Official Report: Minutes of Evidence

The Deputy Chairperson (Mrs Mason): I welcome from the Department for Communities Raymond Caldwell, the director of the Department's voluntary and community division; Colleen Bell, the head of the Department's charities policy and legislation team; and Martin Ireland and Gerard Reilly from the charities policy and legislation team.

Raymond, I believe that you will make a brief opening statement, after which we will have questions from members.

Mr Raymond Caldwell (Department for Communities): Thank you very much, Deputy Chair. Good morning, members. Thank you very much for the opportunity to attend the Committee and brief you this morning on the draft Charities (Amendment) Bill and its role in strengthening the operation of the Charities Act (Northern Ireland) 2008.

Northern Ireland's charity sector plays a crucial role in community life. Thousands of organisations, from small, volunteer-run groups to large service-delivery charities provide major social value. They support vulnerable people, help community networks to keep going, promote health and well-being and deliver cultural, educational and environmental services. They also contribute significantly to our economy, employing many thousands of people and relying on a wide base of volunteers. For those reasons, it is vital that public trust be maintained and that the regulatory system be clear, fair and fit for purpose.

The draft Charities (Amendment) Bill aims to ensure that the framework that was set out in the 2008 Act remains strong, proportionate and workable. It follows the independent review of charity regulation, which was published in 2022 and made 93 recommendations for the Department for Communities, the Charity Commission for Northern Ireland (CCNI) and the wider sector. Those recommendations were designed to improve charity regulation for the benefit of charities and their beneficiaries and to support a cultural shift within the commission towards more proportionate and collaborative regulation. The Bill takes forward 18 of those recommendations.

The Bill also addresses issues identified through practical experience, especially around information sharing and the commission's ability to act quickly and transparently. Strengthening those areas helps to maintain confidence not only among the public but among charities, which depend on good governance and clarity in order to operate effectively. It is also important that Northern Ireland keeps pace with developments elsewhere. Charity law in England and Wales, on which our legislation is based, has been updated in recent years to give the regulator greater, clearer and more modern powers and oversight tools.

A key aim of the Bill is to reduce unnecessary bureaucracy. Many charities have limited administrative capacity, so, where processes can be simplified without weakening accountability, they should be. A proportionate regulatory system allows charities to focus more of their time and resource on front-line work and delivering social value. To support that, the Bill introduces measures to modernise regulatory powers and streamline accounting and reporting. The key elements include greater flexibility in setting accounting rules, clearer and more consistent reporting requirements for smaller charities and the ability for the commission to grant dispensations where exceptional circumstances push a charity temporarily over income thresholds. The changes are designed to create a system that is easier to navigate while maintaining proper standards of transparency and governance.

In summary, the Charities (Amendment) Bill is intended to reinforce public trust, modernise the regulatory framework and support an innovative and effective charitable sector that continues to deliver significant social benefit across Northern Ireland. It strengthens the commission's ability to act where problems arise, improves alignment with other jurisdictions and reduces administrative burdens on those smaller charities, which are vital to our communities.

Thank you, Deputy Chair. I will now pass to Colleen Bell, who will provide more detail on what the Bill will do and the improvements that it aims to make.

Ms Colleen Bell (Department for Communities): Thank you, Ray. Good morning, Deputy Chair and members. As Ray said, I will provide you with a little more detail on the practical outworkings of the clauses. The Bill will be out for public consultation shortly, subject to Executive agreement, and may therefore be subject to change before it is formally introduced. However, it is important to note that the majority of the clauses implement recommendations from the review.

The Bill has three core aims: the first is to strengthen the commission's regulatory powers; the second is to streamline accounting and reporting requirements; and the third is to repeal section 167 of the 2008 Act to provide clarity for institutions that are established elsewhere but operate for charitable purposes in or from Northern Ireland. It is a small Bill, containing only 14 clauses, but its impact on the charity sector and the commission will be significant.

Clause 2 widens the commission's information-sharing powers so that they apply to any person discharging functions of a public nature. That resolves limitations in the current legislation, which includes only public bodies. It will, for example, allow information sharing with the Fundraising Regulator and similar oversight bodies that were not previously covered. That strengthens cooperation, supports early regulatory intervention and ensures that issues affecting charities can be addressed more efficiently.

