COMMITTEE FOR SOCIAL DEVELOPMENT

OFFICIAL REPORT

(Hansard)

Charities Bill

17 January 2008

Members present for all or part of the proceedings:
Mr Gregory Campbell (Chairperson)
Mr David Hilditch (Deputy Chairperson)
Mr Mickey Brady
Mr Fred Cobain
Mr Jonathan Craig
Ms Anna Lo
Mr Fra McCann
Mrs Claire McGill
Miss Michelle McIlveen
Mr Alban Maginness

Witnesses:
Mr Dermot Curran )
Ms Majella McCloskey ) CO3 — Chief Officers 3rd Sector
Ms Carol O’Bryan )
Ms Wendy Osborne )

The Chairperson (Mr Campbell):
We now come to the marathon that will be the Charities Bill. We have officials from CO3 with us. You are very welcome, and thank you for coming along and supplying the Committee with hard copies of your presentation.

Majella, do you want to introduce your team? We will start with your presentation, followed by members’ questions.

Ms Majella McCloskey (CO3 — Chief Officers 3rd Sector):
I thank the Committee for inviting us along to give evidence.

I am Majella McCloskey, and I am the director of CO3 — Chief Officers 3rd Sector. I am accompanied by three CO3 members: Wendy Osborne, who is the chief executive of the Volunteer Development Agency; Carol O’Bryan, who is the chief executive of the Simon Community; and Dermot Curran, who is the chief executive of the Belfast Community Housing Association and is also CO3’s treasurer. Wendy and I will make the formal presentation, and Carol and Dermot will help us to answer any questions.

CO3 is a membership body for the people who head up charities in Northern Ireland. It has 175 members, and it looks after the professional and personal development needs of those members. CO3 also keeps members well informed by sharing information, and it investigates policy issues from time to time on particular subjects. That is a key point; with charities that have paid staff, it is likely that their chief executives will have the lead role on governance and relations with the new charity commission.

We thought that it might be helpful to give members a flavour of the charitable sector in Northern Ireland. It is important to point out that there are some large charities in Northern Ireland, with a turnover of more than £10 million to £20 million. They have large staff numbers, both people who work in Northern Ireland and others who are based here for organisations that operate in other jurisdictions such as the South of Ireland, Britain and internationally. There are also some small community-based organisations — groups that come together because of a shared interest such as local community groups, historical associations, and so forth. It is a broad church, for want of a better word. A wide range of groups is involved, and it is crucial to bear that fact in mind.

The sector is made up of not only indigenous and local charities but charities that operate on an all-Ireland or UK basis. Indeed, some charities that are based here operate on a global level — for example, the Mexico Child Link Trust.

There is great breadth in the charitable sector. Some charities are schools, universities, playgroups, local community groups and civil liberties organisations. The breadth of the charitable sector in Northern Ireland is tremendous. The sector is vibrant, and I feel proud to be a part of it. The sector has played an important role in Northern Ireland society and should continue to do so.

What is CO3’s core message? Why are we here today to give evidence to the Committee? It is important to say at the outset that we welcome the establishment of a charity commission. We have talked extensively to, and carried out consultations with, our members since the idea of a charity commission was first mooted in 2006. It is important that there is regulation, and we believe in the importance of accountability. We are mindful of the fact that we receive public money, both from Government and from donations from the public. We are aware of all those issues, and it is important that organisations are accountable and transparent. There is a need for a charity commission.

That being said, there have been very few cases of fraud or mismanagement of money in the charitable sector in Northern Ireland. It is really a matter of having a common charities register so that more information is available — for example, how many charities there are and what they do.

That being said, it is important that the commission is properly established and has the resources to do the job that it needs to do and that it is accountable in its operations. The commission must understand and value the work of charities in Northern Ireland in its approach and operation.

In our submission, we proposed an amendment to the Bill that focuses on valuing the importance of charities to civil society in Northern Ireland. We are not suggesting that a charity commission should champion the role of charities or that it should represent charities, because bodies already exist in the sector that do that, and do it very well. The charity commission should have a built-in ethos that recognises that charities are important in Northern Ireland. The commission should be mindful of the importance and value of charities. If that ethos existed, it would set the tone for a good relationship with the charitable sector and for the commission being proportionate in the way in which it deals with organisations. Thus, if an organisation is very small, the commission will be conscious of that in its operations. That is a key point.

Ms Wendy Osborne ( CO3 — Chief Officers 3rd Sector):
I will talk about bureaucracy and accountability. We all know that this is a highly technical, complex and wordy Bill. The legislation will not sit in isolation; it will sit alongside other policy initiatives that deal with charities and the voluntary and community sector. It is important that it does not overburden organisations by requiring them to prepare different sets of submissions and annual returns for various Departments and the charity commission. That would not be an effective use of a charity’s resources.

