Oireachtas Joint and Select Committees
Thursday, 21 November 2019
Public Accounts Committee
2018 Financial Statements of the Charities Regulatory Authority
We are meeting representatives of the Charities Regulatory Authority, CRA, regarding its financial statements for 2018. We are joined by Ms Helen Martin, chief executive officer; Mr. Niall Scanlon, finance manager; and Mr. Eamon O'Halloran, head of registration and projects. We are also joined by Ms Ciara Bates, principal officer, and Mr. Kevin Power, assistant principal officer in the Department of Rural and Community Development. It is interesting that this is the first time the authority has appeared before the Committee of Public Accounts. It is also Ms Martin's first appearance before the committee, having been appointed to her current role last summer. We wish her well.
I remind members, witnesses and the people in the Gallery that all mobile phones must be turned off or put into airplane mode, as merely putting them into silent mode does not prevent interference with the recording system.
By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by it to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given. They are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable.
Members are reminded that under Standing Order 186, the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policies.
While we expect witnesses to answer questions asked by the committee clearly and with candour, they can, and should, expect to be treated fairly and with respect and consideration at all times in accordance with the witness protocol. I ask the Comptroller and Auditor General to make his opening statement.
Mr. Seamus McCarthy:
The Charities Regulatory Authority was formally established in 2014 under the Charities Act 2009. It is responsible for the regulation and protection of charitable trusts and organisations. It has been granted a wide range of powers and duties, including the power to conduct investigations into the affairs of charities. Under the provisions of the Act, the authority holds funds in trust on behalf of charities that wish to participate in a common investment fund controlled by the authority. Separately, it holds the funds of charities in a charity funds account. My audit of the authority covers two sets of financial statements: the financial statements for the normal operations of the authority and the financial statements for the charity funds account. The common investment fund is separately accounted for and is audited by a commercial firm of auditors. The financial statements of the common investment fund are not presented to the Oireachtas.
The 2018 financial statements of the authority recorded total income of €3.96 million, all of which is Oireachtas grant funding. Its expenditure in that year was €3.7 million, which included staff costs of €2.1 million and other administration costs of €1.5 million. The authority reported an operating surplus for the year of €47,000, after appropriation of €236,000 for capital purposes. A clear audit opinion was given on the 2018 financial statements. Certain charity funds have been lodged for safekeeping with the authority or its predecessor, the Commissioners for Charitable Donations and Bequests, and are being held pending clarification of their proper use. These funds are held by the authority in a separate charity funds account. The authority uses the same account, as required, to receive and transmit funds between charities and the common investment fund. The balance on the charity funds account at the close of 2018 was €1.38 million. Most of the balance related to funds of charities being held for safekeeping. Receipts into the fund account during 2018 amounted to just over €2 million, mainly comprising dividends from the investment fund and proceeds of investment units realised at the direction of participating charities. The charity funds account payments in 2018 mainly represented distribution of the receipts to the charities concerned. A clear audit opinion was given on the 2018 financial statements of this account.
Ms Helen Martin:
I thank the Chairman and the members of the Committee of Public Accounts for inviting me here today to address the committee on the 2018 financial statements of the Charities Regulatory Authority. I am joined by Mr. Eamon O’Halloran, who is the authority's head of registration and projects; and Mr. Niall Scanlon, who was recently appointed as the authority's professional accountant and finance manager. The committee will be aware that the CRA, or Charities Regulator as it is known, was established as an independent authority on a statutory basis in October 2014 in accordance with the Charities Act 2009. The board of the authority has 12 members and the authority has 37.5 full-time equivalent members of staff.
The Charities Regulator is funded by the Exchequer through a subhead of Vote 42 of the Department of Rural and Community Development. In 2018, our budget was €4.4 million and our total spend was just over €4 million. Pay accounted for approximately €2.1 million of our overall spend and non-pay expenditure amounted to approximately €1.9 million. Monthly financial reports are used by senior management, by the finance, audit, risk and governance committee and by the board to monitor performance against key strategic priorities, objectives and yearly business plan targets. We have a number of statutory functions, such as maintaining a register of charities, ensuring charity trustees comply with the 2009 Act, carrying out inquiries and investigations into the affairs of charities and issuing guidance and other codes to assist charity trustees. We deal with applications by charities under the Charities Acts, 1961 and 1973, for services and assistance such as authorising cy-prèsschemes and sales of charity lands. When it was established, the Charities Regulator took over responsibility for administering a common investment fund scheme for charities, established under the Charities Act 1961. The current value of this fund is approximately €39.7 million.