Clause 3 introduces a new official warning power modelled on the system that operates in England and Wales. The power gives the commission a proportionate regulatory tool that may be used instead of opening a statutory inquiry or at the conclusion of an inquiry where a formal warning is more appropriate than stronger action. It will enable the commission to signal formally when it has identified misconduct, mismanagement or a breach of duty by a charity or its trustees and allow them to take corrective action as appropriate. Important safeguards are provided, such as prior notice to be given to the charity or its trustees, clear grounds to be set out for the proposed warning, notice of any intention to publish the warning and a period during which representations may be made, allowing the commission to amend or withdraw a warning after considering those representations.

Clause 4 closes the loophole in the commission's current removal powers. At present, individuals involved in misconduct can resign before the commission takes action, allowing them to avoid formal removal and the resulting automatic disqualification from acting as a charity trustee. The clause ensures that, once the commission has formally given notice of its intention to remove someone following an inquiry, it may proceed even if that person has already stepped down, thus guaranteeing that the full disqualification consequences will still apply. That will protect charities from individuals whose conduct has contributed to misconduct or mismanagement.

Clause 5 introduces a new protective power allowing the commission, during a statutory inquiry, to make an order directing that certain actions must not be taken or continued where doing so would amount to misconduct or mismanagement. That complements the existing power at section 36 of the Act, which allows the commission to direct that specified actions be taken in the interests of a charity. To ensure proportionality, any such order must be reviewed at least every six months. Rights of appeal to the Charity Tribunal for Northern Ireland in respect of the new power mirror those already available under section 36.

Clause 6 extends automatic disqualification from acting as a charity trustee to officers, agents and employees who have been removed from their position for misconduct. Currently, only trustees who have been so removed are automatically disqualified from acting as a trustee of another charity. The clause therefore closes a loophole, aligns the framework with that in England and Wales and provides greater protection for charities and charitable assets.

Clauses 7 to 10 introduce a suite of important reforms intended to modernise and simplify charity accounting and reporting. Clause 7 removes from primary legislation detailed accounting rules for smaller charities. The Department will instead set those requirements through regulations, allowing the regime to be tailored to different types or sizes of charity. Clause 7 also gives the commission new flexibility to adjust accounting requirements for groups of charities or to relax requirements for a charity that exceeds the income threshold due to exceptional, one-off income.

Clause 8 updates the rules on when charity accounts must undergo independent examination, meaning that very small charities, which are those with a gross annual income of below £20,000 and assets under £100,000, will no longer be required to have their accounts independently examined. That will reduce costs and administrative burden for the smallest organisations, and it aligns with the proposed new registration threshold below which charities would no longer be required to register with or report to the commission. Importantly, the change reflects feedback from the public consultation on the registration threshold and is also intended to support the small charities that choose to remain registered despite their falling below the registration threshold. The Department will retain the power to adjust the financial thresholds through secondary legislation, allowing the framework to be updated as needed.

Clause 9 relates to the definition of "gross income" in the 2008 Act, which does not clearly distinguish between income and capital receipts. A lack of clarity has created practical difficulties for charities, particularly smaller organisations, in preparing their annual accounts. The clause gives the Department a new regulation-making power to define what contributes to gross income. That approach allows the definition to be updated and clarified over time, improving consistency and reducing ambiguity without needing further primary legislation.

Clause 10 modernises reporting requirements by giving the Department flexibility to tailor annual reports and returns for different types of charity. That includes the option of simplified or template reporting for very small charities, which will reduce administrative burden while maintaining transparency.

Clause 11 repeals section 167, which provides for a Northern Ireland regulatory framework for institutions established elsewhere but operating for charitable purposes in or from here. That provision has never been commenced and, in practice, could not operate effectively, given the practical application of the territorial extent of the 2008 Act and strong stakeholder opposition to Northern Ireland-only reporting. The vast majority of stakeholders who responded to the September 2025 consultation argued that such a requirement would introduce additional costs and administrative burden, because many such institutions are neither structured to report in that way nor required to do so in any other jurisdiction. Furthermore, the anticipated benefits, such as increased funding opportunities for institutions established outside Northern Ireland and tax advantages for institutions established outside the United Kingdom, could not be realised through registration as a section 167 institution, because that status does not make them charities under the law of Northern Ireland. Should such organisations consider it advantageous, they may choose to constitute separately and register as a charity in Northern Ireland.

