Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome Ray Caldwell, director of voluntary and community division; Colleen Bell, head of the charities policy and legislation team; Martin Ireland, deputy principal in the charities policy and legislation team; and Gerard Reilly, deputy principal in the charities policy and legislation team. Ray will make some remarks, and then we will come to members.

Mr Raymond Caldwell (Department for Communities): Thank you, Chair. Good afternoon. First of all, thank you for the opportunity to come before the Committee today as part of your scrutiny of the Charities (Amendment) Bill. I am joined by my colleagues who have already been introduced. They will pick up on any specific questions that members may have on the detail relating to the Bill.

At the outset, I acknowledge the careful and constructive scrutiny that the Committee has undertaken to date. We have found the evidence from the Assembly's Research and Information Service (RaISe) particularly helpful both on the substance of the Bill and on its potential financial implications.

We have also listened closely to the evidence provided by the Charity Commission for Northern Ireland, Northern Ireland Council for Voluntary Action (NICVA) and the Fundraising Regulator. Those sessions have helped to identify where further explanation may be useful and where there may be opportunities to refine the Bill.

The Department welcomes the scrutiny. It reinforces the importance of continuing to work closely with the commission and the wider charity sector as we move from the primary legislation to implementation.

The Department remains firmly of the view that it is a good and necessary Bill. It strengthens the commission's regulatory toolkit, addresses known difficulties in existing legislation and creates the basis for a more proportionate accounting and reporting framework, particularly for smaller charities. It also removes an unworkable provision relating to organisations established in other jurisdictions.

At a high level, the issues identified by RaISe and discussed by the Committee fall into several broad themes: the scope and clarity of the commission's information-sharing powers; the safeguards associated with official warnings and other regulatory powers; the accounting and reporting arrangements for smaller charities; the development of regulations and the Department's engagement with charities and the commission; the practical and digital support required for charities; and the financial resource implications of implementation for the commission.

We recognise that the Committee is concerned about whether the commission will have the resources that it needs to implement the legislation effectively. The Department shares those concerns and recognises the additional demands that the Bill and associated regulations will place on the commission.

The commission has operated within a constrained budget for many years. It has lived within the funding allocated to it, through prioritising appropriately, and has continued to deliver on its core statutory functions. However, the Department recognises that that is not an ideal situation.

Like other arm's-length bodies (ALBs), the commission is operating in a very difficult financial environment. We are clear that the Bill creates additional responsibilities for the commission but that they must be properly resourced. That issue has been raised at the highest levels in the Department, and we are committed to ensuring that the resource pressure required to implement the Bill and associated regulations is met.

It is important to recognise that the commission has already received most of the capital funding that it identified as necessary through allocations made over the past two years. We are also aware that it will require further capital funding next year to complete the necessary changes to its systems.

The commission has also identified a requirement for approximately £387,000 in additional resource funding to implement the Bill across this year and the next two financial years, together with around £50,000 to £60,000 for training, guidance and support for charities.

The Department recognises the need to consider the commission's capacity beyond the initial implementation. As the reform becomes established, it will become part of the commission's normal business. The Department will continue to monitor operational and resource impact with the commission, with any longer-term needs considered through the normal business planning and budgeting processes. That will help to ensure that the delivery of the reforms does not adversely affect the commission's existing regulatory functions.

The Department is listening. We recognise that implementation is not simply an IT exercise but that it will require staff capacity, new operational processes, guidance, training and clear communication to help charities comply with the new arrangements. I assure the Committee that the Department is working to ensure that additional resources required to implement the Bill will be met.

While we must operate within a very constrained, wider financial context, we recognise that passing legislation without making proper provision for its implementation would create significant risks for the commission and the charities sector.

The commission has been clear and constructive about what it believes it needs. We continue to work closely with it to test and refine those requirements, agree a realistic implementation timetable and ensure that available resources are directed to the areas of greatest need.

Our shared objective is not simply to place new provisions on the statute book; it is to ensure that the commission can operate those provisions effectively and proportionately and that charities receive the guidance and practical support that they need.

The Bill contains a number of enabling provisions because the detailed accounting and reporting requirements are better placed in regulations. That allows those requirements to be developed in consultation with the commission and the sector and to be adjusted over time without requiring further primary legislation. That flexibility will be accompanied by transparency, consultation and appropriate Assembly scrutiny.