Although there must be some bureaucracy and a level of accountability, there is a concern that if the people who run the charity commission do not understand that it must not sit in isolation, it may be ineffective in conducting its business.

It is right that charities, particularly when they are in receipt of public funding, should undergo an increased level of auditing and reporting, and the new charity commission must take account of that and ensure that such procedures are as streamlined as possible. Such accountability will help everybody to understand how charities work.

The subject of trustees must also be considered, including matters relating to the establishment of the incorporation of trustees and charitable incorporated organisations. Although those new provisions are to be welcomed, the charity commission must understand how they will integrate with existing arrangements, and established charities and organisations will have to consider the implications of the new arrangements and make choices about what they will do, which will depend on understanding the regulations and creating effective bureaucratic systems.

When considering trustee eligibility, the nature of Northern Ireland must be taken into account, and issues relating to that must be brought on board and understood to ensure that people who may wish to be trustees are not automatically excluded. One size may not fit all; attempts to legislate for only one size deter people and create difficulties for the very people whom the legislation was intended to encourage and enable. We do not wish to stop charity; we wish to ensure that a charity is as effective as it can be.

Proportionality is another key issue. All groups and organisations that wish to attain charitable status will be required to register with the charity commission and, in most instances, provide similar information. I will draw from my own experience; the organisation of which I am the chief executive — the Volunteer Development Agency — has a revenue turnover of around £1 million; however, I also happen to be the chairperson of a local historical society, which has no paid staff and revenue of perhaps only a couple of hundred or a few thousand pounds a year. Auditing requirements for those bodies will be different, which is to be welcomed; however, in all other regards, charity commission registration will be exactly the same. If the legislation is to work, proportionality must be considered in order that such local historical societies and volunteer-led groups will still be eligible for charitable status but will not have the bureaucratic burden that one would wish for a large charitable organisation, which might be responsible for large sums of public funding. The key issue is proportionality, and the legislation does not adequately recognise that and will not enable the charity commission to regulate charities of all sizes effectively.

There is a question about whether the charity commission will be adequately resourced. A figure of £800,000 is stated in the legislation. Last year, the new regulatory body in Scotland — with a staff of 45 people — had an operating budget of £1·7 million. The nature of what the new charity commission will be asking organisations to do and its regulatory functions will, over time, create a substantial volume of work to register all charities in Northern Ireland. If the charity commission is to create guidance and be responsible for the accountability of that guidance, those functions must be adequately resourced. Experience tells us that charities will be required to ensure that they conform to the regulations. Therefore, the regulatory body will have to ensure that those procedures are as streamlined as possible, and resources will affect that process. Ultimately, the problems with conforming to regulations will impact on charities’ work, and I do not believe that any one wishes that to be affected.

There may also be resource implications for charities. Clearly, my organisation and organisations that are members of CO3 will have to consider, and take advice on, what they do and how they will conform to the new regulations. If that becomes an issue, additional legal advice may have to be sought, which will have resource implications for charities.

The legislation allows the new charity commission to request payment for certain things, if that is deemed appropriate. That may never come to pass, but the legislation allows for it. Regulation is good, but it must be undertaken with the aim of allowing the charitable sector in Northern Ireland to flourish. Therefore, the key question for the people agreeing, progressing and implementing the legislation is how to get the balance right.

Majella mentioned accountability, and CO3 does not want to stop charitable organisations operating in Northern Ireland; it wants its organisations to be regulated so that they are as effective as possible. If we agree that charities are important, that they operate in all areas and all communities in Northern Ireland, that they attract public participation and many additional financial resources, it cannot be disputed that they add real value to life in Northern Ireland. Therefore, the charity commission must be independent, because it will regulate a substantial amount of civil society in Northern Ireland. For that reason, it is important that the charity commission is seen to be free from interference and is accountable. The scope and powers of the commission will have such an impact on the charitable sector that it should be directly accountable to the Northern Ireland Assembly.

CO3 welcomes the establishment of the charity commission, and it wants it to be successful. In order for the commission to succeed, it must take the context of charities into consideration and ensure that it does not hamper charities’ effectiveness by being overly burdensome. It must be properly established and resourced, be accountable and, crucially, be balanced and proportionate. The commission must show that it values the context in which it is working.

It is not known how many charitable organisations are recognised, but the establishment of the charity commission will have far-reaching implications for everyone who works in the charitable sector. CO3 is happy to engage further with the Committee for Social Development on any issues that we have raised.

The Chairperson:
We will now move on to members’ questions. Please be aware that there are time constraints, so I would appreciate it if the questions and responses are concise.

