COMMITTEE FOR SOCIAL DEVELOPMENT

OFFICIAL REPORT

(Hansard)

Charities Bill

7 February 2008

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

Witnesses:
Ms Jennifer Ebbage }
Mr Alastair Rankin ) Cleaver Fulton Rankin Solicitors
Ms Joy Scott )

The Chairperson of the Committee for Social Development (Mr Campbell):
Good morning. I welcome Ms Jennifer Ebbage, Ms Joy Scott, and Mr Alastair Rankin from Cleaver Fulton Rankin Solicitors to the Committee. I think that you were present when I gave my now customary warning to turn off mobile phones because the session is being recorded. Mr Rankin, if you begin, your colleagues can make their contributions after you. At the conclusion of your presentation the Committee will ask questions.

Mr Alastair Rankin (Cleaver Fulton Rankin Solicitors):
Thank you for inviting us to submit evidence. We are one of the largest firms of solicitors in Northern Ireland, and we act for many national and local charities that come under every category in the Charities Bill. We have a charity unit, which is cross-disciplinary because there are various aspects to charity law; I specialise in trusts, my partner Jenny Ebbage specialises in company work, and Joy Scott specialises in property work. However, we all deal with charities where those disciplines come together. As head of the charity unit, Jenny will take the Committee through our presentation.

Ms Jennifer Ebbage (Cleaver Fulton Rankin Solicitors):
I thank the Committee for the invitation to give evidence. Since it was established in 1893, our firm has kept an eye on the development of charity law here — some of our clients have been with us for more than100 years.

The Chairperson:
Good grief — what age are they? [Laughter.]

Ms Ebbage:
I see one of them at the back of the room. [Laughter.]

The Chairperson:
He is remarkably fresh for his age. [Laughter.]

Ms Ebbage:
I will give Bryson Charitable Group a plug.

We engaged in the consultation process and have produced a response to the draft Charities ( Northern Ireland) Order 2007. We are practitioners of law and have approached the Bill from an operational point of view to understand how the Bill will affect our clients and determine the advice that we give them. I will focus on practical points that we feel must be clarified, and I hope that the Committee finds our evidence useful.

In parts 1, 4 and 14 of the Bill the theme is registration of charities. Northern Ireland is unique in aspiring to register every charity that is involved here so that there is clarity and transparency and a good idea of the size and structure of the sector. The definition of a charity is set out in the Bill as a body or institution that is: “established for charitable purposes only” and is subject to the control of our High Court. There is a two-fold test for a purpose to be classed as charitable: it must satisfy one of the 12 purposes set out in clause 2 and pass the “‘public benefit’ test” set out in clause 3. Clause 16 makes it clear that if an organisation meets those requirements it must register as a charity.

The draft Order stated that every charity established in Northern Ireland or that operates here must be registered, which is different from the provisions of the Bill. At first, I did not see the difference, but it becomes clear in part 14 and clause 167 of the Bill, which had not been in the draft Order; it deals with charities that are from the Republic of Ireland, England or Wales, for example, but which operate for charitable purposes in Northern Ireland.

Mrs McGill:
I am sorry to interrupt, but it would be helpful if you indicated the page in your submission that you are referring to.

Ms Ebbage:
I hope that everyone has a copy of the submissions; I thought that they may help members to keep pace with my presentation.

The point that I am making about non-Northern Ireland charities is that clause 167, which refers to “section 167 institutions”, states that the Department “may” require the commission to keep a register. However, there is no requirement for those bodies to register, even though it is essential that we have clarity and transparency about who is carrying out charitable works in Northern Ireland. One of my recommendations is that we have a compulsory register of section 167 institutions.