It is also recognised that it is important that the Bill, as introduced, intends to reduce burdens as well as introduce new powers. Template reporting and the proposed removal of independent examination requirements for the smallest charities should produce tangible benefits. The official warning power should also provide the commission with more proportionate and, in some cases, less resource-intensive alternatives to opening a statutory inquiry. I acknowledge the clarity of the commission's evidence about how it expects to use those new powers. In particular, the commission explained that official warnings would form part of a graduated and proportionate regulatory approach. That operational insight was helpful and should provide reassurance that the powers will be exercised carefully, consistently and with regard to the circumstances of each case.

There remain some points of detail on which the Department and the commission currently take different views. That is not unusual during the scrutiny of legislation, but we are actively listening and responding to the commission's concerns, including its comments on the information-sharing powers in clause 2 and the dispensation of provisions in clause 7. We are also taking further advice from the Office of the Legislative Counsel (OLC). Overall, our position is that the Bill, as introduced, is coherent, workable and well drafted. Where stakeholders have suggested changes, we will consider them on their merits and assess whether they would genuinely improve the legislation without creating uncertainty or unintended consequences.

Chair, I will now pass to Colleen, who will pick up on some of the principal issues in more detail.

Ms Colleen Bell (Department for Communities): Chair, I acknowledge the Committee's letters that we received this week, following last week's evidence sessions. I will address the issues raised about the Bill as I go through the briefing, but, first, I want to address the issues raised regarding the proposed registration threshold, which is not part of the Bill.

The proposed registration threshold, below which charities will not be required to be registered with or report to the commission, is to be introduced through regulations, which are at an advanced stage of development. Officials anticipate bringing them before the Committee during this mandate. They will be subject to the draft affirmative procedure, with the Committee and the Assembly having the opportunity to scrutinise the threshold and supporting arrangements before they can be approved. The independent review recommended that all charities should continue to be required to be registered. However, following representations from the sector about the burden on very small organisations, the previous Minister rejected that recommendation and instructed officials to develop policy and draft regulations for a £20,000 registration threshold. The purpose is to create a more proportionate framework, not to weaken accountability.

Registration below the threshold will be voluntary. Existing charities may remain registered, rather than apply for removal. Charities not yet registered may choose to register. A charity that is removed will be required to re-register if its income exceeds £20,000 in three consecutive financial years or if its assets exceed £100,000 at any time. The regulations will also specify the evidence required and will enable the commission to verify whether a charity qualifies or continues to qualify for exemption from registration. The Department recognises that exemption from registration may reduce the public visibility of some charities. However, they will remain subject to charity law and to the commission's regulatory oversight under the Charities Act (Northern Ireland) 2008.

Following engagement with the Financial Action Task Force and His Majesty's Treasury, we are satisfied that the regulations contain robust safeguards and will not materially increase the risk of wrongdoing within the affected cohort. The threshold will also provide significant benefits for the smallest charities by reducing disproportionate administrative burdens and allowing them to direct more of their limited resources towards their beneficiaries. The Bill introduces a simplified template reporting regime for charities that fall below the proposed registration threshold but choose to be registered. Those reporting easements were recommended by the independent review.

I will now go through the other issues raised about the Bill in previous evidence sessions and the Committee's letters, beginning with clause 2 and information sharing. The Department understands the commission's concerns about the drafting of section 24 of the Charities Act 2008 and, in particular, its concerns about the legal certainty associated with the term "office-holder".

It might be helpful to explain how clause 2 developed. Our original intention was to replicate, as far as possible, the information-sharing model used in England and Wales. That approach led us to the clause that was consulted on. However, as the Committee will be aware, concerns were raised during the consultation that the information-sharing powers were too wide. We subsequently considered the particular practical problem that the amendment in clause 2 was intended to resolve, which was the commission's ability to share information with the Fundraising Regulator. As the Fundraising Regulator is an independent, non-statutory regulator rather than a statutory public body, there was uncertainty about whether it fell within the existing reference to a "public body or office-holder".

The drafting, therefore, evolved into a more targeted amendment to section 24. Clause 2 clarifies that:

That was intended to address the identified gap without widening the commission's powers more extensively than necessary.

At that stage, the Department did not consider it necessary to amend the separate reference to "office holder". Our position was informed by the Charity Tribunal for Northern Ireland’s reference determination of October 2025, which indicated that:

which includes elected representatives —

We recognise that the commission does not consider that determination to provide the degree of legal certainty that it would prefer. The commission has also asked why provisions in England and Wales could not simply be lifted into the Northern Irish legislation. It is important to be clear that it is not necessarily as straightforward as replacing a few words in section 24. In England and Wales, the relevant information-sharing framework is spread across four sections of the Charities Act 2011. Sections 54 and 55 deal with information provided to the commission, while sections 56 and 57 deal with disclosure by the commission and associated restrictions. In Northern Ireland, the relevant powers sit within a single section of the 2008 Act. The structure of the Acts is therefore different. A direct lift would require section 24 to be substantively restructured or replaced, together with careful consideration of the consequential amendments, restrictions on disclosure and the relationship with the data protection legislation.