You mentioned resources and bureaucracy. Am I right in assuming that some of the larger charities — or those that are part of a larger organisation, either in the UK, the Republic or elsewhere — may be able to draw on resources to help them to cope with increased bureaucracy to which smaller charities may not have access?

Ms Osborne:
Larger charities may have expertise in their own structures and may also have access to additional resources. Smaller charities will not have those resources, especially if they are led and run by volunteers. Additional bureaucracy will be more complex for such charities and their trustees than it will be for larger organisations.

The Chairperson:
I assumed that that was the case. There are greater demands for transparency all around. I have read press articles in which charities state how much out of every pound donated — 85p, say — goes directly to the people that that charity was set up to try to help. Is the amount of money that goes to those people likely to fall because of the increased levels of bureaucracy that the charity commission will demand?

Mr Dermot Curran (CO3 — Chief Officers 3rd Sector):
Housing associations are registered charities, and they receive grant aid for development and for the provision of social housing, so regulations already require accountability. Monitoring and performance management are also considerations. The formulation of common objectives and needs, and the added value of good practice, would be beneficial to the sector, because housing associations are quasi-public authorities and are accountable to the Equality Commission for Northern Ireland and the Northern Ireland Commissioner for Complaints. Therefore, housing associations are already regulated by the Department for Social Development. They are also audited by the Northern Ireland Audit Office. Openness, transparency and accountability are required. The sector does bring added value, which, perhaps, the 85p out of the pound cannot always clearly identify in local communities.

The Chairperson:
Majella, you mentioned the Mexico Child Link Trust. There are charities in Northern Ireland that have links to places such as the Republic of Ireland, GB, Europe and Africa. Accountability is a clear issue for charities that are based in Northern Ireland. How does accountability work if a charity has international links?

Ms McCloskey:
Our understanding of the Bill is that, if a charity is based or operates in Northern Ireland, it will have to register with the charity commission. Some CO3 members who are part of wider operations in Ireland or in Britain are concerned that they will be obliged to make multiple registrations. It will be important for charity commissions to work closely together to ensure that there some of the processes are duplicated in order to avoid additional bureaucracy.

The Chairperson:
If a charity based in Northern Ireland is working in a country that does not have a charity commission — for instance, I do not know whether Mexico has one — how will accountability be affected?

Ms Carol O’Bryan (CO3 — Chief Officers 3rd Sector):
The key issue for such charities is their local links. Oxfam and Christian Aid disperse moneys in the developing world, and their local relationships, which should have integrity, are of the utmost importance.

The Chairperson:
I am not suggesting that there is any impropriety or interference; it was simply a query.

Mr Hilditch:
Thank you for the presentation. Majella, can you elaborate on why you feel that there may be a conflict about the commission’s advice/guidance role, given its regulatory function?

Ms McCloskey:
If you do not mind, Wendy will answer that question.

Ms Osborne:
The primary function of the charity commission will be as a regulatory body. It can be difficult for a regulatory body to provide guidance and information, because it may have to step in and make a judgement about how an organisation has carried out its business. Tensions will always exist. The charity commission will have to provide information about its regulations and what charities will have to conform to. It will have to maintain a wall between that role and the regulatory function.

The Volunteer Development Agency and the Northern Ireland Council for Voluntary Action (NICVA) are good examples of organisations that already provide information and guidance for the sector, which can tap into their resources. In some ways, it is better to use those resources, because the charity commission can then remain independent, which is important, given its key regulatory function. There are examples in England and Wales of the blurring of the regulatory and the advice, guidance and support functions of such commissions, which were no help to those organisations or the charitable sector in general.

Mr Hilditch:
What is your assessment of the current level of advice and guidance that is available?

Ms Osborne:
A range of advice and guidance is available for charities in Northern Ireland. However, it requires quite a bit of changing and tweaking, because it will have to respond to the Bill and to the guidance from the new charity commission on the legislation. The task of informing the charitable sector about the new regulations will be an onerous one.

Ms Lo:
I understand the concerns of the voluntary sector. However, the Equality Commission, for instance, gives advice and guidance to employers and employees as well as having a regulatory role. Such organisations can operate effectively if those roles are clearly defined. I do not believe that there is a significant conflict of interest. Do you have an opinion about that?

Ms Osborne:
A conflict of interest could arise. We have already said that we believe that the charity commission will be required to provide support and guidance — but at what level? Having used the resources of the Equality Commission and other regulatory bodies, I know that they are quite specific about the guidance that they offer and how it is given, so that there is no sense in which they could be seen to be acting inappropriately. They may have to account for the guidance that they have given and for the impact that a particular case may have on the organisation. Those organisations are very careful about that, and rightly so. There are boundaries; it is important that the charity commission understands and recognises those boundaries and is able to operate within them.