Our first statement of strategy supported the establishment of the Charities Regulator and guided us through our formative years from 2016 to 2018. Over this period, significant time was dedicated to establishing organisational structures, processes and procedures to ensure compliance with the code of practice for the governance of State bodies. During the period of our first statement of strategy, we developed an online public register of charities and established a contact centre for charity trustees and other members of the public to call or email us with any queries they may have. Other key milestones during that period included the publication of a suite of practical and informative guidance materials to assist charity trustees, including guidelines on fundraising from the public, the development of a concerns unit and an online concerns process, the completion of a number of statutory investigations under the 2009 Act, the implementation of a new digital platform to support our regulatory and organisational activities, the launch of an enhanced website and a quarterly e-magazine to keep those involved in the sector updated on key developments, the formulation of a draft scheme for a charities (amendment) Bill along with associated draft accounting and reporting regulations and the launch of the charities governance code.
In 2019, we published our second statement of strategy, for 2019 to 2021, which aims to move us closer to realising our vision of a vibrant trusted charity sector that is valued for the public benefit it provides. Strengthening public trust and confidence in charities is one of four strategic priorities under our second statement of strategy.
A key objective in this regard is to enhance further the public register of charities, which is a searchable online facility.
Charities are independent organisations run by charity trustees. They play a vital role in our society and provide public benefit in diverse ways to communities in Ireland and across the world. It is, therefore, essential that charities are transparent and accountable to volunteers, beneficiaries, employees, funders, donors and the wider public. The register is intended as a point of reference for members of the public to learn more about individual charities. There are currently 10,370 registered charities in Ireland and 65,904 charity trustees listed on the register. According to research published by the Charities Regulator in 2018, the majority of charities on the register are small volunteer-led charities with income of less than €50,000. However, there is no doubt that registered charities make a significant contribution to our economy and society more generally, with income of €14.5 billion, approximately 189,000 people employed in the sector and more than 300,000 volunteers.
Other general functions of the Charities Regulator include the promotion of compliance by charity trustees with their legal duties and ensuring the accountability of charities to donors, beneficiaries and the public. In this regard, we work closely with charities, charity representative groups and other experts and stakeholders to ensure that the guidance materials that we publish are of practical assistance to those volunteering and working in the sector. Examples include the guidelines on fundraising from the public, guidance for charity trustees, internal financial control guidelines for charities and, more recently, a governance code toolkit comprising templates and other guidance materials to underpin the charities governance code. Promoting compliance with the charities governance code and working with charities to support them in its implementation will remain a key focus for the Charities Regulator for the period of our current strategy.
Our statutory remit also includes monitoring compliance by charitable organisations with charity law and carrying out investigations. We actively monitor compliance with key regulatory requirements, such as the requirement for charities to submit annual reports. Compliance rates in regard to this obligation have increased significantly over the past three years, with the overall compliance rate for annual reports due in regard to 2017 reaching 98%.
We also carry out inquiries as part of our concerns process. In 2018, we received in excess of 686 concerns, which was an increase of 29% on the previous year. Of the concerns received in respect of registered charities, over 50% related to internal financial controls and transparency and other governance issues. We closed 722 concerns during 2018.
Other compliance activities in 2018 included 48 statutory directions to provide information or produce books, documents and other records for the purposes of our inquiries. In addition, we published two inspectors’ reports into the affairs of two registered charities, GLEN and Solas–Galway Picture Palace, and we imposed intermediate sanctions on one registered charity.
Developing our compliance and enforcement function further is a key objective in terms of meeting our strategic priorities of providing proportionate risk-based regulation and protection, and promoting compliance within the sector. Supported by our new IT platform, along with a number of important legislative amendments, which the Minister for Rural and Community Development is progressing through the charities (amendment) Bill, we hope to enhance our proactive monitoring capabilities further, using data to identify and anticipate risks to facilitate targeted and proportionate regulatory interventions and engagement with charities. The charities (amendment) Bill is key in this regard as it will create a level playing field for all charities, including those that are companies, and will facilitate increased levels of transparency and greater accountability in regard to the finances of charities.
Since our establishment in 2014, the Charities Regulator has made significant progress in meeting its statutory mandate. Through the hard work and commitment of the authority, its staff and those working in the charities sector, we have a strong foundation on which to build and deliver on our second statement of strategy. We remain committed to working with all our stakeholders to fulfil our mission to regulate the charity sector in the public interest so as to ensure compliance with the law and support best practice in the governance, management and administration of charities. I am happy to respond to any questions members of the committee might have.
