The Charities (Northern Ireland) Order 2006

Proposal for an Order in Council

October 2006

1.  Introduction

1.1  Law Centre (NI) is a public interest law non-governmental organisation.  We work to promote social justice and provide specialist legal services to advice organisations, our members and disadvantaged individuals through our advice line and our casework services from our two regional offices in Northern Ireland. 

1.2  We welcome the opportunity to respond to this consultation document.  The overhaul of the charity sector is long overdue and there are significant benefits arising from the proposals within the draft Charities (Northern Ireland) Order 2006 (the Order).  Generally, we welcome the changes proposed by the Order which will strengthen the charity sector, giving it a more robust legal and regulatory framework.  Below we have made some general comments in response to this consultation.

2.  Definition of “charitable purpose”

2.1  We welcome the significant changes brought forward by the Order to replace the current four heads of charity by twelve charitable purposes. These purposes more closely resemble modern-day expectations of what causes are, or should be, charitable.[1]  The expansion of the definition of “charitable purpose” will increase the recognition of, and benefits available to, a variety of organisations in Northern Ireland that under existing legislation may have been unable to secure charitable status. 

2.2  The use of virtually the same definition of “charitable purpose” within the Order and the Charities Bill for England and Wales is another welcome development to ensure consistency within the United Kingdom, particularly in relation to tax relief and related financial assistance available to charities.

2.3  We are particularly encouraged by the inclusion of “prevention” of poverty alongside the “relief” of poverty as a new charitable purpose.  This focus on prevention rather than just relief is a helpful expansion of the current definition of “charitable purpose”, which is to be particularly welcomed in Northern Ireland where around 341,000 people live in relative income poverty, 100,000 of these children.[2]

2.4  The inclusion of a further new charitable purpose regarding “the advancement of human rights, conflict resolution or reconciliation or the promotion of religious or racial harmony or equality and diversity” is also of great significance to Northern Ireland.  We welcome the addition of this purpose, which will extend to include the “advancement of peace and good community relations”, which is of particular relevance to groups who have, or may seek, charitable status in Northern Ireland.  

2.5  The inclusion of a miscellaneous category in Article 4(4) to allow for the ongoing development of “charitable purposes” will ensure that there is sufficient flexibility for the law to evolve in response to changes in society and evolving social and economic needs.

3.  Public Benefit Test

3.1  We generally welcome the introduction of a public benefit test, and the removal of the presumption of public benefit.  The current position presumes that charities working under the heads of relief of poverty, religion and education automatically benefit the public, while all other charities have to demonstrate a public benefit arising from their work.  This creates an inequitable divide in the expectations placed upon charities.  In the new scheme, an organisation whose activity satisfies the definition of “charitable purpose” will also have to show that its work benefits the public in some way in order to gain charitable status.  This is a welcome addition to charity law as it will ensure a more level playing field for all charities.[3]

3.2  We support the decision not to include a definition of “public benefit” within the Order but to allow the test to develop by reference to decisions made by the Charity Commission for Northern Ireland (the Commission) and by common law.  This will ensure that the law is able to encompass not only the range of existing purposes but those yet to be defined. 

3.3  We believe it is important that a charity be required to demonstrate, on an ongoing basis, that its purposes are for the public benefit.   We would welcome further information regarding how the Commission will monitor the public benefit test and the regularity of any reporting requirements specifically related to how a charity continues to benefit the public.  It is hoped that the regulation of the public benefit test will not be unduly restrictive; equally there needs to be ongoing monitoring to ensure continued compliance rather than this being a one off test applied at registration and never considered again. 

3.4  Whilst we welcome the application of a new public benefit test, we have reservations concerning the balancing of “public benefit” against “public disbenefit”.  The Order states that regard must be had to how any “disbenefit incurred or likely to be incurred by the public, in consequence of the institution exercising its functions compares with the benefit gained or likely to be gained by the public in that consequence”.   We are concerned as to how the comparison of public benefit against public disbenefit in respect of a charity exercising its functions will be measured.  We would welcome further information regarding the factors that the Commission will take into account in reaching a decision on whether a charity meets the public benefit test, the nature of the comparison between “public benefit” and “public disbenefit”, how the Commission will balance these considerations.    

