Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome Kathryn Barr and Ross Connolly, research officers in the Assembly's Research and Information Service (RaISe). Kathryn, please open up, and then we will come to members' questions.

Ms Kathryn Barr (RaISe): Good morning, Chair and members. Thanks very much for having us along today to give a briefing on the Charities (Amendment) Bill. I will go through the policy issues in the paper, and Ross will cover the financial implications.

I am very conscious of your time, so you will probably be relieved to hear that I am not going to go through the whole paper line by line. However, I am happy to take any questions if that is helpful. I am also conscious that officials from the Department have been here a couple of times already, and I do not intend to repeat what you have already heard.

I will give you a quick summary to start. The key takeaways that I want to raise with you are that the Bill would expand the Charity Commission for Northern Ireland's information sharing and enforcement powers; make changes to accounting procedures with particular effects for smaller charities; and repeal the never-enacted section 167 of the Charities (Northern Ireland) Act 2008, which was supposed to deal with charities that operate in Northern Ireland but are based in other jurisdictions. It reflects a number of recommendations from the independent review of charity regulation in 2022 but takes a different approach in some areas, which I will discuss as we go through. Some clauses align with the position in England and Wales, which is the jurisdiction that our legislation is largely based on, but other parts of the Bill do not align with any of our neighbouring jurisdictions.

Generally, the 38 consultation responses to the Bill in April 2026 were supportive, although the consultation period was only four weeks. The consultation led to a number of changes to the Bill that I will flag as we go through.

There are some particular issues that members may wish to take account of in relation to scrutiny, including assuring themselves of the safeguards in place in relation to the commission's new and extended powers and what support and engagement there would be with the commission and charities in implementing the Bill. Members may also wish to consider whether the right balance has been struck between reducing bureaucracy for charities, particularly the smallest charities, and ensuring sufficient oversight to protect trust in the sector.

In relation to the provisions on accounting, quite a lot is being left to secondary legislation, so members will likely wish to consider the advice of the Examiner of Statutory Rules on that and consider what engagement is planned with charities and the commission.

The substantive provisions of the Bill start at clause 2 and expand the commission's powers to share information with public bodies by changing the definition of a public body to include bodies that discharge:

and/or

That is really to allow the commission to share information with the fundraising regulator. That clause came about because the commission highlighted the limitations of its existing powers, and it was not something that was addressed in the independent review.

The Department's original proposal in its consultation was narrowed following some concern from respondents. Members may wish to consider how the commission's information sharing is working with regard to, for example, the processes that are in place around data protection and what, if anything, is likely to change.

Clause 3 would introduce a new power for the commission to issue official warnings, which can be published. The warnings are intended to be a step instead of a full inquiry or, potentially, as the outcome of an inquiry. Although there was support for the proposal in the consultation, concerns were raised about the potential impact on charities' reputations. That led to the Department requiring that, where a published official warning is withdrawn, the commission must publish a withdrawal notice within 28 days. That is the major difference between this provision and what is in place in England and Wales.

Members may wish to consider the evidential thresholds likely to be needed to issue an official warning, what time period is likely to be in place to allow representations from the charity and how any compliance with an official warning will be monitored, particularly if it may lead to the withdrawal of a warning.

Clauses 4 and 6 relate to the commission's powers to remove a trustee and the consequences of that. That issue was not addressed in the independent review. Where the commission has started an inquiry and is satisfied that there has been misconduct or mismanagement, it can remove relevant trustees, officers, agents or employees where doing so is necessary or desirable.

Clause 4 would mean that the commission could still make a removal order even where someone has already resigned, which I believe has been an issue on several occasions in the past. The existing appeal rights would still apply. There were some questions about how all that interacted with employment law. If the Committee has not heard more from the Department on that, it may wish to ask for an update. Currently, if a trustee has been removed in that way, they are disqualified from becoming a trustee again.

Clause 6 would extend automatic disqualification from being a trustee to officers, agents and employees of the charity being removed. The commission can apply a waiver that would allow someone to become a trustee if it judges it appropriate.