The Department does not dismiss the commission's concerns in that area. However, it notes that MLAs and MPs are not expressly referenced in the equivalent legislation in England and Wales. In that context, where concerns have been raised about the absence of the specific reference to elected representatives in our section 24, it is not evident that adopting the English and Welsh wording would in itself address that issue, as the corresponding provisions similarly do not expressly refer to such office holders. The Department, therefore, considers that the amendment suggested by the commission may not provide any greater clarity or certainty than the current drafting.

Our objective remains to give the commission an effective and legally certain information-sharing framework, while ensuring that any amendments are proportionate and do not create unintended gaps or confer unnecessarily broad powers, which respondents to the consultation opposed. The Department is currently in conversations with the commission and the Office of the Legislative Council to see whether additional clarity is needed and can be provided.

The commission also suggested that the provisions in clause 7 that allow it to dispense with or modify accounting requirements should be removed from the Bill because the Department's intended policy approach has developed since the Bill was drafted. Our current intention is to provide a one-year grace period, where a charity exceeds the £250,000 income threshold for accruals accounts. Under that approach, a charity would not have to move immediately from receipts and payments accounts to accruals accounts merely because of one exceptional year of income. If its income were to exceed the threshold for a second consecutive year, it would then be required to prepare accruals accounts. That approach better reflects sustained growth in the charity, rather than a one-off exceptional increase in income. It also avoids requiring charities to apply individually to the commission for a dispensation and avoids placing an administrative and resource burden on the commission to determine those applications.

The commission's position is that if we no longer intend to operate the individual dispensations system, the enabling provisions should be removed to provide certainty. The Department's current view is that there may nevertheless be value in retaining some future flexibility. We do not intend to use those provisions to establish the form of individual dispensation regime originally envisaged. However, circumstances may change. If a limited dispensation mechanism for any other accounting-related issue became appropriate in the future, removing the power now would mean that further primary legislation could be required.

There appeared to be some uncertainty during previous evidence sessions about how the new powers will apply to designated religious charities. The position is that the official-warning power in clause 3 will apply to designated religious charities. An earlier proposal to exclude them was removed following consultation. The Bill as introduced, therefore, permits the commission to issue an official warning to a designated religious charity. By contrast, the new section 36A power, which is provided at clause 5, to direct that specified action must not be taken, will not apply to designated religious charities. That distinction follows the structure of the existing Act. Sections 33 to 36 contain powers that are exercisable following the opening of a statutory inquiry, and those provisions do not apply to designated religious charities. The new section 36A is an extension of that suite of inquiry-based powers. It is therefore excluded on the same basis. The position is consequently consistent.

Designated religious charities may receive an official warning, because that power does not depend on the opening of a statutory inquiry and provides the commission with a proportionate regulatory tool to address wrongdoing, but the commission may not use the new section 36A inquiry-based direction against a designated religious charity.

It is important to note that where concerns are raised about a designated religious charity, the commission retains the power to open a statutory inquiry into that charity. It is then up to that charity to take remedial action. Failure to take the appropriate action could result in the removal of designated religious charity status.

Separately, the Committee wrote to the Department regarding the rationale for the use of the word "may" in issuing an official warning rather than stating "choose to". The use of "may" is deliberate and reflects the wording of equivalent legislation operating in England and Wales. It gives the commission discretion to issue an official warning where the statutory conditions are met, rather than requiring it to do so in every case. The commission will be expected to consider the particular circumstances, including the seriousness of the conduct and whether a warning would be necessary and proportionate. "May" is the usual legislative term used to confer such a discretionary power. Wording such as "choose to" would not provide the same legal clarity.

NICVA raised concerns about the potential reputational effect of publishing an official warning. The Department agrees that publication should never be automatic. Clause 3 gives the commission discretion as to whether and how a warning should be published. Before issuing a warning, the commission must notify the charity and the relevant trustees, explain the grounds for the proposed warning, state whether and how it proposes to publish it, and allow representations to be made. The commission must then take those representations into account. While warnings would normally be published in the interests of transparency, the commission may withhold publication where that would risk a person's safety, breach confidentiality, affect national security or cause disproportionate harm to beneficiaries.

