Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome to the meeting Denise Copeland, who is governance and charity advice manager at NICVA, and Donna Semple, who is governance and charity advice officer at NICVA. Denise will make the opening statement — is that correct? — after which we will move on to members' questions.

Ms Denise Copeland (NICVA): Yes. Thank you very much, Chair. Good morning, members — it is still morning for a few more minutes. NICVA is grateful to the Committee for the opportunity to provide comment on the Charities (Amendment) Bill, including the changes that the Department has outlined in its consultation report. NICVA acknowledges the work of the departmental officials who have considered the feedback in the consultation responses, but the intentions in the consultation report need to be translated into the Bill so that there is no confusion in the future.

NICVA welcomes most of the proposals, but we have some concerns and some recommendations for further consultation on the proposals for the accounts. We agree with the amendment that would clarify the wording about information-sharing powers for the commission. We agree that the commission should be able to issue official warnings to charities or their trustees. Issuing an official warning might help to make the trustees take notice if they had not done so previously and could prevent a full investigation by the Charity Commission, which neither party would want. We welcome that there would be safeguards, including prior notice, and an opportunity for the charity to respond, so that the commission could then vary or withdraw the warning. We are concerned, however, that those would be published in the public domain, as that could cause reputational damage to the charity. Even if the commission were then to withdraw the warning, it would still have been in the public domain, and reputational damage may still have been done. We have seen in recent years how some media outlets jump on a bad news story about a charity. They are unlikely to do a good news story about the same charity, should the commission publish a withdrawal notice. That negative media can have a damaging effect on the whole charity sector.

NICVA agrees that the commission should have the power to remove a trustee for misconduct from a charity, even if they have resigned, so that they can be officially removed as a trustee and included in the register of removed trustees. That would prevent them from serving as a trustee with another charity. NICVA agrees that the commission should be able to issue a direction to a charity for a specified action not to be taken. That would complement the commission's power to direct that specific actions be taken by the trustees. It is proposed that automatic disqualification be extended to officers, agents or employees from acting as a charity trustee if they have been removed by the commission. NICVA has concerns about that being extended to employees; there may be employees who have acted under duress from a CEO or officer of the board.

NICVA welcomes that very small charities under the £20,000 reporting threshold would not be required to carry out an independent examination of their accounts. The proposed changes would also allow for template reporting if the charity's annual income is less than £20,000. NICVA agrees that the template reporting may be useful for some charities, but not all. We need to recognise that not everyone has the digital capabilities necessary to complete the annual reporting online. NICVA suggests that the new template be available for download so that charities could complete it. They would have the option to upload it or input the information digitally.

NICVA agrees in principle that the Department should be able to make new regulations to specify the minimum content requirements for receipts and payments accounts. However, we urge the Department to ensure that the new regulations would not create something that is onerous for small charities. It needs to be simple. For example, charities should not need to have to pay for an accounting professional to prepare their receipts and payments accounts. We need to be mindful that a charity is still small if its income is less than £250,000 and very small if that is less than £20,000.

NICVA welcomes that a dispensation would be available to charities from the requirement to prepare accruals accounts where a charity exceeds the £250,000 threshold due to an exceptional spike in income. However, the word "exceptional" should be replaced by "unusual", or removed altogether, as the word "exceptional" may prove to be a very high bar, as is the case with the current audit exemption that the Charity Commission can grant. We particularly welcome the move to allow trustees to be permitted to continue to prepare receipts and payments accounts if they go over that income threshold, which should be easier than waiting on the Charity Commission to grant it permission. The wording in the Bill, however, is confusing: it refers to "the Commission", while the text in the consultation report refers to the trustees being able to make that decision. The spike in income would be permissible for only one year. It would be preferable to allow dispensation for a second year, but with the requirement for the commission to grant the dispensation in the second year. That way, there would not be the same time pressures in getting the permission from the commission.

