Memorandum from Sheen Stickland Chartered
Accountants (DCH 252)
INTRODUCTION
1. Sheen Stickland is a seven partner firm
of Chartered Accountants, with a strong presence in the charity
sector. Clients range in size from small local groups to international
charities and their activities include grant making, welfare,
religion, education, the arts, conservation and health. We act
as advisers, auditors, reporting accountants and independent examiners.
Individual partners are closely involved with the sector as charity
trustees, treasurers, other officers and volunteers.
2. While this submission is made by us as
a firm, we have, in the course of its preparation, taken soundings
from our charity clients. Conscious that smaller charities might
find it less easy to make a direct submission we have placed particular
emphasis on their views. This document should therefore be taken
as a small charity submission.
3. The Bill is broadly welcomed. This submission
responds to the eight specific questions raised but only concentrates
on matters where we believe comment is required. It does not deal
with sections where we are in broad agreement.
SPECIFIC QUESTIONS
4. The draft Bill strikes the right balance
between flexibility and accountability. The general consensus
within small charities is that over-regulation is best avoided
by continuing the Charity Commission's dual role both as a monitor
and adviser. The fear is that a separate regulator will be less
sympathetic to the realities of the world in which small charities
operate.
5. The Bill will improve public confidence
because it takes account of current public opinion as evidenced
by the Cabinet Office Strategy Unit report. It will not in itself
lead to more giving and volunteering. Giving and volunteering
is a more deep seated issue. Almost all charities are worried
that those currently aged under 40 are unwilling to commit on
a systematic basis.
6. The 12 new charitable purposes require
neither additions nor deletions. In particular the advancement
of religion is correctly identified as charitable.
7. Although religion's immediate impact
might not always be clear, the fact that those involved in religion
are much more likely both to donate to charity and to volunteer,
is in itself evidence of the public benefit flowing from the advancement
of religion.
8. There are concerns that the Public Benefit
test might lead to challenges that are driven by political correctness.
Issues such as equal opportunities and prevention of discrimination
are matters for general legislation and should not form part of
the Public Benefit test.
9. The Bill should not seek to define Public
Benefit. This should be left to case law and common law and should
be allowed to develop over the years. Historically charities have
been in the forefront of identifying and seeking to address needs
that initially have not attracted full public support. An article
on the subject written by a Sheen Stickland partner is appended.
10. The Bill neither adds to nor takes away
from the sector the opportunities to play a greater role in the
delivery of public services. The inclusion of this question has
raised concerns that there is a hidden agenda to transfer more
public services to the voluntary sector with a consequent diversion
of resources from smaller to larger charities.
11. The likely benefits of the draft Bill
will be the raising of the audit threshold, the power to spend
capital, the introduction of the Charity Appeal Tribunal and the
proposed Charitable Incorporated Organisation.
12. The costs are difficult to quantify.
There are concerns that the cost of an appeal to the Charity Appeal
Tribunal could put it beyond the reach of small charities. There
are also concerns that the cost of enforcing the public charitable
collections regulation will be passed to charities as a licence
fee.
13. We do not have sufficient information
to determine the level of funding necessary for the Charity Commission
to carry out its additional tasks effectively. There is concern
that these costs will be passed directly or indirectly to the
sector. There are already problems in raising funds for core costs.
Small charities in particular will find it difficult to find the
resources to pay fees or levies to fund the operating costs of
the Charity Commission.
14. Charities should not be allowed unlimited
trading as part of their normal activities. Unlimited trading
could lead to the profit motive predominating, would put non-charitable
competitors at a disadvantage and would almost certainly lead
to cases of charitable funds being used to support trading activities.
It would also risk the charity's assets in an insolvency and raises
the very real possibility that the reputation of the sector will
be damaged by businesses abusing charitable status to shield commercial
activities from taxation.
15. The fundraising proposals are workable.
However, central guidance is needed to ensure consistency between
local authorities. The question of consistency is not a matter
for either the Bill or regulations by the Secretary of State.
There are concerns that the burden of regulation will fall unduly
on certain local authorities, as lead local authorities.
16. The Charitable Incorporated Organisation
is particularly welcomed. With little of the detail in the Bill
it is difficult to determine whether it will be workable.
17. Many unincorporated charities will switch
to the new structure both for continuity and to relieve the trustees
of unlimited liability. The potential benefits for charities that
are companies limited by guarantee are less clear-cut. The proposed
procedures for moving to the new structure are welcome and workable.
18. The duty on a member to act in good
faith [Schedule 6.5 (5)] is welcomed but there are doubts about
how it can be enforced. If members are not liable to contribute
in a winding up [Section 69B (5) (a)] is there an enforceable
binding contract between the member and the CIO?
19. Some small charities are concerned that
the powers to merge may not be workable but were not able to point
to specific deficiencies in provisions in the Bill.
OTHER POINTS
20. The £100,000 threshold for registration
for charities that are currently excepted is realistic as an interim
measure [Section 7]. Some charities felt that the Bill should
include a clear indication that the threshold will be progressively
reduced to bring it in line with the threshold for other charities.
21. The powers to spend capital are welcomed.
The need for Charity Commission concurrence in certain cases [Section
33, Section75A (4)] appears to be unnecessary, unless they are
intended to prevent an abuse that has been identified.
22. The requirement to disclose more information
from commercial participators [Section 35 (4)] may reduce the
support from this source since the participator may regard the
information as commercially sensitive.
July 2004
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