3.5  We note that the Commission is under an obligation within the legislation to issue guidance in relation to the public benefit test and request that careful consideration be given to the guidance issued.  We support the obligation placed on the Commission to promote awareness and understanding of the test and we expect the Commission to carry out considerable public consultation prior to the issuing of any guidance.  We would welcome the opportunity to contribute further to the development of such guidance and would be happy to participate in the consultation process.  We look forward to the provision of further information regarding how the Commission will apply and administer the “public benefit” test. 

3.6  We would also welcome further information regarding the potential application of the terms of Article 5(3)(b).  This Article refers to circumstances where the public benefit provided by an organisation seeking charitable status is to only a section of the public and where the Commission is required to consider whether any condition on obtaining that benefit (including any charge or fee) is unduly restrictive.  Again, we would request information regarding how the Commission will consider the extent to which any conditions, including charges or fees, on access to a charity’s service may be considered to be “unduly restrictive” and welcome involvement in further consultation on the development of Commission guidance on this issue.

4.  The Charity Commission for Northern Ireland and the Charity Tribunal for Northern Ireland

4.1  We generally support the establishment of the Charity Commission.  There is a need for a regulatory system within Northern Ireland to ensure that charities are accountable for how they function and that they are deserving of charitable status.  The Commission should help to streamline this process and create a more efficient and transparent means of regulating charities and their functions. 

4.2  The Commission also has an objective to increase public trust and confidence in charities.  We welcome this objective, as there is a need to enhance and improve public support and confidence in the charitable sector, especially following the recent media focus on money laundering in the charity sector by paramilitary groups in Northern Ireland. 

4.3   We have concerns regarding the dual functions of the Commission to act as both a regulator and advisor.  We would welcome further information on the exact nature of the Commission’s advisory functions.  Particular comment on how the functions will be implemented in practice to avoid blurring the boundaries between regulation and advice would be beneficial.

4.4  We recommend that the Commission be required to work closely with national regulators in the United Kingdom and Ireland to ensure consistency across the sector.  Building close working relationships between the charity regulators in the United Kingdom and Ireland is vital for the continued development of policy and legislation across the sector.

4.5 We welcome the creation of a Charity Tribunal for Northern Ireland (the Tribunal) to ensure that decisions or directions made by the Commission are open to independent scrutiny.  However, we note that there are no provisions for an internal review and reconsideration procedure before the Commission prior to referral to the tribunal.  Such a procedure would be welcome as a first reference for any queries or complaints regarding Commission decisions and to strengthen the effectiveness of decision-making.

4.6  The creation of the tribunal will be a step forward however, it is not clear how the tribunal will work in practice.  We would welcome further guidance on how the tribunal will operate and the costs involved in bringing a case.  It will be important that the cost of taking a case to the tribunal will not be unduly prohibitive for charities or bodies seeking charitable status.

4.7  The success of the tribunal will depend on people being able to exercise their right of appeal. It will be essential to keep the cost implications of bringing an appeal under review to ensure that the tribunal is able to fulfil its potential.

4.8  In Britain tribunals are subject to the scrutiny of a Council of Tribunals (currently being re-cast as an Administrative Justice Council).  No equivalent scrutiny exists in Northern Ireland.  As a result, we recommend that either a similar body is created in Northern Ireland or the remit of the Administrative Justice Council is extended to cover tribunals in Northern Ireland.

5.  Registration

5.1 We generally welcome the creation of a comprehensive Register of Charities, which is open for public inspection.  However, we have some concerns regarding the implementation of the Register.  

5.2  The Register of Charities will assist in increasing public knowledge and confidence in charities, by making information on the various charities more accessible.  It will also further promote transparency across the sector between individual charities and ensure a clear jurisdictional base for the operation of the Commission and tribunal. 

5.3  We note that unlike the provisions in the rest of the United Kingdom there will be no exceptions or exemptions for organisations wishing to act as charities from registration in Northern Ireland.  This should aid the streamlining of processes within Northern Ireland and again further increase transparency. 

5.4  We have concerns regarding the effect this blanket requirement to register will have on smaller charities operating in Northern Ireland.  It is important that adequate support systems are available to ensure that smaller charities can obtain the advice and support they will need to complete the registration process and to comply with any subsequent reporting requirements.  We trust that as part of its advice-giving role the Commission will provide such support for smaller charities to ensure that the obligations placed on them are not unduly onerous. 