We ask that any necessary amendments also ensure that the independent examiner permitted to undertake an examination up to the threshold of a quarter of a million pounds can continue to do so for a charity with a spike in income accounts. While the audit threshold is not directly within the scope of this Bill, we are encouraged that the Department is currently engaging with stakeholders on the implications of increasing the audit threshold for both individual charities and group accounts. We met Department officials on Friday to discuss our rationale for those changes, which we are in favour of.

We would also welcome a commitment from the Department to increase the threshold for the preparations of accruals accounts from £250,000 to £500,000 and to raise the threshold for independent examination so that it is aligned with those operating in other UK jurisdictions. NICVA believes that there must be further consultation when the regulations are drafted for the proposed new format for both the template reporting and for the content of receipts and payments accounts so that the trustees of small charities can test it to ensure that it is not overcomplicated for a non-financial person. In addition, the consultation could include proposals for threshold changes for the preparation of accounts and the type of independent examination. We are being told that changes to thresholds in the future can be made by future regulations, but we would like to see the onus being put on the Department so that that actually happens and does not get forgotten about if there is a change in personnel in the Department.

The Chairperson (Mr Gildernew): Thank you very much. The first question from me is about the temporary breach of the £250,000 accounting threshold. You are suggesting that trustees should be able to manage that themselves rather than applying to the commission for dispensation. What safeguards would you put around that approach to ensure that it could not be used to avoid higher requirements where a charity has experienced sustained growth?

Ms Copeland: A charity with that income is currently required to have an independent examination, and the person carrying out the independent examination, referred to as the independent examiner, must, regardless of what level they are when they are carrying out an independent examination, follow the direction set by the Charity Commission. Direction 9 of the Charity Commission's directions talks about the content and preparation of the accounts. The independent examiner has to check that that is appropriate. The independent examiner also has an onus on them to report any matters of material significance to the Charity Commission. The safeguard is the independent examiner in the examination that they will carry out.

The Chairperson (Mr Gildernew): I want to flag to members that there is a time constraint with the next session, so can we all be as succinct as possible? I am not seeking to curtail questions but to keep them succinct.

On disqualification of employees, you support extending automatic disqualification beyond trustees, but you raise a concern about employees who may have acted under duress or direction from senior management. What distinction would you like the legislation or its safeguards to make between an employee who is personally responsible for misconduct versus one who has acted under direction or coercion?

Ms Copeland: I think that I will leave it to solicitors to tease that out. NICVA held a consultation seminar on the Bill. Charity solicitors were present and raised that as an issue. They were concerned about how employment legislation interacts with that. We were concerned about a scenario where somebody is maybe not strong enough to stand up against someone who is quite dominant in the organisation and does what they are told to do without realising, maybe, that they can whistle-blow.

The Chairperson (Mr Gildernew): Or, indeed, they may have been acting on a mistaken view. It might not even be as onerous as that.

Ms Copeland: Yes. That is right.

The Chairperson (Mr Gildernew): It could be a director making a mistake and directing someone who feels that they are not able to say anything about that. That is one thing that we want to watch for.

Ms Mulholland: I will focus on the publication of official warnings. Thank you very much for what you have prepared and for your contribution. Can you give us a bit of an insight into the consultation event that you held with charities? What was their view on official warnings? I suppose that there is a balance to be struck. Should those remain unpublished until a certain point or until the charity has missed or ignored certain warnings?

Ms Copeland: The majority of people had views in the same vein. They were concerned about the reputational damage that it could do to charities, but one person present had been complaining about a charity.

They might have been a user of charity services. They put in complaints about the charity and would have liked them to be made public, but I am not sure whether they had thought of the full ramifications of something such as that getting into the public domain. Sometimes, service users or beneficiaries of charities do not understand the full complexity of what a board of trustees deals with or of their decision-making. Whilst somebody might have a complaint or a gripe about a decision of the board, that would need to be investigated to see what the reasons were for it and whether it was justified.

If the Charity Commission issues a warning to a charity whose trustees do not give it the information that it needs to prevent it from having to carry out a full statutory inquiry, the commission's safeguard is that, as part of the full statutory inquiry, it can carry out the investigation and then publish the results. The warning is good, and it is useful for trustees. The issue is publication.