The power also allows a warning to be varied or withdrawn. Where a published warning is withdrawn, the withdrawal itself must be published within 28 days. That is an additional safeguard intended to reduce the risk of continuing reputational damage after the matter has been resolved. The commission was clear in its evidence that it intends to use the official warning power as part of a proportionate regulatory framework. A warning may be appropriate where advice or guidance alone would not be sufficient but where opening a statutory inquiry or using more intrusive powers would be disproportionate. Publication can serve an important regulatory purpose. It can help to protect donors, beneficiaries and charitable assets, maintain public confidence in the sector and highlight lessons that may be relevant to other charities. At the same time, the commission must carefully consider the potential reputational impact on the charity concerned. We therefore welcome the proportionate and considered approach that the commission outlined to the Committee regarding the use of that power.

A further issue raised during scrutiny concerns the commission's power to remove a person from employment with a charity where there has been misconduct or mismanagement. It is important to be clear that that is an existing power under section 33 of the 2008 Act. The Bill does not create that power or extend the circumstances in which an employee may be removed. The relevant change in the Bill addresses a different problem. It ensures that a person cannot avoid the regulatory consequences of removal by resigning after receiving notice that the commission intends to make the order. It also extends the associated trustee disqualification consequences to officers, agents and employees removed on the relevant statutory grounds.

The existing power to remove an employee has never been used by the Charity Commission in Northern Ireland, nor has the equivalent power been used by the Charity Commission for England and Wales. We recognise the potential interaction with employment law and human rights. The suggestion that the underlying employee removal power should itself be repealed has arisen principally during the Committee's scrutiny. It is not a proposal that the Department has consulted the sector on when developing the Bill, nor is it one that was flagged during the independent review. We do not consider that it would be appropriate to make that wider policy change now without proper evidence, consultation and consideration of the consequences.

Additionally, the Committee wrote to the Department to ask whether it considered whether automatic disqualification should extend beyond charity trustees to individuals holding senior management positions as it does in other UK jurisdictions. We have concluded that doing so would raise complex issues relating to employment law, contractual rights and procedural fairness. Trustees hold a distinct legal office and have ultimate responsibility for the charity, whereas senior managers are employees whose roles and authority may vary considerably between organisations. The Bill therefore focuses on preventing disqualified individuals from holding the legal powers and responsibilities of trusteeship. Trustees remain responsible for senior appointments and for managing the associated governance and safeguarding risks. We nevertheless recognise the concern that a disqualified person could seek to retain significant influence through an employed role. Any extension of the regime would require further policy development, legal analysis and consultation to ensure that it was clear, proportionate and compatible with human rights.

The Department intends to develop a further charities Bill in the next mandate. That Bill will include consideration of measures reflecting more recent developments in England and Wales, which could further reduce unnecessary bureaucracy for charities. We could consider the employee removal power and the extension of the automatic disqualification to senior management roles as part of that work. That would allow the issues to be examined fully and consulted on before any amendment is proposed.

Returning to clause 7, there was some confusion during one evidence session about an asset register. The commission does not hold an asset register.

That issue arose when we were discussing why the proposed exemption from independent examination is based on a charity's income without a separate assets test. The current thresholds for independent examination and audit are based on an assessment of income only. Introducing an asset element could be confusing and might cause a small charity to have to value its assets, whereas it is not currently required to do so. Those charities are currently required to provide only a statement or list of their assets and liabilities. They are not required to provide a value for them to the commission. If eligibility for exemption from independent examination depended on the value of a charity's assets, charities would have to value those assets simply to determine whether they fell above or below the threshold for template reporting.

We recognise that some charities may have valuable assets and a very low income. Those charities will not become invisible. If they remain on the charity register and are eligible to use the proposed template reporting model, they will still provide simplified financial information. The detail of that information will be developed through regulations for template reporting. Our intention is that templates should provide an appropriate level of visibility, potentially including an indication of whether the charity holds assets, without imposing a disproportionate valuation exercise on the smallest charities.

NICVA also highlighted the digital capacity of some charities and suggested that the template report should be capable of being downloaded, completed and uploaded. Annual reporting to the commission is already digital: the Bill does not introduce digital reporting. Our objective is to simplify the information required of the smallest charities and not to make access more difficult. There are already helper groups and other sources of support for trustees who lack the confidence, skills or access required to complete their reporting obligations online, and that support will remain important.

