DCH 289 Institute of Chartered Secretaries
and Administrators
INSTITUTE OF CHARTERED SECRETARIES &
ADMINISTRATORS
RESPONSE TO THE DRAFT CHARITIES BILL (ENGLAND
& WALES)
The Institute of Chartered Secretaries and Administrators
(ICSA) is the professional body qualifying and supporting company
secretaries and corporate administrators in all sectors of the
economy. Members are educated in a range of topics including
finance, HR, company law, administration and governance, which
enable them to add value to any organisation. The Institute has
some 10% of UK members as being directly employed in the Not for
Profit sector with many more involved on a voluntary basis in
capacities such as Trustees and School Governors.
In formulating the Institute's response to the Draft
Charities Bill, members covering the large multi-million pound
charities to small, local organisations were approached for their
views given the depth of their knowledge of the sector and of
complying with relevant legislation.
General Comments
Overall, the ICSA is broadly supportive of the Draft
Charities Bill, though there are some aspects of the drafting
that need to be reconsidered and clarified before presented to
Parliament. We are particularly pleased to see the increase in
charitable purposes combined with the public benefit test, especially
as due consideration has been given to ensuring that flexibility
is built into the legislation in order that charitable purposes
may evolve with society, and that the importance of case law has
been retained.
ICSA would urge that further consideration be given
to co-ordinating developments in charity law in England and Wales,
with those in Scotland and Northern Ireland in order to further
promote the public's better understanding of charities and reduce
inconsistencies for those charities operating on a UK-wide basis.
In addition the Institute recommends, given limited
Parliamentary time, that a consolidation Act should be introduced
in order to bring all relevant charity legislation together under
one Act.
To aid the committee's consideration of the Institute's
submission, points are raised in order that they appear in the
Bill.
Part 1 - Meaning of "Charity" and "Charitable
Purpose"
- The dual approach of maintaining
fluidity and flexibility in the evolution of what constitutes
a charity and charitable purposes is to be commended by keeping
the wealth of experience generated by case law and by not establishing
a fixed definition of charity in legislation.
- The twelve heads of charity are a welcome development,
along with the removal of presumed public benefit that was prevalent
under previous legislation. The Institute is however concerned
that the legislation does not explicitly lay down measures that
enables the Charity Commission to undertake a rolling review of
a charity's public benefit, as opposed to it being proven at the
point of registration. As previously argued in the Institute's
response to Private Action, Public Benefit, by only subjecting
those charities applying for registration to the public benefit
test you inadvertently introduce two-tiers to registered charities,
with only a minority subject to the higher standards of a public
benefit test.
Whilst an extensive programme to evaluate the
public benefit of every registered charity will require greater
resources for the Charity Commission, the system would therefore
be equitable. Such a programme would also focus the minds of
charity trustees to ensure that their charity continues to meet
its stated objectives and does not apply donated funds to areas
outside of its remit.
- It is the Institute's opinion that the measures
outlined in this part of the Bill will go a significant way to
maintain the high levels of public trust and confidence the sector
enjoys.
PART 2 - REGULATION OF CHARITIES
Chapter 1 - The Charity Commission
- Whilst the Institute has previously endorsed
the proposal to have the Charity Commission's objectives set out
plainly, yet in a manner that maintains their relevance over the
passage of time, there are concerns with regard to the third regulatory
objective set out in the Bill: The social and economic objective.
Whilst charities should be able to measure their
impact in a number of ways and demonstrate to stakeholders their
success and failures, the Institute does not deem it appropriate
that economic impact should be an overriding objective. Perhaps
the committee would consider replacing this objective with one
that supports and advances the 'public benefit' principle of charities?
- The Institute would also welcome inserted into
the Bill, an additional requirement for the Commission to introduce
and maintain mechanisms in order to facilitate the rolling programme
of public benefit reviews for all registered charities, within
realistic financial constraints.
- In all matters relating to the regulation of
charities, ICSA would expect that the Charity Commission be encouraged
to act proportionately and fairly given the wide range and size
of charities.
- The Institute endorses the requirement for the
Charity Commission to have due regard for accepted best practice
in good governance for its own affairs and hopes that this is
sufficient to encourage the Commission to adopt those measures
that are practical and applicable.
- ICSA is also encouraged to see that the Commission
will continue to act as both advisor and regulator to the sector,
though we would anticipate the Commission to make it clear to
charity trustees when they are offering guidance and when they
are instructing charities to abide by regulatory procedures.
CHAPTER 2 - THE CHARITY APPEALS TRIBUNAL
- ICSA welcomes the establishment of the Charitable
Appeals Tribunal (CAT), though we would like to see its remit
widened to envelop all activities undertaken by the Commission
including 'non-decisions'.