The draft Bill therefore repeals section 167 in its entirety. As a result, those institutions will not be required to register under section 167 or comply with Northern Ireland-specific regulatory requirements and will continue to operate here exactly as they do at present. That removes uncertainty for affected organisations, which will continue to be regulated in their home jurisdiction, thereby avoiding duplication and providing greater clarity for cross-border charities.

Finally, it is intended that the Bill will come into operation on the day after Royal Assent, with the exception of the clauses that deal with accounting and reporting requirements, which require regulations. The Department will commence those clauses by order at the same time as the regulations are made.

That concludes my summary of the Bill. I will hand back to Ray.

Mr Caldwell: Thank you, Colleen. I will conclude the opening remarks, which have, I hope, given the Committee a flavour of what the Bill will do and of the positive impacts that it will have on charity regulation in Northern Ireland.

On financial implications, we anticipate there being minimal costs to the public sector, with a one-off cost to the commission of approximately £100,000 capital and £250,000 resource between 2026 and 2028. For charities, particularly those that are small and medium-sized organisations, the impact is expected to be positive due to reduced reporting burdens and simplified compliance.

The Department considers the Bill to be compatible with the European Convention on Human Rights, due to the built-in safeguards. No adverse differential impacts were identified under section 75 of the Northern Ireland Act 1998. The team will provide more detail as the Bill goes through its stages in the Assembly, but we are very happy to take any questions that the Committee may have now. Thank you, Deputy Chair.

The Deputy Chairperson (Mrs Mason): Thanks for that, guys. It is great that we have the draft legislation in front of us, so thank you for providing that and for providing those explanations of it.

Colleen, you said that the amendments will give to the commission a power that it can use instead of launching a statutory inquiry. Does the Department have any concerns that that power could be abused or that it limits transparency?

Ms Bell: No. It is intended to be a proportionate approach. It is an additional tool for the commission, not something that it might use instead of a statutory inquiry. Well, it can use it instead of a statutory inquiry, but it is intended to be more of a warning that would allow a charity to turn back to compliance whenever there are issues. It can also be used at the end of a statutory inquiry, if the commission finds it to be a more proportionate approach than removing a trustee or taking another more stringent action.

The Deputy Chairperson (Mrs Mason): It would be more of a starter thing, and then they could move on.

Mr Caldwell: It is a proportionate approach.

Ms Bell: The same tool is available in England and Wales, and it works very effectively there. It is just an additional power for the commission. The commission will work with charities to try to get them to turn back to compliance before using the more stringent tools that it has. If a charity is not compliant, however, that is another element that the commission can use.

Mr Martin Ireland (Department for Communities): There is a period during which representations can be made to the commission, and it can vary the warning power or withdraw it. There are in-built safeguards.

The Deputy Chairperson (Mrs Mason): I have one more question, which relates to smaller charities. You mentioned the removing of the independent examination and having simplified reporting for smaller charities. How will the Department ensure that there is still transparency and that public trust is not in weakened in any way?

Ms Bell: The feedback that we had was that kitchen-table charities — very small organisations that are registered with the Charity Commission — have to pay maybe £500 for an independent examination. That is not proportionate, given their receipts and payment accounts. The simplified template reporting is supposed to help those charities as well. All their accounts will still be available for people to see on the charity register, and that provides the opportunity for public scrutiny of where the funds are going. The commission still has oversight powers of those charities, so, if issues are raised, it can ask for further information from them.

Mr Caldwell: It is designed to simplify and to be proportionate, not to remove accountability. It is about simplifying and being proportionate to the size of the charity.

The Deputy Chairperson (Mrs Mason): It is about support for smaller charities.

Ms K Armstrong: Thank you, everyone. This feels like we are coming around to close the circle after the previous mandate, when we were not so hard with you on this.