NICVA raised issues about the level at which thresholds are currently set for a charity to obtain an audit or to prepare accruals accounts. Those issues are not related to the Bill. Existing powers allow relevant thresholds to be amended separately by order or regulations, following consultation and the appropriate Assembly scrutiny procedure. The Department is undertaking targeted stakeholder engagement on charity audit thresholds. Subject to the outcome of that engagement and wider policy considerations, we hope to make a recommendation to the Minister during this mandate. Whilst that work is distinct from the Bill, it forms part of the same broader objective of ensuring that regulatory requirements remain proportionate to the charity's size, income and complexity.

Finally, we continue to work closely with the commission to agree a realistic and achievable timetable for the regulations. While the Department remains keen to move forward and deliver the benefits of the new arrangements as soon as possible, we also need to be realistic about the commission's capacity, the necessary systems changes and when the sector will be ready. We will continue to work with the commission to agree an achievable timetable so that we can provide the sector with clear expectations and sufficient time to prepare.

Turning to the process to implement clauses 7, 8 and 10, the Department is due to have initial engagement with the commission in November to commence the development of the regulations, ensuring compatibility with the commission's IT systems or scoping any required changes. Once drafted, the regulations will be subject to public consultation early in the new mandate, prior to their being made. The commission will undertake stakeholder engagement as to the particulars of the proposed template reporting, including engagement with bodies such as the Ulster Society of Chartered Accountants, whose representatives you heard from last week.

During that process, the Department and the commission will agree a communications plan to ensure that the sector is fully informed of the incoming changes. Until the new arrangements are in place, all charities will need to comply with the existing arrangements, including independent examination of their accounts. At this stage, it is not intended that there will be any transitional arrangements before the regulations take effect. We will continue to work through the detailed points that have been raised with the Office of the Legislative Counsel, the commission and relevant stakeholders, particularly in relation to clauses 2 and 7. Where an amendment is thought to materially improve the Bill, we will consider it constructively. Equally, we need to be careful not to amend provisions without fully considering the possibility of unintended consequences.

Our position remains that the Bill provides a strong and workable basis for modernising charity regulation in Northern Ireland, reducing unnecessary burdens and supporting public trust and confidence in the sector. Formal written responses to the Committee's letters will be sent in due course, but I hope that this briefing has addressed the issues raised in the interim. We are happy to take the Committee's questions.

The Chairperson (Mr Gildernew): Thank you, Colleen and Ray, that was very useful. I get a strong sense, following the deliberations, of the issues that have been raised, and I welcome that. I welcome your commitment, Colleen, to forward that information in writing. I will be as quick as I can with a couple of questions.

My first question relates to funding and the smoothing model, to which NICVA referred. You appear to have used its figure of £387,000 for resource in a multi-year system. You have touched on your thoughts around that, but I do not know whether that fully meets what the commission was suggesting. Do you intend to table amendments in order to create the multi-year model that the commission suggested, or is there a halfway house between that and what was originally planned? When might you table any potential amendments?

Ms Bell: The updated figure that the commission has provided — the £387,000 for resource — is for this year, next year and the following year. That is based on the smoothing mechanism. We are not going to go down the dispensation route. The higher figure that the commission presented to you is for the additional staff whom it would need to man that process, essentially. Our approach is that it will be £387,000 over the three years, plus the £50,000 to £60,000 for training and support for charities.

The Chairperson (Mr Gildernew): When will we see that? Sorry, go ahead, Ray.

Mr Caldwell: My directorate is responsible for the sponsorship of the Charity Commission and, separately, for legislation and policy. We have a good working relationship with the commission. We keep in regular contact and discuss these issues in detail. Today, we have given a commitment and assurance to the Committee that we are working to meet the resource pressure that has been identified by the Committee. We can give that assurance to the Committee.

The Chairperson (Mr Gildernew): OK, but I am still not clear on whether you are amending the Bill to reflect the commission's concerns. I get it: you are providing it with resource.

Ms Bell: We do not need to. The Bill is drafted in such a way that it will be the secondary legislation that delivers the smoothing mechanism. The way in which the Bill is drafted is fine as is. We do not need to make any amendments at this stage.

The Chairperson (Mr Gildernew): Will you provide us with the definitive proposed interpretation of "office holder" before we get to our clause-by-clause scrutiny?

Ms Bell: Yes, we are working with the Office of the Legislative Counsel and the commission. It is a live issue that we are still discussing. OLC has suggested that it could provide additional wording to support that definition. We could provide the Committee with that.

The Chairperson (Mr Gildernew): Thank you. I noted the themes that you mentioned, Ray. I was happy to see that they covered everything, bar one area, but each of you then picked up on it: the religious organisations. You have explained that they will be subject to the official warnings but will sit outside the investigatory framework. What is the rationale for that?