I thank the witnesses for coming in and for their opening statement. I wish them the best of luck in their important work. Given the number of charities, and there are those that come under two lists, that is, those that are registered and those that are not, and given the number of full-time staff in the Charities Regulator is 37.5 whole-time equivalents, does it have enough capacity to do this work? It is a relatively new organisation and has had to develop and get structures in place. While I believe this is a positive thing, and I do not say that regularly, it seems a small number of staff for the work it does, given there are 10,370 registered charities.
The Charities Regulator has had a turnover of senior staff lately. That usually sets off alarm bells here. Ms Martin might explain, so we can clear that up, why the three senior people left.
How often does the Charities Regulator liaise with the Office of the Director of Corporate Enforcement, the Revenue Commissioners, the Garda fraud squad, the Data Protection Commissioner and the Companies Registration Office? Will Ms Martin give us a flavour of that in regard to meetings and interactions, what they are about and how often they take place, sharing data, investigations and so on?
Ms Helen Martin:
With regard to the number of staff, we do not have enough staff and the complement should be about 53. However, as the Deputy rightly pointed out, we have achieved an enormous amount, although that has been on the back of the real commitment of staff and focusing our resources on where we think we can have the greatest impact. That would be in terms of supporting charities but also, at the same time, since 2016, building up our concerns unit. In future, when we have more staff, we will look to move into the area of more proactive monitoring, and I will come back to that later as there are certain things we require in that regard.
We have managed to get staff over the past year, having lost some staff. We have a new in-house finance manager, which we did not have before as we previously used a consultant. I wanted to bring that role in-house so that person would be reporting to me, as CEO. We have also got our head of communications and stakeholder engagement, which is another key position we have filled since June of this year. In addition, we have a number of positions that are obviously key and which we absolutely need to fill, such as the corporate affairs manager, and we also need more legal resources. On the legal resources, it is a very challenging marketplace out there but we are using the different avenues available to us and working with the Department on that in regard to seeking expressions of interest for secondment of people from within the civil and public service and drawing down from past panels that are available to us. That is very much the focus at the moment. Another key position was filled in recent weeks when Thomas Mulholland joined us as our head of compliance and enforcement.
Ms Helen Martin:
The turnover was due to promotions that were available to others within the Civil Service. As the Deputy knows, the CEO moved on to become CEO of the Mental Health Commission. Our head of compliance and enforcement moved on. At the time, his role was graded as assistant principal and we sought to have that regraded, but unfortunately he had moved on to a promotion opportunity within the HSE. Our head of communications and stakeholder engagement had been with us on a two-year contract and, as a result, had wanted to move on, and he moved back into the charities sector. They were the main losses that we had.
Ms Helen Martin:
This was in regard to our interactions with other agencies. The main agency we interact with is Revenue, with which members of our registration team would interact. The Deputy might be aware from our briefing material that 6,500 of the charities on our register are there because they were deemed registered at the date the register was established.
The deeming was related to the fact that on that date, they held a charitable tax exemption so, effectively, they came on to the register. We have over 3,500 others which are what we call section 39 bodies. They are the charities that registered with us. As a result of the fact that we have a huge number of section 40 bodies, the ones that are deemed registered, we would deal with Revenue a lot. Where a section 40 charity that has been deemed registered loses its charitable tax exemption through the operation of the Act, it automatically comes off the register. We have no input into that decision. Once a charity loses its tax exemption, it comes off the register and must try to re-register. That is why we interact regularly with Revenue.
In addition, we would be in contact with the Companies Registration Office regarding our IT platform and the fact that we would draw down certain materials from its website regarding the accounts of those charities that are companies. Our compliance and enforcement team would be in contact with staff from the Office of the Director of Corporate Enforcement where particular issues arise, for example, if we were dealing with a company that was not keeping proper books of account. Unfortunately, under our Act at the moment, we would not be able to proceed against such a company for breach of the Charities Act because it is a company and is carved out. That is something we are looking to address under the charities (amendment) Bill because we believe all charities should be equally regulated by the Charities Regulator. It means that in those situations, we have to contact the ODCE because, obviously, it is an offence not to keep proper books of account under the Companies Act. We are reliant on the ODCE to take action in that regard. Similarly, we would have almost daily contact with An Garda Síochána.