CHAPTER 3 - REGISTRATION OF CHARITIES
- With regard to the powers for the Charity Commission
to be the main regulator for those exempt charities where a main
regulator does not currently exist, the ICSA welcomes the principle
of promoting accountability and transparency for all charities.
To this aim, the Institute would appreciate an indicative timeframe
for introducing these proposals.
- Greater clarification would also be appreciated
with regard to the balance of power between the roles of the Charity
Commission and other main regulators. It may be viewed that the
powers outlined in the draft Bill provide the Commission with
a dominant position over other regulators, such as the Housing
Corporation. If this is indeed the scenario, considerable thought
needs to be given to synchronising approaches to certain aspects
of regulation. For example, the Housing Corporation's approach
to board member remuneration is different in some regards, to
that taken by the Commission, and would need to be resolved swiftly
in order to limit confusion within the not-for-profit sector and
the wider public.
- By requiring all charities above the proposed
£5,000 to register with the Charity Commission, any confusion
or undue complexity can be resolved and furthermore transparency,
and accountability promoted by a Commission acting fairly and
equitably.
- ICSA also welcomes the continued option for charities
under the £5,000 registration threshold to register voluntarily.
CHAPTER 4 - APPLICATION OF PROPERTY CY-PRÈS
- ICSA welcomes the approach taken in the draft
Bill aimed at simplifying the present situation.
CHAPTER 5 - ASSISTANCE & SUPERVISION OF CHARITIES
BY COURT & COMMISSION
- The Institute believes these clauses to be appropriate
and sensible.
CHAPTER 6 - AUDIT OR EXAMINATION OF ACCOUNTS
- These proposals appear to be sensible and workable.
CHAPTER 7 - CHARITABLE COMPANIES
- ICSA is in accordance with the intention for
charity audit levels to complement those outlined in company law.
Such consistency can only improve the understanding of these issues
and thereby increase transparency and accountability.
CHAPTER 8 - CHARITABLE INCORPORATED ORGANISATIONS
- Whilst the draft Bill appears to make sensible
proposals for those charities wishing to incorporate as a CIO,
there does not appear to be any mechanisms enabling a CIO and
one or more charities constituted in a different corporate vehicle,
e.g. a company limited by guarantee or IPS, to merge into a new
CIO. If the Institute is correct in its reading of the draft
Bill, then we would urge further consideration be given to this
aspect.
Furthermore, there seems to be no mechanism whereby
a charity incorporated by Royal Charter, or even Act of Parliament
can easily convert into a CIO, should the wish to do so.
- As with charitable companies limited by guarantee,
the CIO should state on its official letterhead etc, that it is
a CIO and therefore provides limited liability to its members.
There may also be advantages to requiring all CIOs to employ
a company secretary in order to ensure that regulatory and compliance
functions are fulfilled in an appropriate manner, and further
provide the trustees with impartial guidance on issues pertaining
to governance, compliance and regulation, thereby strengthening
the board in undertaking its many responsibilities.
CHAPTER 9 - CHARITY TRUSTEES ETC
- ICSA is in support of the draft Bill's proposals
to maintain the present situation with regard to trustee remuneration,
but would welcome further guidance provided to those charities
paying trustees for a service on the various concerns regarding
conflicts of interest and how to manage them.
- ICSA also supports the new power of the Charity
Commission to relieve trustees from liability arising out of a
breach of trust, where the trustee has acted honestly and reasonably.
CHAPTER 10 - POWERS OF UNINCORPORATED CHARITIES
- The Institute is in accordance with the proposed
legislation.
CHAPTER 11 - POWERS TO SPEND CAPITAL & MERGERS
- It is noted that there will be no requirement
for charities to inform the Commission as to when a merger has
occurred, thereby making the merger register completely voluntary.
In order to ensure that the register is as accurate as possible
the committee may wish to consider recommending that a form of
words are inserted into the Bill that places more onus on charities
to inform the commission when a merger has occurred.
PART 3
- The Institute is concerned that the proposals
to formalise standard approaches to the licensing of charitable
collections by local authorities will lead to increased costs
for local authorities, and may indeed be ineffective unless there
is an undertaking by local authorities to 'police' the procedures.
Furthermore, guidance should be made available to all local authorities
informing them of suitable practice and considerations to be taken
into account when processing an application. The powers, as they
stand in the draft Bill, are far too loose and are easily open
to misuse.
- Whilst ICSA is pleased to note the measures included
in the draft Bill provide for charities to appeal against decisions
made by the local authority refusing a certificate of fitness,
however the use of the Magistrate's Courts may prove to be prohibitively
expensive and burdensome for small charities. A quicker, and
cheaper alternative should therefore be considered.
- In respect of the powers reserved by the Secretary
of State to establish government backed regulation of fundraising
activities, in the light of the failure of self regulation, the
ICSA would welcome the drafting of the criteria that would be
used in order to decide that the sector has failed to successfully
self-regulate its fundraising activities.
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