Ms Bell: The official warning is a proportionate regulatory measure that the commission can use. It does not need to have a statutory inquiry opened into it. It is —.

The Chairperson (Mr Gildernew): My question is this: what is the rationale for excluding them from rather than including them in the investigatory part?

Ms Bell: Do you mean designated religious charities in general?

The Chairperson (Mr Gildernew): Yes.

Ms Bell: That was in the 2008 Act and was debated at that time. Do you want to come in, Martin?

Mr Martin Ireland (Department for Communities): That was introduced as part of the 2008 Act. At the time, the Assembly was of the view that designated religious charities had their own distinct internal governance structures and that the commission would open an inquiry but not intrude too much into the workings of the designated religious charity. The commission would allow it the opportunity to use its structures to remove trustees or take appropriate action. As Colleen has explained, if any designated religious charity refused to do that, a statutory inquiry could be opened and the "designated religious charity" status could be removed. The powers would be used in that case. It is important to say that, at the minute, there is only one designated religious charity in Northern Ireland: the Presbyterian Church. It applies only to it. It is not that there is not the ability to act where wrongdoing occurs but that, in the first instance, because of that disapplication, it is given the opportunity to address the identified wrongdoing.

Ms Bell: "Designated religious charity" status is not automatically granted to any religious charity. It is an application-based process, and the commission has to be satisfied that the charity has the structures in place to be able to address any wrongdoing.

The Chairperson (Mr Gildernew): My concern is that this was not in previous legislation, so should we copper-fasten it in a second piece of legislation? We are dealing, for example, with conversion practices. I get what you say about the Presbyterian Church. In recent times, we have heard of meetings on church premises connected to serious criminal cases — the Jeffrey Donaldson case, in particular. There is concern that there is a blind spot. We will keep that under review as we go along.

I will move on to members, who may ask a question that I was coming to. Rather than doubling up, I will go to members.

Ms K Armstrong: Clause 10(4) amends section 70 of the 2008 Act. The delegated powers memorandum (DPM) states:

Is there a mistake? Should it state that the powers are exercisable by the commission?

Ms Bell: Sorry, Kellie: ask me again. I did not follow that.

Ms K Armstrong: There is provision in the 2008 Act for the commission to have regulation-making powers, but the DPM states that the powers under sections 68 and 70 continue to be exercisable by the Department. Is that correct?

Mr Ireland: That is correct. Any statutory regulatory power lies with the Department. Under the Act, the commission has power to make regulations, but those are not statutory regulations, and the commission can make them only within the confines of its delegated powers to do so. Those regulations must be fully consulted on before they are brought in. Powers to make the statutory regulations that come before the Committee and are voted on in the Assembly lie with the Department.

Ms K Armstrong: OK. Using the same term, "regulations", for both is a little confusing. I want to be absolutely clear on section 70(1) of the 2008 Act. Is the regulation-making power in that provision clear? Is the correct scrutiny procedure being used?

Ms Bell: We can have a wee look at it and come back to you. It has not come to our attention.

Ms K Armstrong: It has been raised with us.

Mr Ireland: We will double-check that.

Ms K Armstrong: Bear with me, because I am going to flick backwards and forwards in the Bill. I have a bit of concern about clause 3, "Official warnings to be issuable". Clause 3(2) inserts section 32A into the 2008 Act. Section 32A(7) provides:

There is no appeals process, but the person to whom the commission issues its warning may wish to go to the Charity Tribunal. Does the new provision allow the Charity Commission to revoke or amend the warning and apologise should the Charity Tribunal find against the commission's determination and in favour of the person to whom the warning was issued?

Ms Bell: It gives the Charity Commission the power to vary or withdraw the warning, but there is nothing in the Bill about apologising. It would be for the Charity Commission to decide whether it was at fault and, if so, needed to apologise.

Ms K Armstrong: We thought about the relevance of convention articles to the warning, because this could destroy someone. The commission may withdraw a warning — whoop-de-do — but there is nothing to say that it has to publish the withdrawal or do anything else.

Ms Bell: The commission will have 28 days to withdraw a warning and, if the warning has been published, publish the withdrawal. We think that the safeguards lie ahead of that, however. When we talked to colleagues in England and Wales about the use of that power, they said that, when they told a charity that they were going to issue an official warning and set out the grounds for that, it normally resulted in the charity turning back to compliance and sorting the issue out before the warning was issued. You will have heard from the commission that it intends to use proportionately the power as a tool. It will not automatically go down the official warning route, and there is guidance about the steps that it will take with the charity before it does so.