I want to check a few things. One issue that charities have is that, when they look at the Charity Commission, they see that it is, of course, their regulator, but there are certain pieces that they would like to happen. I wonder whether this legislation will enable the Charity Commission to do that. For instance, we quite often hear that funders will say to a charity, "You've got massive reserves". As we know, reserves are there for a particular purpose, and there will be a reserves policy. Will the Charity Commission be enabled, through the changes introduced here, to comment publicly on calls from funders who want charities to use reserves, thereby putting them outside the appropriate management and use of money?

Ms Bell: The Bill does not address reserves at all.

Ms K Armstrong: I know that it does not address reserves, but would it allow the Charity Commission to make a statement on something that it sees as an issue?

Mr Ireland: It does not change its ability to do that. There is an intention to bring forward a further Bill in the next mandate because a number of things were brought forward in England in 2022 that reduced a lot of bureaucracy and helped charities there. We will look at those. I cannot say for sure, but that may address the issues that you raise.

Ms K Armstrong: Very good. I am delighted to hear about section 167 charities. I would have declared an interest in the previous mandate, but it is more than 10 years since I worked for a section 167 charity, but that change opens up funding options for people.

The public consultation opens on 27 March for four weeks and not eight weeks. Why are we going for four weeks?

Ms Bell: We are approaching the end of the mandate, and it is a tight window. We would like to try to get the Bill introduced before summer recess to give you as much time as possible to scrutinise it.

A lot of elements in the Bill have already been subject to consultation, but there are a few elements on which we would like to hear from the public. The official warning power was already consulted on, but the independent review said that the Department should further consult on its use, so we have included that.

There are two elements. The amendment to section 24 of the Act, which is on information-sharing powers, has not been consulted on previously. It is in place in England and Wales, and it has been problematic here, with the commission not being able to share information with the Fundraising Regulator. Therefore, we would like to hear information on that.

The other element is the automatic disqualification of officers, agents and employees. Those two elements have not been subject to full consultation.

Mr Caldwell: When the consultation begins, it will cross-reference to the consultation that has already happened and summarise that, so it is building on that, rather than opening up a consultation that has already taken place; hence the need for the requirement for a shorter period for the consultation.

Ms K Armstrong: The only other questions that I have are about the official warnings. There does not seem to be an inclusion of an official appeal process. Is that what you meant earlier, Martin, when you said that you can contact and be in communication with the commission?

Mr Ireland: Yes.

Ms Bell: It is the same, and there is no appeal process in England and Wales.

Ms K Armstrong: My other question is about that. The commission may publish any warning. If this is a belt-and-braces approach and all the work has been done, I wonder why a public warning was not included, or is that an assumption, given that it could be on a website, but not everybody will see that? Is there anything else that could strengthen that?

Ms Bell: We can take that away and look at it. When we are conducting our clause-by-clause scrutiny of the Bill, we can do that.

Ms K Armstrong: That is great. Thank you very much. Having worked on it before, I know how complicated and technical it can be. Thank you very much.

Mrs Cameron: Thank you for your attendance. It is good to see you, Ray. I have a fairly generic question. Some good questions have already been asked and answered. We have a lot of very small charities. What are you expecting? Obviously, the Bill will go out for consultation, but you said that it is a bit of an add-on to work that has already been done. What are you expecting to hear back? Are you expecting the update to be primarily positive and, hopefully, to make things easier for charities?

Mr Caldwell: I will pick up on that and then pass over to Colleen. We have already said that the intention here is to simplify processes and reduce bureaucracy. We anticipate a positive response to the consultation, but you can never guarantee what the response will be. We will give that due consideration when it closes.

Ms Bell: I am not sure that I have anything to add to that. You mentioned that we have very small charities. They do not tend to respond to consultations. It will be funders, academics or legal representatives. Those are the types of people whom we expect to hear from. We want those types of people to scrutinise the Bill to make sure that it does what we need it to do.

Mr Ireland: It is important to say that those reporting easements come from recommendations from the independent review, which those charities have fed into.

Mrs Cameron: Is it a concern that small charities do not tend to respond?