I have also recommended that the term “operates” be clearly defined. Does it mean that one engages in fund-raising? Does it mean, for example, that one comes across from Dundalk to Newry one Saturday a year and raises funds by rattling tins in a shopping centre? Is that what is meant by “operates”; or does it mean that one has premises here, employs staff here and provides services here? It would be useful if the Bill clarified what is meant by “operates”. Many of Cleaver Fulton Rankin’s clients are large national organisations that have a branch, office or base here. We also have clients who are based in Northern Ireland and who operate in the Republic of Ireland, England, Scotland, Wales and elsewhere.

Clause 167(3) requires trustees of section 167 institutions to prepare a statement of their Northern Ireland operations and activities and a financial statement. However, it simply requires them to prepare those documents; they could prepare them and put them in a drawer. They should be required to submit such documents to the commission so that they can be made available for public inspection; that way, we would know what those bodies are doing in our jurisdiction.

Under company law, if a company that has been registered in England establishes a place of business in Northern Ireland, it has to register with our companies registry. That is a more limited formal registration than that required for English incorporation. Nevertheless, it provides the basic information on accounts, the body’s constitution, what it does, and the names of its directors. Perhaps a similar registration would be appropriate for a body that is recognised and registered as a charity elsewhere. That might provide a practical solution. I hope that I have explained the matter clearly.

I will now turn to charitable purposes and tax exemptions, which is not, strictly speaking, in the Bill, although the Bill will have implications for it.

At present, if a Northern Ireland charity wants tax exemptions, it makes an application to Her Majesty’s Revenue and Customs in Bootle (HMRC). HMRC considers whether, for tax purposes, a body is a charity — that is, whether a body or trust has been established for charitable purposes only. If a body is eligible, it gets all the tax breaks, which is one of the reasons that people set up charities. We want to ensure that, in considering the definition of charitable purposes when assessing a tax application, HM Revenue and Customs is mindful that there are differences in the charitable purposes definitions in the three main jurisdictions in the UK. For example, the definition “advancement of peace and community relations” is exclusive to Northern Ireland’s legislation. Promotion of the efficiency of the armed forces, and so forth, is not included in our legislation but is in that of Scotland and England. The advancement of religion, including analogous philosophical beliefs, is in Northern Ireland’s and Scotland’s legislation but is not in that of England.

We do not want a different test to apply. We recommend that dialogue be started with HM Revenue and Customs, if that has not already been done, to ensure that each jurisdiction is assessed and that each charity — provided that it is a charity in its own jurisdiction — has the tax breaks and that one law does not take precedence over another. I hope that someone will know who the appropriate person is to take that matter forward.

Part 2 of the Bill deals with public benefit guidance. The Charity Commission for England and Wales has just produced a very detailed public benefit guidance paper, which includes a practical summary of the law. Under legislation, our commission would be required to produce guidance, but it would not be required to consult when revising the guidance. We suggest that it should be at the discretion of the commission to make minor changes to the guidance, but that it should consult on any major revision rather than being able to make changes that it believes do not require consultation. Because the proposals are so new, we are keen for charities to be involved, particularly given that a change to the public benefit guidance could result in a charity losing its status at some point. That issue must be addressed.

Part 6 of the Bill relates to taxation of a solicitor’s costs. I am sure that the Committee did not expect us to let this part slip by unnoticed. For those among us who are not familiar with what this part involves, I shall explain briefly. There is a process under the Solicitors ( Northern Ireland) Order 1976 and the High Court’s jurisdiction whereby if a client is not happy with the bill that a solicitor has charged for services, he or she can challenge it. It is a balanced process that allows a solicitor to make representations. A determination is then made as to whether the fee being charged is proper and appropriate. If it is determined that it is, it must be paid.

The Chairperson:
By whom?

Ms Ebbage:
Do you mean who makes the assessment?

The Chairperson:
Yes.

Ms Ebbage:
The taxing master makes the assessment. Professional costs drawers look through a file, consider the work that has been done, and allocate a value to it. The order for taxation comes at court level. I believe that that is correct.

Mr Rankin:
The taxing master is a master of the High Court.