Clause 5 would add a new power for the commission allowing it to, any time after it started an inquiry, direct that a charity or relevant person not take a particular action, such as hold an AGM. That mirrors an existing power to direct charities to take particular actions and includes the same safeguards in relation to appeals. Members may wish to consider whether the intention is that such directions can only be issued during the course of an inquiry and how the timing and duration of those powers are expected to operate in practice. Given the requirement to review the order every six months, what is the process for ending one of the orders?

I will deal with clauses 7, 8 and 10 together, as they interrelate and cover several different issues relating to accounting. Given the time limits, I will not go into all the details now, but through those clauses and subsequent regulations, the Department is planning to introduce a simplified template reporting framework for charities with incomes of under £20,000. Those charities will not be required to undergo an independent examination of their accounts. That largely aligns with separate proposals to allow those small charities to opt out of registering with the commission. It may be worth considering how those proposals relate to the planned regulations coming through separately in relation to the registration threshold for charities.

The Department also plans to specify the form of receipts and payments accounts that charities with incomes between £20,000 and £250,000 have to complete. Regulations would also allow charities that have exceptional one-off incomes of more than £250,000 to complete receipts and payments accounts for one year rather than accruals accounts, which are more complicated and numerous. It is worth noting that that is a significant change from the original proposal that was in the Department's consultation, which would have required the commission to decide whether to grant dispensations on a case-by-case basis. That changed approach to give charities one year's grace is primarily due to resource concerns in the commission, which Ross will talk about further. For now, it is enough to say that the Department has said that it does not need to change the Bill for the regulations to take account of that changed approach. There are a number of potential scrutiny points in the blue boxes in that section of the paper. I will not run through them all now, as I am conscious of time, but members may wish to consider them, including the meaning of "classes of charity" in those clauses.

Gross income is currently defined in the 2008 Act as a charity's:

Clause 9 would allow the Department to update and clarify the meaning of gross income via secondary legislation. That follows on from a recommendation in the independent review. Although the Department has not indicated that it plans to introduce such secondary legislation at this stage, members may wish to check with the Department on what it plans to do.

Clause 11 would repeal section 167 of the 2008 Act, which applies to any institution:

At the minute, there are around 700 of those charities, and a lot of them are household names that we are all familiar with.

Section 167 has never been brought into force, and, as drafted, the independent review concluded that it was unworkable. It is worth noting that the independent review recommended that it be enacted but that amendments be made to make it workable. However, the Department has said that repeal would not prevent such organisations from operating in Northern Ireland but it would mean that they would be regulated by their primary regulators wherever they are registered.

Originally, the Department consulted on that in autumn 2025. It found a slight majority of respondents in favour of commencing section 167. Respondents cited issues relating to accessing a Northern Ireland charity number and issues relating to tax. However, following that, the Department outlined its view that section 167 would not resolve those issues, as the organisations would not be charities under Northern Irish law and would not get a Northern Irish charity number and so on. Following that clarification, most respondents to the 2026 consultation on the Bill earlier this year were supportive of repeal.

Under clause 13, most of the Bill will come into operation on the day after Royal Assent, apart from clauses 7, 8 and 10, which are the main accounting ones. They will come into operation on a date ordered by the Department. Members may wish to know the likely timeline for the relevant regulations under those clauses and the commencement of the main clauses. It may also be helpful to know what preparation is being done now so that the commission and charities are ready for everything else coming into effect the day after Royal Assent.

That is a bit dense, but, hopefully, it is of some use to your deliberations. I am happy to answer any questions as best I can after Ross has taken you through the finances.

Mr Ross Connolly (RaISe): Thank you, Kathryn. Good morning, Chair and members. As Kathryn has outlined, I am here today to present my review of costs paper for the Charities (Amendment) Bill. I am also conscious of time, so I will focus on the key financial implications of the Bill and highlight some additional evidence that became available after the paper was finalised.

Before turning to the details, it is worth noting one significant development. Since the publication of the paper, the Department has provided further information on the expected costs associated with delivering the Bill if it is enacted and implemented as introduced. While the Bill's explanatory and financial memorandum (EFM) estimates costs to be approximately £340,000 to £350,000, more detailed modelling now suggests that costs could be somewhat higher than that.

By way of brief context, as Kathryn has already outlined, and members will be aware, the Bill would enhance the regulatory powers of the commission, make changes to the charity accounting and reporting requirements and repeal section 167 of the 2008 Act.