5.5  We also have concerns regarding the requirement for charities already registered in the United Kingdom or Ireland to register separately in Northern Ireland.  We would request further information regarding how registration documentation will be shared to avoid the re-generation of registration and reporting material.  As previously mentioned, this requirement could place an unnecessary burden on smaller charities as the need for duplicate reporting and registration may put off some charities from working in Northern Ireland, which could result in significant losses in the sector in Northern Ireland.

5.6  Clarification is required in relation to the information, apart from the name of the charity, to be included in the Register.  We would welcome the use of risk-assessments prior to the publication of information relating to a charity.  It is clear that there may be a need, in certain circumstances, to limit the publication of information relating to a charity, for example, the names and details of trustees or board members, in the interests of public safety. 

5.7  A plan to phase in the Register to avoid undue administrative delays and to ensure that smaller charities are able to access the advice and support they will need to complete their registration is important.  Further comment on the time frames for the phasing in of the Register would be welcomed.

6.  Accounting Records and Reporting

6.1  While we support the need for more transparent reporting procedures within the charity sector, we have considerable reservations regarding the thresholds that are set for accounting and the audit requirements within the Order. 

6.2  We recognise the need to better regulate the financial reporting of charities and welcome the tiered model of reporting proposed in the Order, which places differing obligations on a charity dependent on its income.  However, we consider the thresholds defined within the Order may be unsuitable for Northern Ireland.

6.3  The Order varies widely from the requirements placed on the rest of the United Kingdom.  In the Charities Bill for England and Wales the accounting threshold is £100,000.  Scotland has recently raised its accounting threshold from £25,000 to £100,000 to mirror this.[4]   We recognise that many charities operating in Northern Ireland have significantly lower annual incomes than other charities in the rest of the United Kingdom.  However, we nevertheless consider that to set the account threshold for Northern Ireland at £25,000 is disproportionately low and may place an onerous obligation on Northern Ireland charities.  Further, the threshold in the Order for charitable companies to provide an accountant’s report is set at £100,000, again considerably lower than the £250,000 figure set for England and Wales.  We would argue that in this regard there should be uniformity across the United Kingdom.  We would welcome further information on the rationale behind these figures, especially when most jurisdictions are increasing the audit thresholds not decreasing them.[5]

7.  Public Charitable Collections

7.1  We welcome the extension of the Order to cover all public charitable, philanthropic and benevolent collections.  We support the increased registration of collections through the requirement to obtain a public collections certificate, permit and, in the case of a door to door collection to notify the Commission of the collection.  Tighter regulation especially around door to door collections is welcome and will assist with increasing public confidence in the regulation of public collections.  It should also help to reduce the instances of rogue charities collecting in Northern Ireland.

7.2  We would welcome further information regarding how information on the new legislation will be disseminated to the general public so they are aware of the need to ensure collectors have a public collections certificate and/or permit to verify them as a bona fide collector. 

7.3 There should be a clear and consistent system for checking the eligibility of organisations wishing to undertake public collections, but it is important that this does not unduly increase the bureaucratic burden on charities.  We look forward to the release of further guidance on the application process for certificates and how they will be issued.  Particular guidance on the nature of the “inquiries” that will be made by the Commission prior to reaching a decision on an application will be viewed with interest. 

7.4  In relation to time frames for the application for permits and certificates we note the use of the terms “prescribed period” and “specified period” within the Order.  It is assumed that further information regarding these time frames will be set out in guidance published by the Commission.  It is important that time frames are not unnecessarily arduous and that the Commission will not require lengthy periods of notice prior to issuing a permit or certificate. There is a need for a considerable degree of flexibility for charities so that they may be able to respond to emergency, or one-off, appeals and in consideration of the limited resources available to smaller charities who may be unable to plan far in advance for public charitable collections.

8.  Other clauses

8.1  We welcome the tighter regulation of professional fundraisers and commercial participators.  The requirement that written contracts exist between parties is good business practice.  Employing contracts will ensure that arrangements are clear and agreed to by all parties at the outset. The existence of a written contract of agreement will ensure better resolution of disputes where they may arise regarding the arrangements between parties.

8.2 The introduction of the incorporation of trustees is a welcome advance in charity law.  The main advantage of this is that the charity itself will be able to hold property in its own name, rather than via a holding trustee, which may be expensive and time consuming for charities.

9.  Conclusion

9.1  Law Centre (NI) welcomes the opportunity to respond to this consultation document.  We trust you will find our comments helpful.  If there is any further way in which we could contribute to this process we would welcome the opportunity to do so.