Ms Ebbage:
Our concern about clause 52 is that it mirrors a provision of the Charities Act ( Northern Ireland) 1964 (Chapter 33), whereby the Department had the power to make an order for a solicitor’s costs to be taxed by the taxing master. However, we believe that a provision in the Solicitors ( Northern Ireland) Order 1976 has superseded that provision. The original provision might have slipped into the Charities Bill when, in fact, it may not be necessary because of that intervening legislation. It is a very complicated area, and we have spoken to a costs drawer about the matter. We are not convinced about the need for clause 52, and we are concerned that it may conflict with the processes under the Solicitors ( Northern Ireland) Order 1976, particularly because the Bill does not expressly set out a right for a solicitor to be heard.

We do not profess to be experts on this subject, so we recommend that there should be consultation with an appropriate costs drawer or taxing master, if appropriate, to ensure that clause 52 does not cause confusion. I want to make it absolutely clear: there should be taxation of solicitors’ costs, but we are simply not sure whether this is the right way to do it.

Part 8 deals with charity accounts, reports and returns. As the Committee knows, this provision will introduce a radical change. To date, only charities that have been companies have had to make their accounts publicly available. We are concerned about the effect that that change will have on many small charities, particularly small family trusts and charitable trusts, which, in many cases, have gross incomes of less than £100,000 a year. We are concerned that the cost of an audit, even a limited one, could be disproportionate to a charity’s income. Therefore the Bill should clarify that trustees can, acting reasonably, pick an appropriate person to scrutinise their accounts. We would simply like the wording to be clarified, and we are happy to submit a suggested wording if that would be helpful.

We were also concerned about the effect of a legacy — perhaps a one-off donation — that took a charity up to the next threshold for auditing purposes. Such a donation cannot be planned for and may mean that a full audit is necessary where previously an independent examination was sufficient.

People who are involved in auditing charities have told me about the proportionately increased cost of preparing an audit as opposed to an independent examination. Therefore we recommend an exception in the case of a legacy that triggers a movement into the next threshold.

We have also been made aware, particularly by our colleagues in the Northern Ireland Council for Voluntary Action (NICVA), of an anomaly relating to small company charities. At the moment, under the Companies ( Northern Ireland) Order 1986, a company charity with an income of less than £90,000 a year is exempt from audit. Certain provisions of the Companies Act 2006 — the largest piece of legislation ever to be passed by Parliament — which will come into force in April of this year will remove that exemption. However, there seems to be a gap between company law and charity law as to who will regulate small company charities. We recommend that a small company charity with an income of less than £100,000 should be subject to the same audit requirements that apply to small unincorporated charities. We note that the charity commission for Northern Ireland will be able to order an audit of a charitable company in any event under clause 103, which we welcome. However, that gap must be plugged.

I will now move on to the subject of charitable incorporated organisations (CIOs). As Alastair said at the beginning of our presentation, I am a company lawyer and most of my charity clients are companies limited by guarantee. Many of them have been asking me about charitable incorporated organisations and have aspirations to become such an organisation. We examined some practicalities around clauses 119 and 122, which relate to the ability to transfer the property of an unincorporated charity to a charitable incorporated organisation.

It seems to be the case that a small unincorporated charity or trust that possesses “designated land” — land set aside for specific purposes, such as a building left by someone who has stipulated that it should be used only as a school or a mission hall or church hall —cannot be converted into a CIO. However, I have not been able to find anything that says that it cannot be converted into a company limited by guarantee. That is strange. I have spoken to the Department about it. By and large, the same provision is in place in the equivalent English legislation, but we felt that an exception should be made or further explanation given as to why designated land has been carved out of the equation, because it stops people from using charitable incorporated organisation status in instances in which it would be more suitable than conversion to a company limited by guarantee. Where the designated land was of very low value we can use cy-pres, but we felt that it would be useful to have an exception where the land was of minimal value and of no great use to anyone.