The paper starts by highlighting the wider public finance context. Any costs arising from the Bill would ultimately need to be met by departmental spending. As members will be aware, the Executive and Departments continue to operate within a very challenging financial environment, with a draft multi-year Budget still to be agreed. Indeed, the Communities Minister told the Committee in June that the Department for Communities (DFC) is constrained as a Department because its spend is in areas that cannot easily be rolled back. The paper therefore suggests that the Committee may wish to seek further detail from the Department on how implementation of the Bill will be resourced should it be enacted as introduced.

Turning to the costs, the starting point is the Bill's EFM. That document states that the Bill is expected to have a minimal net cost to the public sector, with approximately £100,000 of capital expenditure and £240,000 to £250,000 of resource expenditure anticipated between 2026 and 2028. It also anticipates a positive net financial impact for many charities, particularly small and medium charities.

During the preparation of the paper, however, the Charity Commission provided RaISe and the Department with more detailed implementation costs. Those estimates suggest potential costs of between approximately £707,000 and £951,000 if the Bill were implemented as introduced. The commission's estimates included staffing costs, training and guidance costs and digital systems changes.

The principal area driving those revised higher estimates is clause 7 of the Bill, which relates to charity accounting requirements. The commission identified the proposed dispensation process under that clause as potentially resource-intensive, requiring applications to be assessed and determined within specified time frames.

Since publication of the paper, the Department has provided further detail in a document received by RaISe on 1 September. The Department maintains that the Bill would have a limited net cost to the public sector but acknowledges that more detailed modelling and analysis has indicated higher implementation costs than those originally estimated in the EFM. Again, the Department attributes much of that increase to more detailed modelling around clause 7. Further analysis has estimated that implementing the Bill's provisions as they are currently framed, would require four new posts, at a cost of £611,000 over three years. Additionally, initial programme costs of £50,000 to £60,000 are estimated to be required for training and resources for charities, as well as the £100,000 in capital expenditure for IT changes in 2026-27. In an attempt to mitigate that, the Department and the commission have since explored an alternative approach, namely a first-year grace arrangement for charities whose income temporarily exceeds the accruals accounting threshold. Under that approach, charities would only move to accruals accounts if the threshold was exceeded in two consecutive years. Both the Department and the commission considered that that could achieve the same broad policy objective while significantly reducing administrative burdens and staffing requirements.

If the proposal for a first-year grace scenario proves workable, the Department has acknowledged the commission's view that that would revise total expected implementation resource costs to around £377,000 over three years. In the Department's view, the programme and capital costs would remain as previously set out. Under that scenario, the staffing requirements would drop from four to 2·5 full-time equivalents. Of note to the Committee is the fact that that workaround would be intended to be delivered through secondary legislation. The Committee may therefore wish to ask the Department for any further costings that it would consider when formulating any secondary legislation under the legislation to ensure that the public purse implications of such secondary legislation would receive adequate Assembly scrutiny.

With regard to departmental staffing, the Department has assessed that there has been a total estimated cost of around £500,000 with respect to the Bill's development over the past two years, comprising 3·5 full-time equivalent staff across grade 7 and the deputy principal and staff officer grades. It notes that the Bill team in DFC has been managed with existing staff resources. That is new information that was not available for inclusion in the original paper. That is why it has been submitted here.

Looking across the evidence available, the following broad cost areas emerge, which I will summarise. The first area is staffing. Depending on the final approach to clause 7, estimated staffing costs range from approximately £387,000 to £621,000 over three years. Those estimates are £10,000 higher respectively compared to the figures provided by the Department on 1 September. That is due to the commission advising RaISe in late August that those figures be amended upwards slightly due to a small area of previously uncounted costs in its new modelling.

The second area is training, guidance and support for charities that are adapting to the new arrangements. The Department and the commission, as well as the paper, now place those costs in the region of £50,000 to £60,000.

The third area is digital and IT capital costs. There remains some difference between the commission and the Department in that area. The Department has continued to estimate costs of around £100,000, while the commission's assessment remains at around £270,000. It appears that that divergence is due to the commission counting previous capital spend of £170,000 under its IT strategy as relatable to the Bill, whereas the Department considers it to be a separate area of spend.