Mr Caldwell: It is a size, scale and capacity issue. There will be an opportunity, and we will make clear when the consultation is published that we welcome responses from all. I will circle back and say that we believe that it is a good-news story for the smaller charities because of the reduction in bureaucracy and the streamlining and simplification of some of the processes in response to 18 of the 93 recommendations that were made in 2022.

Mrs Cameron: Presumably, the fact that they do not tend to respond may be a good thing. You would imagine that, if there were serious issues of concern, they would respond.

Mr Caldwell: When we consulted on section 167, some of the smaller charities responded. Through that consultation and the responses, we identified some misunderstandings about what it actually meant and what it would lead to. We have taken the opportunity to articulate those and communicate them back out to the sector, including to the smaller charities.

Mrs Cameron: Thank you.

Mr Bradley: Thank you very much for your presentation. You have given the commission more powers. How can you guarantee that they will not be used in a way that unfairly damages individuals or charities, especially the smaller charities, and what specific safeguards have you written into the legislation to prevent overreach?

Mr Ireland: With regard to the additional powers, apart from the official warning power, there will be rights of appeal to the Charity Tribunal. As you may know, a scheme of delegation was brought into the Charity Commission, so certain high-risk decisions are reserved for commissioners. The commission's own internal processes will help to ensure that, but, basically, the rights of appeal to the Charity Tribunal are the cast-iron guarantees that there will not be overreach.

Mr Bradley: Clause 2 allows for information to be shared by any:

That is a very wide definition. Why is it necessary, and where in the Bill is the requirement that sharing must be necessary and proportionate to safeguard against sensitive information being shared too widely?

Ms Bell: The commission has its own processes in place about whom it will share information with. This problem arose because it could not share information with the Fundraising Regulator, and there was a question mark over whether it could share information with the Committee or MPs. This just widens the definition to ensure that it can share information with people whom it needs to share information with. Obviously, it has all its processes in place so that it does not share information with anyone with whom it should not share information.

Mr Bradley: Thank you very much.

Mr McHugh: Tá fáilte romhaibh uilig.

As cathaoirleach

of a small charity, I welcome the easing of what is required of small charities in order to meet the conditions of the framework. The 'Independent Review of Charity Regulation' in the North recommended that section 167 be reviewed and amended. Why was it scrapped?

Ms Bell: The independent review had six or eight months to carry out its review, and it made 92 recommendations. Former Minister Hargey was quite interested in section 167 and asked specifically that that section be looked at, because we knew that it was not workable in its current format. It looked at it at the time and sought feedback, but I do not think that they were able to get into the depth of that section to understand how it would work in practice. Therefore, we carried out a further consultation last year. We understood what the problems were, the misconceptions about it, how people thought it would operate in practice and what it was going to achieve for people. Actually, it was not going to achieve what they wanted it to achieve with funding and tax exemptions. It was just going to create more bureaucracy for them. That is why the decision was taken to repeal it: the original policy intent could not be achieved.

Mr McHugh: There was a consultation last year on that.

Ms Bell: Yes. There were around 120 attendees at two online webinars, and we had a consultation online as well.

Mr Caldwell: Colleen made the point about some of the misunderstandings about what section 167 would have brought about. In the Department's response to that consultation, we took the opportunity to clarify and articulate what it would and would not have achieved in order to remove those misunderstandings.

Mr McHugh: Go raibh maith agat.

The Deputy Chairperson (Mrs Mason): There is one further thing that has not been mentioned. The Bill will allow key elements such as the accounting rules and the definition of "gross income" to all be set through the regulations. What level of scrutiny will the Assembly have, or what involvement will it have in that?

Ms Bell: They are to be introduced by draft affirmative procedure, so they will be brought before you.

The Deputy Chairperson (Mrs Mason): They will come before the Committee?

Ms Bell: Yes.

The Deputy Chairperson (Mrs Mason): OK. Thanks for that. I am sure that we will see much more of you in the weeks ahead. We have no further questions. I know that the Committee is looking forward to getting stuck into the Bill, as Kellie said.

Ms Bell: Thank you, Chair.