Designated religious status is a new provision of the Bill, which was not in the draft Order. We have spent a great deal of time examining that provision and are mindful that similar provision exists in Scotland and that there are changes afoot in England and Wales in relation to the treatment of religious charities. I wanted to make it clear from the outset that a charity for the advancement of religion — as it will be defined in the Bill — is required to register and to submit appropriate accounts. What is missing from part 14 is that the register should contain a statement if a body has applied for and been granted designated religious charity status. That should be clear from the register. The register should also indicate whether such a designation has been withdrawn for any reason.

The Chairperson:
Should the register state whether designated religious status has been withdrawn or simply the reason for its withdrawal?

Ms Ebbage:
It may be sufficient simply to record the withdrawal; however, I was suggesting that one should be able to find out why status was withdrawn.

It is not a matter for me to pronounce on. However, at least the withdrawal of such status should be on the register.

I picked up on another point, although it may be only a technical, drafting matter. There is provision in clause 165(3) that allows the Department, by order, to modify any provisions of the Bill with regard to designated religious charities. A change to allow a further concession for a designated religious charity, for example, should not just require an order but should be approved by resolution of the Assembly. Perhaps it is just that the technical wording is missing, because those words are used elsewhere in the legislation. However, it is important that the Assembly have the final say on whether a change is made.

My final main comment on the substantive part of the Bill relates to mergers of charities, which are referred to at part 14. I have been involved in several charity mergers during the past year or so. In 2007, Ms Scott assisted me with one that was quite large and involved many complicated issues. Mergers of charities are difficult; particularly maintaining the ethos of different organisations, securing the buy-in of staff and volunteers, and ensuring that services are not disrupted. I welcome the Bill’s provisions because they will greatly simplify the merger process, particularly with regard to one particular problem: when, for example, charity A merges with charity B and charity A receives a legacy or bequest. What do we do when a legacy pops up after charity A has disappeared? We have had to keep charity A alive for the purpose of receiving legacies and passing them on under a trust arrangement. The change proposed in clause 164 will mean that any gift that is made will automatically transfer to charity B without our having to keep charity A alive.

The only issue that we have with that is one of timing, because clause 164(2)(b) states that a gift that:

“takes effect on or after the date of registration of the merger”

will pass across. We are concerned that there may be a gap between the date that the charities’ merger takes place and the date that it is registered. A gift could fall through the gap. Therefore we propose an amendment to the clause that will render the gift effective from the date of transfer. I appreciate that there may be a knowledge gap unless mergers are registered quickly or are required to register within a set time — it will be up to the commission’s processes to get the registration on the public register so that people can see that the legacy to charity A now goes to charity B. That is a matter of process. Our recommendation would ensure that such gifts are not lost.

Finally, I have some general comments on costs. I am aware that funding is an issue and that the Budget has just been finalised. However, we believe that the commission is so important to Northern Ireland that it must be properly resourced and that compliance with the requirements must always be affordable and proportionate, particularly bearing in mind the range of charities — from small family trusts to multinational and international bodies.

We also want to flag up possible conflict, or perception of conflict, in the commission’s role both as advisor and regulator, particularly when, for example, a charity phones the commission for advice and is told that it must do X, Y and Z — which it does — only to have the other branch of the commission come down on it like a ton of bricks because it has not complied. It goes without saying that when a charity relies on advice from the commission, it should not be hauled up for complying with advice that turns out to be incorrect. I hope that that will never be the case; however, the right safeguards must be put in place so that the commission can perform both of its roles.

I noticed that in the Bill there is a suggestion that the commission be staffed through secondments from the Civil Service, and I understand the rationale behind that. However, there must also be a balance in that staff should also be independently recruited to get people into the commission who have experience of working in the sector and who understand the issues for charities. A blend of the two would be worthwhile in order to ensure the integrity of the commission in the sector’s eyes.

We also want the commission to be directly accountable to the Executive.

The commissioners will have a great deal of work to do and will have many responsibilities. Those posts need to be valued; and fully remunerating the commissioners will underline the importance and value of their role in Northern Ireland.