The paper also identifies several areas where future costs remain uncertain. Those include the use of official warnings, the operation of review and appeal mechanisms under clause 5 and the implementation of future secondary legislation under clauses 7, 9 and 10. As those details have yet to be fully developed, the associated costs remain difficult to quantify.

In conclusion, the evidence now available suggests that implementation costs are likely to be higher than originally anticipated in the Bill's EFM. Whilst the precise figure remains dependent on a range of implementation choices, the biggest of which relates to clause 7, both the Department and the commission appear to accept that more detailed modelling points towards higher costs than initially envisaged. A key issue for the Committee therefore is not only the scale of those costs but how appropriate resources would be secured to support implementation in the current financial climate. The central estimated range, taking into account all evidence available, places the direct financial cost implications of the Bill between £527,000 and £941,000.

I thank the Committee for the invitation to deliver this presentation today. I am happy to take any questions from members on the area of financial effects.

The Chairperson (Mr Gildernew): Thank you, Ross. I will pick up where you finished, on the review of costs. Clearly, we will have ongoing work to do, because there is no agreed figure for that. However, in general, are the costs forever costs, in that they will be built into the system, or will there be an implementation cost over the first two or three years that will then reduce?

Mr Connolly: I do not believe that it has been modelled that far, but a lot of the implementation costs will primarily be one-offs. As well as that, the capital costs associated with IT systems changes would diminish after the initial three-year horizon in which they were considered. I have not considered that directly in the paper beyond the three-year horizon. I am happy to provide further information if that is required by the Committee.

The Chairperson (Mr Gildernew): Thank you.

On the safeguards around official warnings and such things, I know that there are significant differences between this and other jurisdictions. My mind goes partly to the case involving Fujitsu and the Post Office, which demonstrated that systemic issues can lead to huge consequences that no one foresees at the time of implementation. A right of appeal seems like a very basic safeguard to forego. What do other jurisdictions include, and what are the risks of not having those types of safeguards built into the Bill?

Ms Barr: The risk was based on the legislation in England and Wales, with the addition of the provision that, if there is a withdrawal notice, it needs to be published within 28 days. The regulators in Scotland and the Republic of Ireland operate a bit differently. They are a bit less quasi-judicial. When they take action, they need to go to court. They therefore operate a wee bit differently.

The Charity Commission for England and Wales is the most similar. It does not have an appeal right as such. I know that the Department has told the Committee that it considers the fact that charities can make and withdraw representations to be enough of a safeguard. I suppose there is a balance there. It is not clear in the Bill how long charities will have to make those representations. We all know — this is perhaps the case here more than it is in other places — that bad news travels faster than good news, so if an official warning was put out and then withdrawn in six months' or a year's time, could the damage have already been done?

In the paper, there is also a question about how, in practice, the commission will monitor what a charity has done to deal with whatever problems have come up in an official warning. How will the commission know to withdraw a notice? There does not seem to be a formal procedure for that, so it may be worth asking the commission about that.

The paper references the fact that the Charity Commission for England and Wales has quite a lengthy guidance document, which it consulted on, and which is available online, on how it approaches official warnings, so at least there is that bit of transparency about how it works in practice. It might be worth considering that here as well, whether in legislation or afterwards.

The Chairperson (Mr Gildernew): On the impact of the removal of section 167, will a charity that is operating in Scotland and here have access to both procedures? Can you shop around for the jurisdiction that suits you best? How will that be addressed?

Ms Barr: It will primarily be regulated in Scotland under its rules. If concerns are raised about how a charity is operating in Northern Ireland, all the charity regulators have memorandums of understanding (MOUs) in place with each other. My understanding is that the regulators would alert their counterparts in Scotland about their concerns. Obviously, if there is anything illegal, the PSNI or any other agency can be involved.

The Chairperson (Mr Gildernew): We should keep an eye on the nuances of that. I am also very conscious that, even where charities cross the threshold, there may be volunteers who are working with good intent. I do not want to take away from the need for rigour, but it is important that protections are in place. We will continue to look at that.

Significant elements of the legislation will come through in the secondary legislation. From a scrutiny perspective, which of the delegated matters is it most important for the Committee to keep under review and why?

Ms Barr: To cover myself, I will say that it will be important for the Committee to look at everything.