Ms K Armstrong: The difficulty is that we do not know what the commission's policies and procedures are or what regulations it may lay.

Ms Bell: We can see how it operates in England and Wales, which is a good thing for us to look at. The commission has said that it will consult on how the power is used.

Ms K Armstrong: I have one last question, Chair, if you do not mind. We know that, before making regulations under the provisions in the Bill that amend sections 68 and 70 of the 2008 Act, the Charity Commission may undertake consultation, but there is no such amendment to section 179 of the 2008 Act. That section provides that the Department must undertake consultation before making regulations under listed sections of the Act. Should the amendment to section 70 of the Act specify that the Department should consult on regulations to be made under that section?

Ms Bell: We had not considered that.

Mr Ireland: As I said, the statutory framework will be set out in the Department's regulations —

Ms Bell: They will be consulted on.

Mr Ireland: — which will come through the Assembly. That is what section 179 refers to. The regulations that the commission has the power to make are not statutory regulations. The overall outline of the template, for example, will be set by the Department in the statutory regulations that will be approved in the Assembly. The detail of the template —

Ms Bell: What the template will look like.

Mr Ireland: — will be set in separate regulations to be made by the commission after it has consulted and carried out full stakeholder engagement.

Ms K Armstrong: I am worried about the fact that section 179(5) states:

I am concerned to see a reference to what the commission "considers appropriate", without mention of formal consultation. Do you not think that that would be strengthened if wording were added to state that the commission has to consult on section 70?

Mr Ireland: We would need to take a further —.

Ms Bell: We could. You heard from the commission two weeks ago, and it said that it will consult on various changes. It is an enabling regulator that tries to bring the sector along with it. It does not want to impose changes on the sector that will impact negatively on it. It recognises the importance of consultation.

Ms K Armstrong: I am not a great fan of leaving it up to people to decide to do things.

Ms Bell: We can take advice on that.

Ms K Armstrong: It would be really helpful if you could do that. I just want to find out whether we can strengthen that. I am concerned that RHI outcomes did not follow that process, and I am concerned that devolving it could be a concern when there is no scrutiny of what the commission does with its regulations.

On the subject of the assets register, all charities have a reserves policy. They have to say what their reserves are and what they include, and that includes the assets register. They also have to know that for their insurance. For any charity to say that it does not know what its assets are and what they are valued at —. Charities have to do that annually for their insurance policy. I am worried that a charity could save money through straight-line depreciation on an asset, which is a removal out of income, but that we are not looking at that.

Ms Bell: Those charities will still have to submit their financial information for the template reporting. We felt that it was disproportionate for them to have to value their assets for the assessment of whether they can use the template. The independent examination and audit determination that they are required to do are also based on income only.

Ms K Armstrong: Yes, but income is money coming in. It could be spent to protect an asset that is worth millions. I am concerned that the asset register is not being considered. It can generate income as well.

Ms Bell: On that point, the commission does not have an asset register.

Ms K Armstrong: No, but charities do, and it is not being looked at. Under their regulations, they could use money from the asset to pay part of a fine.

The Chairperson (Mr Gildernew): Do members have any further questions?

I think that it was Kellie who raised the point about the publication of official warnings, and I will double up on that. Part of the concern is that the warning might go out on the front page of a paper but the retraction might go out on page 8. That is one issue. The other issue is that, if there is a right to make representation, why, as good practice, would you not formalise that and make the appeal part of the process? Why was it decided to leave it a bit looser?

Ms Bell: That would be disproportionate. It is supposed to be a lower-level regulatory tool — something that is accessible. If there were a right to appeal, there would be a cost burden on charities and the commission of having to go to tribunal, but we think that it is sufficient to have the representation process before that happens. You have seen how the commission said that it would operate that. If needed, the commission can then open a statutory inquiry and use the harder-hitting powers, for which there are appeal rights.

Mr Ireland: When we spoke to colleagues in England and Wales, where there is not an appeal right for this, they told us that an appeal right would make the power impractical and undermine its effectiveness as a swift early intervention tool. There is a cost involved in anything that goes to a charity tribunal. There is also a delay.

Ms K Armstrong: There is also a cost to the individual who might have lost their position in society. I just do not understand, given the convention rights.

Mr Ireland: As I said, the warning is a warning. There are more significant powers should that warning not be complied with and a section 22 inquiry opened. All the powers falling out of the statutory inquiry, which are contained in sections 33 to 36, are appealable.

The Chairperson (Mr Gildernew): Do the warnings have to be published, or does the commission have discretion?