Thank you for bearing with me; I know that I raised many points. Despite being lawyers, we hope that our submission was not overly technical. We are happy to take questions.

The Chairperson:
It was not too technical at all; it was very helpful. Like many others who have given evidence to the Committee, you support the principles of the Bill. Ninety-nine point nine per cent of charities do tremendous work. However, there is a concern that a tiny percentage has, in the past, taken advantage of the total lack of legislation and regulation of the industry and has acquired funds from the general public under the guise of being a charity. One presumes, with the introduction of legislation and regulations, that that will be more difficult.

Are you aware of any apparent loopholes in the legislation that will enable people to get away with acquiring money illegally or will the legislation stop them?

Ms Ebbage:
It is hard to know whether that will be the case. The commission will have wide powers to conduct investigations, and the sanctions that are available to it seem to have teeth. The police will deal with certain criminal matters such as fraud and deception; but the Bill will go some way to addressing those issues, although it is difficult when drafting legislation to predict every circumstance.

The media have played an important role in getting the message about unscrupulous charities to the public. Several locally produced, good high-profile television documentaries have exposed people committing fraud under the guise of charity.

The legislation will give the commission the power to make the results of its investigations public if it sees fit to do so, and that should be borne in mind.

The Chairperson:
Are you reasonably content that the Bill will be tight enough to ensure — as much as is possible — that people will be prevented from acting illegally?

Ms Ebbage:
It will make it much harder for them as there will be more accountability and charities will be required to produce accounts for independent audit or inspection. In producing such accounts, it will become public knowledge as to who is behind an organisation.

The Chairperson:
You mentioned designated religious status. Are any of your clients — I am not interested in individuals — small religious charities that may fall just outside the criteria that entitles them to designated religious status?

Ms Ebbage:
Yes.

The Chairperson:
Have they made representations to you or do you have any concerns about how the Bill will affect them?

Ms Joy Scott (Cleaver Fulton Rankin Solicitors):
We have had no representations from our clients as such, but we represent several small religious organisations that will be affected; many of them have been established for a long time in Northern Ireland.

The criteria that are set out in the Bill will create difficulties for them because some of them have fewer than 1,000 members.

We have concerns about those criteria. They do not seem to create a level playing field for the smaller religious charities. The larger charities will come under the criteria and will have the freedom to govern their organisations. There are important criteria, such as the supervision of the charity over its component elements; but the Committee may need to re-examine the criteria relating to numbers and the length of time that a charity has been established. There may be other issues.

The Chairperson:
The numbers issue has come up, as has the length of time that charities have been established. Will those be an issue?

Ms Scott:
They will.

Mr Rankin:
It may be an issue only as a result of ignorance of what is being proposed because the criteria, such as those relating to the 1,000-member designation, will simply mean that the charity commission will not have certain direct powers. The Bill does not mean that small religious charities will be at any disadvantage with regard to the Inland Revenue, for example; it simply means that if they do not operate properly, the commission has the power to investigate them. The commission will not be able to investigate the larger Churches directly, as they have internal structures. That is the difference between the two procedures.

The Chairperson:
Although the smaller Churches could say that that very difference means that they are being treated differently. If the books of a Church given small religious designation are not audited properly, for instance, any anomaly will be treated in a different manner. That will always be the case whether the benchmark is 1,000 members, 500, or 50.

Mr Rankin:
That is the case.

Mrs McGill:
Thank you for your briefing. I am interested in the makeup of the commission. I have concerns, which I articulated earlier, that it could grow and grow. We have received information over time about the number of people that would be employed by the commission, and I note that you are keen to ensure that it would be properly resourced and staffed. How many staff would the commission employ?

Ms Ebbage:
It is difficult for us to make an assessment. Having spoken to colleagues in the Charity Law Association, I know that the Office of the Scottish Charity Regulator (OSCR) now employs more than 45 staff. We will have to see what will be needed as we go along.

The Chairperson:
Do you know how many staff OSCR employed at the beginning?