The Chairperson (Mr Gildernew): That is a catch all.

Ms Barr: The Committee should particularly look at template reporting and how it works for charities with incomes under £20,000. Potentially, there will be less information going to the Charities Commission, and there will be no independent examiner in place, and that links to clause 8 of the Bill. Currently, if independent examiners see anything worrying, they have a duty to report that to the commission, but that will not be in place. There is a judgement call for the Committee on the balance for dealing with very small charities.

In addition, although it is slightly outside the scope of the paper, it is worth considering the forthcoming regulations about the registration threshold for charities with incomes of under £20,000, and the ways in which the regulations interrelate may be something that the Committee may want to consider.

The Chairperson (Mr Gildernew): Thank you.

Miss Brogan: Thank you, Kathryn and Ross. The briefing will be very helpful as we go through the Bill. Ross, I want to go back to something that you said, and I hope that I picked it up right. The Department has said that, since it published the EFM, it has estimated greater costs, and it will try to scale those back with the first-year grace period. Is that right?

Mr Connolly: Essentially, the Department now accepts that the implementation costs would be higher than those laid out in the EFM. The main driver of the higher costs is clause 7, as it currently sits, which is the dispensation to prepare accrual accounts. The first-year grace period is intended to drive the costs down through secondary legislation. The Committee may wish to keep an eye on that because it will have a significant impact on the expected cost of the Bill.

Miss Brogan: What impact will it have on the rest of the Bill? Obviously, it has not gone out for consultation, but will the stakeholders welcome that?

Ms Barr: I will jump in on the stakeholders point. My understanding is that the commission had called for something similar, and the Northern Ireland Council for Voluntary Action (NICVA) may have called for a slightly longer grace period, but it called for something similar. There was a lot of concern in the sector about how long it may take the commission to grant a dispensation to charities, and if it was not granted, the charity might have only a few weeks to sort out its accounts. Broadly, my understanding is that the charities are happier with the changed approach.

Miss Brogan: Kathryn, you mentioned the four-week consultation. There are over 7,000 charities in the North, and 38 responded to the consultation on the Bill. Did the short four-week window have an impact on the number of responses? Can the response be taken as a competent view of charities?

Ms Barr: The 38 responses were not all from charities. There is a list of the charities that responded at the end of the consultation. There are responses from a mixture of small and bigger charities, as well as from NICVA and other representative organisations. Obviously, four weeks is not ideal; everyone would acknowledge that. The Department said that there was limited time left in the mandate. The Department would probably also point to the fact that some of this has been consulted on already through the independent review. There was a separate consultation on registration thresholds, which touched on some of the template reporting stuff. There was also a separate consultation on the repeal of section 167. Those were also shorter consultations, however. I know that the Committee undertook a separate consultation to seek different charities' views, but — this came up previously in Committee — it can be hard to get the views of very small charities, where people have limited time.

Miss Brogan: They are so busy elsewhere. That is grand. No doubt we will be in touch again with more questions. Thank you both for that.

The Chairperson (Mr Gildernew): Thank you very much. Looking at both papers, are there any areas in which the available evidence was not sufficient to reach a firm conclusion? In that respect, are there areas, or Departments for that matter, from which we should seek further information or evidence during our stakeholder engagements?

Ms Barr: In some areas, the independent review did its analysis, and there is the evidence base from the review. The areas that were not covered in the independent review and therefore had quite a short consultation period may be worth considering further. There is also the fact that we know what the Department says it wants to do now through the regulations, but that may change. It is about understanding the evidence for what the Department is planning to do, while making sure that the Committee is aware of how that may change. We have already heard about how plans have changed in a matter of months. It is about having the evidence base, particularly on the template reporting. The independent review recommended something similar to template reporting for charities that had incomes of £25,000 and under — the Bill refers to charities with incomes of £20,000 and under — but it also recommended that all charities continue to register, which is not the approach that the Department is taking. That may be something for the Committee to explore further.

The Chairperson (Mr Gildernew): OK. Thank you. Are members content with that for now?

The Chairperson (Mr Gildernew): Thanks a million, as always, for your work and your evidence. Your support is invaluable to us, and we really appreciate it. As the Deputy Chair said, we look forward to working with you as we go through the Bill. Thank you.