Mrs McGill:
Thank you for your presentation, Wendy. You mentioned proportionality, which is a point well made and is something that must be taken into account. How will that work? How will it be decided? Will it be on the basis of numbers? There are large charities and small charities; will that present difficulties? The point has been made that there is a key requirement that must be enshrined in the legislation.

Ms Osborne:
The requirement that the charity commission consider proportionality as it does its business should be enshrined in the legislation. That is important. In the first consultation document, the audit requirements were far more onerous for smaller charities. We welcome that fact that the legislation will change that situation, so that the audit requirements for charities with smaller revenues will be less onerous than they might have been.

They must comply with everything apart from that. Therefore, the charity commission must understand that a small, volunteer-led and volunteer-run organisation that wants to be a charity — for all the right reasons — may require additional guidance about how those returns are to be made. There might be some element of proportionality in relation to the returns that the charity commission demands. That sort of flexibility will be required in order to make the commission work.

Mrs McGill:
Flexibility is certainly desirable. However, you are talking about enshrining it in legislation, and that will be difficult. The commission must be prescriptive. It must say that, if a charity falls into a certain group, it will be required to do such and such, and, if it is a big charity that belongs to a different group, it will be required to do something else. You have made a good point, but I see a problem with it.

Ms Osborne:
There is already an element of flexibility about finances. There are benchmarks in the legislation already. Therefore, other reporting mechanisms could be created around those benchmarks. The reporting mechanisms — the reports and their structures — could be different alongside the different audit reports. There are already provisions with which the commission could work.

Mr Craig:
As someone who has participated in charities over the past 20 years, I would like the CO3 representatives to expand on the issue of proportionality. I can see a huge potential problem, because the legislation will impose a level of bureaucracy on a charity no matter what. That is acceptable for large charities, because some of them are, in all honesty, more like very well-run businesses. Bureaucracy will not be a big issue for them. However, the vast majority of charities are very small and local. They will not have the infrastructure to comply with some of the legislative requests. Can you expand on your points about proportionality?

Mr Curran:
Finance is one issue, because organisations must produce accounts and have them approved by external auditors. Whether an organisation is small or large, external auditors must sign off the accounts. In that sense, there might be no proportionality in dealing with £100,000 a year compared with £1·3 million a year. However, there might be proportionality in what is expected of an organisation from a procedural point of view. For example, in my organisation — the Belfast Community Housing Association — compared with an organisation that employs two to three people, how can I have clear segregation of duties when I conduct business, if I do not have enough people to do that? How can one get around that? Furthermore, how can one ensure that a charity is governed effectively and is open and transparent about the way in which it is being governed, while, more importantly, ensuring that it can still carry out its business?

There are small housing associations with limited numbers of staff, and their management boards have to get involved in day-to-day business issues. As Mr Craig rightly said, larger organisations have a clear separation of duties and hierarchies of personnel and finance. In that sense, the proportionality would be in accepting as a given the fact that small organisations simply cannot do the same thing as larger ones and that, for example, external auditors are happy enough to sign off audited accounts in the context of a small organisation. That might be one measure.

Miss McIlveen:
Thank you for your presentation. Your written submission, under the heading ‘Trustee Eligibility’, states that CO3:

“would wish to ensure that organisations which wish to have trustees who are ex-prisoners, should be able to do so and that the procedures for doing so should not be unduly prohibitive.”

Can you expand on that? I am concerned, because that might include people who had been in prison for crimes such as fraud and armed robbery. How do you deal with that?

Ms McCloskey:
That point came from some of our members. Generally, there is an intention in the charitable sector to involve users of services in the governance of charities as much as possible.

In some organisations that work with ex-prisoners, such as the Northern Ireland Association for the Care and Resettlement of Offenders (NIACRO), in cases where convictions could not be spent, there would still be a capacity — if it were appropriate and within the confines of good governance — for someone who might fall into that category to be involved in the governance of that organisation. That is an issue that is particular to Northern Ireland.

The Chairperson:
Michelle’s concern was about a conviction that related to some form of financial impropriety.

Ms McCloskey:
That would not be appropriate at all. There is quite a lot of information in the legislation about the categories of convictions that would disqualify someone from ever acting as a trustee. CO3 welcomes that. We have to take account of the particular set of circumstances in Northern Ireland.

Miss McIlveen:
Your comment was very general.

The Chairperson:
It is certainly something that the Committee will take up with the Department.

Thank you all for attending the meeting. I hope that you found it as helpful as the Committee did.