Ms Ebbage:
No.

The Chairperson:
You said that it has a staff complement of 45 now.

Ms Ebbage:
I know that it has grown. Perhaps it would be useful to speak to the charity commissions in England, Wales and Scotland to establish what roles staff play and how many are employed in each function. I am afraid that I do not know what the optimum number would be.

Ms Scott:
We are entering uncharted territory in this regard because we have never had a commission before. Charities have never previously had to deal with the amount of legislation that is being introduced. The commission can be as big or as small as you wish.

 If a great deal of regulation follows the introduction of the Bill, charities would need more staff to cope. I urge a little caution: charities, particularly the smaller ones, will find it difficult to cope with too many regulations, and it may cause them to breach regulations unintentionally. There may be an argument for a phased introduction of regulations and for some control over costs for that period; but we cannot say how much will be spent.

The Chairperson:
I appreciate that.

Mrs McGill:
You said that civil servants could be seconded. Where is that provided for in the Bill?

Ms Ebbage:
Paragraph 5 of schedule 1 on page 144 states that:

“The Commission may make arrangements with the Department for persons employed in the Northern Ireland civil service to be seconded to the Commission.”

The Chairperson:
There it is in black and white.

Mrs McGill:
Who will the official custodian be?

Ms Ebbage:
Clause 11(1) states that the custodian will act as trustee for charities and that:

“the official custodian shall be by that name a corporation sole having perpetual succession and using an official seal which shall be officially and judicially noticed.”

An individual may be designated to carry out that role, and the duties are set out in clause 11.

Mrs McGill:
Could that person be outside the commission? Could they be appointed by the Attorney General?

Ms Scott:
The official custodian will have a trustee role in that he or she will hold property. Charities have the option to hold property in their own name if they are a charitable company or to put the property in the name of their trustees. This clause provides another alternative by enabling charities to appoint the official custodian to hold their property. It will be for that function alone. The charity commission will have the regulatory functions, but the custodian will look after the property.

Mr Craig:
I am interested in the comments in your written submission on the designated religious status issues for smaller religious organisations. Paragraph 7.7 outlines your thoughts on that. Clause 34 is entitled “Power to suspend or remove trustees, etc. from membership of charity”. The trustee of many religious charities will be a minister, a priest, an elder or a committee member. When I realised that someone could be suspended or excluded, I pictured a Big Brother scenario whereby a Government organisation could demand the removal of an elder or a minister from a church organisation. Do you have similar fears about that provision?

Ms Ebbage:
No one who is acting properly as a trustee should have any cause to fear. A balance must be struck. There is always the risk of someone setting up a Church for less than honourable purposes and perhaps influencing vulnerable or young people.

It is a comfort to legitimate organisations that anyone who set up a cult within a religious framework would be subject to the scrutiny of a commission that could remove individuals and install interim managers or trustees and exercise sanctions against someone acting improperly. When someone is operating a charity they are a trustee, and those in small organisations who do that job properly have nothing to fear from not being eligible for designated religious status.

The Chairperson:
Mr Craig’s concern is about a situation when two different Churches are charities and one has designated religious status because of its size and length of time in operation; and the other does not because it is small and relatively new. However, if someone in each group acts improperly, the law will take its course in different ways. Might the smaller Church feel that the person who grievously erred in their Church was treated differently from their counterpart in the larger Church?

Ms Ebbage:
There could be a difference in how the two groups were treated, but ultimately the commission has the power to withdraw designated religious charity status. If it carried out an investigation and found cause for concern, the commission could remove trustees, install an interim manager and exercise the powers that it has over non-designated religious groups.

The Chairperson:
The commission cannot do that to the small groups that do not have designated religious status.

Ms Ebbage:
The commission can already do that to small groups. The only benefit of a charity having designated religious status is that it removes the first challenge for the commission. Designated religious status is not acquired because of a charity’s size or how long it has been established: clause 166 sets out five criteria that must be met, including being able to show that there is already governance in the organisation. The key requirement is 166(3)(e)(i), which stipulates that a charity exercises “supervisory and disciplinary functions” and is already regulated by an established body of good reputation.

