DCH 252 Sheen Stickland Chartered Accountants
SUBMISSION TO THE JOINT PARLIAMENTARY COMMITTEE
BY SHEEN STICKLAND CHARTERED ACCOUNTANTS
8 JULY 2004
DCH 252
SUBMISSION TO THE JOINT PARLIAMENTARY COMMITTEE BY SHEEN STICKLAND
CHARTERED ACCOUNTANTS
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 forty are unwilling to commit on a systematic basis.
6. The twelve 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.
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