Ms Mulholland: It is just about making it public.

Ms Copeland: It is about making it public. I could understand the Charity Commission wanting to do so where it sees an online fundraising appeal by a charity that it believes there to be an issue with. Perhaps, however, the Charity Commission or the Fundraising Regulator, rather than making the information public, could be given the power to tell the charity to cease that appeal itself. What happens is that mud sticks, and you hear people say, "Look at that charity. Sure, they're all the same".

Ms Mulholland: The other points that I had have been picked up, so I will let others come in, Chair.

The Chairperson (Mr Gildernew): The commission has conveyed a sense of that, but you are right to raise it, and we will continue to do so as we go through the Bill. The commission has said, "We have a process in place before we get to that stage". Your perspective on that will be valuable to us. Thank you.

Miss Brogan: Thank you for your submission. You raised concerns about religious charities being exempt from some of the rules. Will you explain which rules those are and the rationale behind that?

Ms Copeland: It is the official warning. There is a designation for religious charities in the Charities Act (Northern Ireland) 2008, and charities with that designated status can sort out their own governance arrangements in the first instance. That was to be followed through in the Bill, in that such charities were to be exempt from the provision for the official warning. However, the consultation report showed that the Department had listened to concerns and removed one of the exemptions. It says that it will let an exemption in another part of the Bill stand and allow a designated religious charity to sort out its own issues. However, if the Department is saying that we need a level playing field for all charities, we need that to apply to everything.

Miss Brogan: It would be worth our looking into exactly what religious charities are to be exempt from.

Ms Copeland: It is in the consultation report. Sorry.

Miss Brogan: That is grand. I know that I am springing it on you. That is fine. We will look into that.

The Chairperson (Mr Gildernew): It is a valid and well-raised point. There have been significant difficulties in religious organisations, and governance needs to be transparent, so we should take that one up.

Ms K Armstrong: My question is about the disapplication for small charities. In your response to the consultation, you mentioned charities with an income of under £20,000. Having been involved in a few small charities, I think that having a template to fill in could be useful for smaller charities, although maybe it should not be a digital template. There is nothing in the Bill that says that the Charity Commission for Northern Ireland or the Department would agree to something like that, but it could be useful, because the Departments have, over the years, asked the organisations that apply to them for completely different things. Would it be worthwhile for the Bill to provide for agreement across the board on such a template?

Ms Copeland: For other reporting?

Ms K Armstrong: Say, for instance, that the Department for Communities had small grants worth £500 to £1,000 and these types of smaller charities could apply for those. Instead of their having to fill out one financial thing for Communities, another for Agriculture and another for Economy, as well as one for a council, that sort of template might be useful.

Ms Copeland: I agree with the spirit of the question. In reality, however, in order to satisfy the Department's funding requirements, that template would no longer be simple. The intention for the reporting template for under £20,000 is for it to be very simple. The issue that we have with it is the fact that it is digital. That is the problem. We are a helper group for the Charity Commission, which means that we assist organisations with the reporting requirements and talk them through any issues that they have. Some trustees have difficulty and do not have the digital capabilities for finding and completing the annual monitoring return. We know that other helper groups assist organisations with that. Adding another layer could be difficult. In that vein, Kellie, not in this consultation seminar but in the consultation seminar that we held two years ago on the charity exemption threshold, one of the umbrella bodies of a uniformed organisation talked about the templates that their units were having to complete. Some of them were already completing two different templates. This would be a third template. I totally understand what you are saying about having a uniform one, but, if it is to satisfy government funding, I do not think that it would work.

Ms K Armstrong: I think of COVID and the lawn bowlers — basically, it was two men and a wee lad — who came forward. They had to fill out all these forms, and it was really hard for them.

Ms Copeland: With funding applications, it is really important that the work of the joint forum and the funding principles are taken forward.

The Chairperson (Mr Gildernew): Thank you. As with the last session, that was very useful, in that you gave a very clear explanation of what the impacts would be from your perspective, which is very important. Thank you for the information that you sent, and we look forward to continuing to work with you as we work through the Bill.