In Scotland, nine bodies have applied for — and been granted — designated religious status, and Scottish legislation mirrors ours apart from slightly different numbers and a few other small differences. The bodies that have been accepted in Scotland include ones at diocesan level in the Roman Catholic Church; others include the Church of Scotland, the Free Church of Scotland and the United Free Church of Scotland. Those bodies are long-established organisations rather than individual parishes or small organisations and have satisfied the Scottish regulator that they have the required governance and have met the other four criteria. The only benefit of being accorded designated religious status is that the commission cannot directly exercise all its powers. However, it can still withdraw that status and exercise its powers if an investigation shows evidence of wrongdoing. For example, the commission in Scotland can investigate the Church of Scotland and withdraw its designation if there is cause for concern, and the same would apply here. Therefore the benefits of the designation of religious status must be kept in proportion.

Mr Craig:
The important difference is that designation gives a religious organisation some self-governance. If there is an issue, the commission will contact the organisation, and its internal governance will deal with the problem under due legal process. You are right in not wanting to think that a religious organisation would want to cheat the system; therefore if anything was uncovered, it would be dealt with internally. Under the opt-out clause there would be no reason to remove designated religious status.

However, you are right that a safeguard can be used if required.

That is OK for large religious organisations; however, smaller organisations will not have the same cover. The legislation means that the internal governance of a small Church or a small religious organisation will not be recognised. That is dangerous territory for any Government to move into; historically, it has been a disaster.

Ms Ebbage:
I would be concerned if a small religious charity had no governance in place. Perhaps the numbers and the length of time outlined in the legislation need to be considered. However, as I say, the key aspect is the provision in clause 166(2)(e) that a Church can exercise supervisory and disciplinary functions to deal with its own problems. An exemption for bodies that do not have such governance would concern me because that would leave individuals at the mercy of someone who may be unscrupulous, and the commission would be unable to intervene.

It is important that the commission can oversee all charities. Church bodies should be granted designated religious status only when the commission is satisfied that they have appropriate governance and can police themselves. That will be a hard test to pass.

However, I do not think that a small religious organisation will be at a disadvantage by not attaining designated religious status. Such organisations should have nothing to fear from the commission if they are properly managed. The commission should not need to take those organisations under its notice, apart from making sure that they are registered and that they file their accounts, annual returns and annual reports on time.

Mr Rankin:
That issue is not really a legal point. A comparison could be made between the RSPCA and the USPCA, both of which operate here. It is a political decision as to whether the RSPCA, which is a large organisation, should get special treatment as opposed to the USPCA, which is a local organisation. Therefore whether the Presbyterian Church in Ireland should be treated differently from a small gospel hall that is a single entity is not really a legal issue.

Mr Burns:
How does the Bill facilitate small sports groups and community groups that need charitable status in order to survive?

Mr Rankin:
As charitable incorporated organisations they will be able to have their sports field or their property in what is, in effect, a body corporate. They will not have the problem of having to change or appoint new trustees. Many sports clubs have individual trustees and perhaps half a dozen members. When two or three of those trustees die or leave, the club has to go through the complicated process of appointing new people to those positions. They often forget to do that and suddenly find that they have no trustees left because they have all died. Therefore executors — who may have no connection with the club — have to intervene to appoint new trustees.

If such clubs become charitable incorporated organisations, they will carry on in perpetuity and will not have to appoint new trustees every few years.

Mr Burns:
Would there be any need for trustees if a charity was a corporate body?

Mr Rankin:
No. There would be no need for individual trustees, but the property would be held in the name of the charitable incorporated organisation.