Ms Bell: No, the commission "may publish" them. I described some circumstances in which they would not publish the warning. Where there would be significant reputational harm to the trustees, the Charity Commission may determine that it is not appropriate to publish the warning. It is discretionary.

Mr Caldwell: Chair, you could have a position in which a warning is not published because its subject has been addressed. In such cases, the warning will be withdrawn. The intention here is that publication is proportionate and, indeed, in the public interest.

The Chairperson (Mr Gildernew): That consideration is valid, as are the concerns.

Mr Gerard Reilly (Department for Communities): In some cases, publication may be something simple. For example, if you look up a certain charity in the charity register, it might just have a mark beside its name to show that there is an official warning in place against it due to its non-compliance — for instance, in accounting and reporting — when it comes to providing a regular report.

Ms Bell: It is not necessary that it is published on the front page —.

Ms K Armstrong: Yes, but where it removes somebody from post under clause 4, that is pretty big.

Ms Bell: Oh, if it removes somebody from post?

Mr Caldwell: There would be an official warning.

Ms K Armstrong: I thought that it was after section 33A, where that is added in, which is all the warnings. No?

Mr Ireland: No, the official warning part is a warning to a charity to try to turn its back to compliance. The removal of a trustee would happen after a statutory inquiry had been opened and use the powers under section 33. That is appealable.

Ms K Armstrong: Through the Charity Commission?

Mr Reilly: The Charity Tribunal.

Mr Ireland: The commission initially has an internal review process.

Ms K Armstrong: That is why I was saying that there is a cost to the individual who has been removed. That is not being considered. It is all about saving —.

Mr Ireland: The Bill does not address that. The powers to remove in section 33 are already there.

Ms K Armstrong: Why can we not put in an amendment for an appeal?

Mr Ireland: There is already the power to appeal in the Bill.

Ms K Armstrong: Not an appeal to the Charity Tribunal but to the Charity Commission.

Mr Ireland: The Charity Tribunal has an internal review process. That is not a statutory process. The process to appeal a decision is to the Charity Tribunal, and those appeal rights are for any decision taken by the commission as a result of a statutory inquiry through sections 33 to 36. You could appeal removal or suspension or the appointment of an interim manager to a charity. All those powers have appeal rights. The idea of the warning is to try to turn a charity back to compliance before you even consider matters like that.

Mr Caldwell: To clarify, the official warning does not convey the power to remove someone. That will come through the statutory inquiry, for which there is an appeal mechanism.

The Chairperson (Mr Gildernew): OK. We will move through those in our consideration of the provisions. When you said that you had looked at opportunities to refine the Bill, I hoped that we would get information on that. When will we get that definitive wording from you on any of the —?

Ms Bell: For "office holder"?

The Chairperson (Mr Gildernew): Yes.

Ms Bell: We are working on that.

The Chairperson (Mr Gildernew): When will we have definitive sight of any of the refining amendments that you are considering at this stage?

Ms Bell: That is the only one that we are considering at the minute. We are working on it, so we will try to get it to you as quickly as possible.

Mr Allen: Very quickly on the official warning, when the commission was in with us, it outlined how it intended to use that, and there was a degree of reassurance. You have referred to how it is used in other jurisdictions, particularly in GB. Is there anything that the Department is looking at, maybe like a code, to give further reassurance? In other words, the Department would have to approve a code for how the commission operated the official warning process.

Ms Bell: No, the commission operates independently from the Department, so it is not for us to determine whether that would be appropriate for it.

Mr Allen: I am just thinking about how we could give further reassurance, given the particular concerns raised around how that would be deployed. I appreciate and understand that the commission highlighted charities failing to comply with reporting, for example, but said that it felt toothless when something like that was happening in successive years. A code may well help to prevent that and encourage charities to comply with that reporting requirement.

Ms Bell: To give a wee bit more assurance, Andy, I point out that the legislation does not delegate a power to staff. It would be a decision of the commissioners, so it would be for that committee of commissioners to decide whether it was appropriate to issue an official warning, unless we choose to delegate it through the scheme of delegation, but we are not proposing to do that. That would give an extra level of reassurance that the commissioners have met to consider the issues and feel that it is appropriate to issue the official warning.

Mr Reilly: I think that the commission has said that it will consult on how it will use the warning as well.

Mr Allen: OK.

The Chairperson (Mr Gildernew): OK. Thank you for that. We look forward to further engagement with you as we go ahead, but we will pick up with members any further questions or next steps. Thank you to all of your team, Ray. Thank you, colleagues. Good luck.