The Charities Act 2009 is now law. Its provisions will be implemented on a phased basis. The legislation is designed to regulate charitable organisations, making them more publicly accountable and transparent. A new regulatory authority will be established, to be called the Charities Regulatory Authority (CRA). All organisations whose activities fall within a definition of “charitable purpose” will be obliged to register with this authority.
A new Appeals Tribunal will hear appeals from certain of the decisions of the CRA, and, in turn, the High Court may hear certain appeals from decisions of the Tribunal. The Commissioners for Charitable Donations and Bequests will be dissolved and their functions (and staff) transferred to the CRA.
A number of duties, including new levels of disclosure, will be imposed on charitable organisations and on the members of their boards, committees or trustees (all to be called “charity trustees”). Sanctions are provided for failure to comply with the provisions of the legislation, including fines of up to €30,000 and terms of imprisonment of up to 10 years.
The Act will bring all charitable organisations within a new, common regulatory framework. The framework is well described in the Bill, but more detail will be contained in Ministerial regulations to be published after the Bill is enacted.
The principal implications of the legislation for nonprofit organisations are the following:
New definition of “charitable organisation”
The legislation will apply to all organisations falling within a new legal definition of “charitable organisation”. There are three parts to the definition of “charitable organisation”.
Firsly, the organisation must promote a “charitable purpose”. This is defined to mean one of the following:
• the prevention or relief of poverty or economic hardship;
• the advancement of education;
• the advancement of religion;
• any other purpose that is of benefit to the community.
The phrase “of benefit to the community” is defined by reference to a wide range of purposes, including the advancement of community welfare; community development (including rural or urban regeneration); civic responsibility or voluntary work; health; the advancement of conflict resolution; religious and racial harmony; protection of the natural environment and advancement of environmental sustainability; the advancement of efficient use of the property of a charitable organisation; animal welfare; the advancement of arts, culture, heritage or sciences, and the integration of disadvantaged persons into society.
In addition to having a “charitable purpose”, the organisation must be “of public benefit”. It must be intended to benefit the public or a section of the public, and, where it benefits someone in some other capacity, the benefit must be reasonable in all the circumstances and pertinent to the public benefit.
And finally, the organisation must either be a charitable trust, or one which devotes its property and income to the advancement of its charitable purpose, and is precluded from distributing profit to its members.
The definition of “charitable organisation” will bring into the regulatory regime a number of organisations which, although they may have obtained charitable status for tax purposes, do not currently think of themselves as charities – arts organisations, for example. Some voluntary organisation are specifically excluded. These include human rights organisations, political parties, sports bodies, trades unions, employers’ organisations and chambers of commerce. Organisations promoting unlawful or terrorist purposes, or a purpose contrary to public policy or morality are also excluded.
The Register of Charitable Organisations
The Charities Regulatory Authority will maintain a public register of all charities. In the first instance, organisations already in possession of a CHY number from Revenue will be deemed to be registered. All other qualifying organisations must register – in the case of a new organisation, before it commences operating; in the case of an existing organisation within 6 months of the commencement of the Act. An application fee will be payable. Organisations registering as charities will be obliged to provide information about their trustees, the activities of the organisation and its financial affairs in the preceding 12 months.
Responsibilities of “charity trustees”
Anybody who serves on the board or as an officer on the management committee of a charitable organisation will in future be described as a charity trustee. The responsibilities of trustees include the obligations to ensure that the charity meets all of the reporting and other compliance requirements specified in the legislation, and to report any suspicion of the commission of an offence under the Criminal Justice (Theft and Fraud Offences) Act 2001, with “whistleblowing” protection for those who provide such information.
Annual reports and accounts
Guarantee companies are already obliged under company law to file audited financial statements with the Companies Registration Office, annexed to their Annual Return. The Charities Act will oblige the Registrar of Companies to supply the CRA with a copy of the Annual Return, and – as the CRA will receive the accounts in this way – the guarantee company will not be required to file accounts with the CRA. For other types of organisation, the CRA will have the power to set a precise standard for the keeping of financial records and the preparation of annual financial statements to be furnished annually to the CRA.
Every charitable organisation, irrespective of its legal nature, will be obliged to furnish annually to the CRA an “Annual Report”. This will contain details of its activities in the previous year, and such other information as the Minister may prescribe by regulation.
All of this information relating to charitable organisations will be available for public inspection.
Powers of investigation
Amongst the powers granted to the CRA is a power of investigation of the affairs of charitable organisations. The CRA may appoint an inspector, with whom charity trustees and their agents (including bankers, solicitors and former trustees) must cooperate, furnishing books records and other information requested. In addition, upon application by the CRA, the District Court may order that the premises of a charitable organisation be searched, and books and records seized.
Offences, penalties and sanctions.
A impressive number and range of offences is created for failure to comply with the legislation. The organisation will be liable for non-compliance, as will the charity trustees personally. Penalties include fines and terms of imprisonment. Charity trustees may also be disqualified from acting in that capacity in the future.
Charity trustees may be paid for services to the organisation
The legislation clarifies that trustees may be paid for professional or other services rendered to the organisation, so long as this is not precluded by the constitution of the organisation, and the arrangement is both documented and considered to be reasonable and proportionate by the other trustees.
Indemnity Insurance
It is also clarified that charitable organisations may pay the cost of insuring their charity trustees against personal liability for acts or omissions incurred in the performance of their obligations.
© Linda Scales, 2010
