charitable organisations can be said to have a political cause: the alleviation of poverty is a political as well as a social aim. In view of current controversies concerning Tibet and Sudan, one can see how charitable organisations that support human rights or promote the rights of ethnic or sexual minorities could be regarded as promoting a political cause.

In the Oireachtas debate at Committee Stage, a number of members of the Opposition sought the removal of the reference to a ‘cause’ so that a charitable organisation would not be excluded from the possibility of being registered as a charity because its principal aim was considered by the CRA to be the achievement of a political cause. The Minister indicated that he could not accept this amendment because advice had been received that to do so might result in bodies engaged in political lobbying successfully claiming charitable status. There will be a right to appeal to a new entity, the Charity Appeals Tribunal, and from there to the High Court.

A registered charity may be de-registered by the CRA where the CRA, after consultation with An Garda Síochána, is of the opinion that the charity has become an excluded body by reason of promoting purposes that are unlawful, contrary to public morality, in support of terrorism or terrorist activities or for the benefit of an illegal organisation. Interestingly, the CRA will not have a similar power to unilaterally de-register a registered charity which it considers to be promoting a political cause although, where the CRA forms the opinion that a registered body has ceased to be a charitable organisation either because it is, or has become, an excluded body or because it has ceased to promote a charitable purpose, it will be obliged to seek a High Court declaration to that effect. If such a declaration is made, the CRA is obliged to de-register the body.

The decision of the CRA to de-register a charity will be capable of being appealed to the Charities Appeals Tribunal, except where de-registration is on foot of a High Court declaration.

CHARITY TRUSTEES

The Act will introduce a new statutory concept of charity trustee. In the case of a charity which is structured as a company, the directors and other officers of the company will constitute its charity trustees. In the case of a charity which is established as an unincorporated body, its officers, and in the case of a charity established as a trust, its trustees, will constitute its charity trustees.

The Act will impose significant statutory obligations on charity trustees. Broadly speaking, where a charity commits an offence under the Act, then the charity trustees can be held liable in the same manner as the charity itself. Offences under the Act will expose a charity trustee to a fine of up to €5,000 or an imprisonment for a term of not more than 12 months where the offence is regarded as relatively minor and tried in the District Court. If a charity is convicted of a more serious offence, then fines of up to €300,000 and imprisonment for a term of up to five years, or both, are provided for in the Act.

Acharity trustee will cease to be qualified to act as trustee if he is adjudicated bankrupt, enters into a formal arrangement with his creditors, is convicted on indictment of an offence or is sentenced to a term of imprisonment. A charity trustee acting as such when not qualified will commit an offence.

AUDITS AND ANNUAL REPORTS

The Act will require charities with a gross income or total expenditure of more than €100,000 each year to have their accounts audited by an auditor qualified under the Companies Acts to act as the auditor of a company and will be obliged to file an annual report and their accounts with the CRA.

WHISTLE-BLOWERS

The Act will include detailed provisions protecting whistle-blowers within a charity who are concerned about alleged breach of the Act. The Act will also impose a statutory obligation on what are termed ‘relevant persons’ to report suspected offences to the CRA. Failure to make such a report will itself be an offence. A ‘relevant person’ will be a charity trustee, the auditor of the charity, any investment firm dealing with the charity and any person involved in the preparation of its annual report. The CRA will have a statutory power to appoint an inspector to investigate the affairs of a charity and will have a right to apply for a warrant to enter and search the premises of a charity.

The Act will also make explicit provision for the CRA to share information in respect of suspected offences committed by a charity trustee or a charitable organisation with An Garda Síochána, the Director of Corporate Enforcement, the Revenue Commissioners and (in an interesting recognition of the economic and business significance of charities) the Competition Authority. The CRA will also have statutory power, having obtained the consent of the Minister, to enter into arrangements with foreign statutory bodies to share information in respect of Irishregistered charities. Before it does, however, the CRA will be obliged to obtain from the foreign entity (which must, broadly speaking, have a similar function to the CRA) an undertaking to deal with information made available to it in the same way as the CRA is obliged under the Act to deal with information that it receives.