Ms Alice Murphy:

Head 29 is related to section 89 of the Bill. There is already a section 89 of the Charities Act on the Statute Book, but because this is a very vexed issue it was never enacted and never commenced. The legislators, the regulator, advisers and policy experts have all given a lot of thought to this. The new section 89 runs to some 20 subsections, so it is really trying to deal with an awful lot.

I agree with the Deputy that this is a tricky matter in governance terms. As was mentioned at the outset, in a forum like this we invariably focus on the thorny issues. That is not to say that the concepts and the principles of section 89 are anything but quite correct, good and positive.

In the way the section has been drafted, we do collectively have some worries. Our first worry centres around the fact that as currently presented, the new section 89 requires an advanced approval for any circumstance in which someone who was on the board is being paid by the charity, even where they are being paid not for sitting as a trustee but for something else that they do for the charity. There is what we would term a "clean slate" approach taken where the section is written as if no charity in the country has anyone on the board who was also doing something else for that charity. Therefore, the way it is written says that if an organisation would ever wish for that to be the case in their charity, first they must go to the regulator to seek advance permission.

This is the biggest issue. Throughout the third level education sector, healthcare and many other sectors, we have people on the boards of charities who are employees of those charities and work in them or people who have some class of an arrangement with the charities. We always use the fictional example of someone owning the photocopying company that leases the photocopier to the charity. Two categories of arrangements already exist. The first category is very straightforward whereby the CEO is also on the board. In some cases legislation requires this, particularly in education. It is premised on there being executive and non-executive board members. To take such an institution, if the Bill as drafted is introduced, this will no longer be permitted and the charity will have to go to the regulator for advance approval. There is no clean slate. Imagining this does not already exist is a drafting problem. It exists and we cannot have large charitable organisations stymied on day one of the legislation with their CEOs not knowing whether they can attend the meetings. They must do so under one Act while the new legislation states they cannot do so. This is quite a big worry.

Other provisions we believe are suboptimal arise in other subsections. The notion of a link was mentioned by the Deputy. The definition of the personal connection is very broad. We all understand why, generally, good governance practice might suggest that contracts for big expenditure are not given to someone on the board. This is very well understood. In large measure charities in this country are run on a shoestring. There are circumstances where, for example, a builder on a board will say a job will be done at cost while other builders could not do this and it would cost three times as much. To follow this fictional example, if the building is falling down and the charity desperately needs to rebuild it for its vulnerable service users, waiting for advanced approval from the regulator would be fine if the process is swift. The regulator's resources are limited and routine applications of this nature in other areas can take three to six months. We can see the problems this could cause.

Another worry we have about this section is that the definition of a personal connection is especially broad. If somebody sitting on the board has another business with a business partner in another field entirely, we could find that the charity could not procure a service based on the definition as it is at present. I regard these issues as more technical. The principal concern we have is the issue of a slam dunk date when all of sudden we find that charities throughout the country are in breach of the law.