Ms Ebbage:
In effect, the trustees would probably become the directors of the company of the charitable incorporated organisation. Individuals would still deal with the running of the sports club, for example, but they would be doing it through the corporate body instead of having personal liability. The personal liability of individuals has always been an issue for unincorporated organisations, particularly when land is held or people are employed or for insurance in sports clubs. Insurance policies could be held in the name of the company of the charitable incorporated organisation; trainers or facilitators could be employees of the organisation rather than be employed by the trustees individually. That puts the trustees at one remove from liability, which is an advantage for them.

Mr Burns:
The more I hear about the Charities Bill, the more I recognise my ignorance of it. I did not understand it. I was concentrating on community groups. I understand the points that were made about sports clubs, but many small community groups meet the criteria set out in the Bill. How will the Bill affect them?

Ms Scott:
They will have to comply with the provisions of the legislation in relation to their accounts, and they will have to ensure that they have proper governance structures in place. They must be properly organised; they cannot just get together as a group of well-meaning individuals, which is often what happened in the past. They may have to deal with more regulation, but that applies to all charities and not just to community groups. That is why we must proceed slowly with regulation and not overburden people.

Ms Ebbage:
I deal with many community groups through a funding body that is a client of mine. The community groups are often organised as companies limited by guarantee. Many of the directors and members of those groups do not really understand what that means. A company limited by guarantee has a legalistic and cumbersome constitution and has to deal with the companies registry. However, converting such bodies into charitable incorporated organisations, which are supposed to be simpler to run, would mean that a body would only have to deal with one regulator — the commission — rather than with the companies registry and the commission.

The charitable incorporated organisation will be a key vehicle for community groups and will suit what they are doing. A community group can increase its credibility if it is set up with a proper structure, including reporting structures. The main aim for community groups is to get people with professional expertise on their boards who can give help and guidance. Community groups’ strength is knowing what is needed and taking action — identifying a need, getting funding and addressing the problem — however, they will need help, and it is to be hoped that the commission will be able to help with red tape and paperwork.

Mr Burns:
Many people involved in community groups see themselves as committee members rather than directors of a charity.

Mr A Maginness:
I welcome your written submission, which was particularly helpful about the Bill. However, the main concern that arises is the standing of charities outside Northern Ireland that are not registered under the law here. They are referred to in the Bill as section 167 institutions.

Under the Bill, there seems to be a danger that rogue charities that are based in Britain or elsewhere would operate in Northern Ireland without being subject to regulation. Would it be practical to register such charities? What are the dangers if that provision is left unamended?

Ms Ebbage:
You make a very important point. The issue is one of identifying those bodies. As the public become more aware that legitimate charities must have a registration number and be recognised, they can go online and look up the basic details about a charity and see whether it is legitimately recognised by our register, and that will help. However, there is a danger in relation to the sanctions that can be applied to section 167 institutions. That is not absolutely clear. At the moment, it seems that Orders will be made as to which statutory provisions will apply to section 167 institutions and which will not.

When I attended the Department’s initial presentations on the draft Order, as it was then, it seemed clear that Northern Ireland would opt for a regime of absolute registration. There would be no exceptions. Under article 18(2) every charity that was established or operated here would have to be registered. That seemed to mean full registration. I am not sure that that is still the case, given the provisions of clause 167. We must have proper scrutiny of such organisations.

If a charity that is registered in England was operating here, there would have to be co-operation between our regulator and the English regulator. There is provision in the Charities Act 2006 for the exchange of information if something unscrupulous is going on in another jurisdiction so that an organisation will not get away with dubious activity just because it happens to be registered in one area but not in another. I do not know whether that is of help to the Committee.

Mr A Maginness:
The drafting of clause 167 suggests that it is not mandatory for a charity that is registered outside Northern Ireland to be registered here.

Ms Ebbage:
That is right. We recommend compulsory registration.

The Chairperson:
No other members have indicated their desire to ask questions. Thank you very much for taking time out of your schedules. The meeting has been very informative and helpful to the Committee in developing its approach to the Bill.

Ms Ebbage:
Thank you, Mr Chairperson.