Regarding donations and donors, we know that quite a number of people leave bequests to charities. What kind of powers does the Charities Regulator use to ensure that the money being left in wills to various different charities does what it says on the tin, namely, goes to the right area and relevant charity and is spent in the way the person, persons or organisations intended it to be spent? Have there ever been instances where anyone in the legal profession has had to be investigated for ignoring or not following instructions 100% regarding the leaving of money to these organisations? What procedures has the Charities Regulator used to follow up in such scenarios? Does it ever carry out random checks in respect of these sort of donations to make sure the money is being spent appropriately to ensure public confidence? I see that the section on donations in its guidelines for charitable organisations states that where donations are made for a specific purpose, the donor's request is honoured. Can Ms Martin give us confidence that this happens?
Ms Helen Martin:
Our role with regard to donations and bequests is under the older Charities Acts. As part of that, there is a requirement, which is the subject of a Law Society direction, that when a charitable donation is made, a receipt must filed with us. The solicitor and executor must confirm with the Charities Regulator that the money or the bequest has gone to the relevant person or charity it was meant to go to. We work with the Probate Office on that. We would receive what are known as PAS 3 forms, which are the forms that are filled out by solicitors and executors regarding charitable bequests and donations. We have a team that would go through those. It follows up with solicitors and executors to see if they have receipts or something they can submit regarding the particular bequest or donation.
I started with a question about resources because it is a genuine issue. I am not saying anything against the Charities Regulator as this is purely a resource issue but surely Ms Martin cannot say hand on heart that she knows that in every scenario where a charity receives a donation, it is spent in the manner it was intended to be spent.
Ms Martin cannot say that, therefore. We are here to help the Charities Regulator in this scenario. From a resource point of view, the committee does periodic reports and if members believe the Charities Regulator needs more resources, we will say that plainly. It involves a statement that as Charities Regulator, and this is not Ms Martin's fault, she cannot hand on heart say that the Charities Regulator has the capacity or resources to assure the public that funds left in wills to charitable organisations are used for the purposes for which they were intended.
Ms Helen Martin:
The first thing involves levelling the playing field between unincorporated charities and companies. If we take out schools, around 60% of the charities on the register of charities are companies. We do not have sufficient powers with regard to those charities when it comes to required regulatory action.
Ms Helen Martin:
It is one of the main measures included in the general scheme of the charities (amendment) Bill. Another major issue concerns the regulations for accounting and reporting. They are dependent on us having this change made with regard to companies. We cannot introduce regulations to require a level of transparency with regard to finances that would only apply to unincorporated charities and would not, therefore, apply to 60% of the charities on our register. We have to wait until this amendment comes into force before we can introduce the regulations that, for example, would introduce something like the charities statement of recommended practice or SORP. This is a statement of recommended practice for charities that would require charities with a certain level of income to give far greater detail in their financial statements that is currently the case.
Again, the committee is here to help the Charities Regulator on this issue. I agree with Ms Martin 100%.
I looked at the percentages showing where donations went under headings such as education, religion, benefit to the community, poverty and economic hardship. I then looked at the funds being left to various organisations under each category. I was very taken by the low figure for higher education. I would have expected it to be much higher.
Mr. Seamus McCarthy:
I have been looking at that since we were talking before the meeting. I think the figures are on page 33 of the annual report. The figure for third level institutions is €2,964 million so it is almost €3 billion. I would imagine that this is the total income of the third level institutions.
I want to dig into this issue because it is one of my main concerns. We have been around the houses in this committee on numerous occasions with issues relating to the third level sector. We did a specific report on it, in fact, and there is a whole quagmire of issues relating to how third level funding operates in respect of third party organisations, etc. We hear a lot about philanthropists funding various third level organisations. We know that Ireland Funds and various other organisations are providing funding to third level. We have had debates where representatives of colleges and universities have come in and said they are putting a sign over a building in Cork, for example, stating that the funding came from private funds they generated themselves, whether through donations or other income. That is complete and utter garbage because the taxpayer has to provide funding in the first place before those bodies are able to access other sources of income.
If the witnesses do not have the information I am seeking, we will need to come back to it another day. I will not stop pursuing the matter because I have a deep nervousness about how these funds are being given to third level colleges, what the Charities Regulator is and is not aware of in this regard, and for what purposes the colleges are using the funds. Are they charitable donations or are they being given for research? Are they being given to the various alumni associations that have been set up to assist in the funding of third level institutions? We have a figure for 2017 but we cannot break it down. Where are we at in regard to 2018?
Looking at the round picture, significant amounts are being given by organisations to third level colleges, universities, etc. From a process point of view, in terms of how that funding is spent, is it true that the Charities Regulator is very limited in terms of how it can analyse whether those moneys have been used appropriately, including, in many cases, for charitable purposes?
Mr. Seamus McCarthy:
The carve-out that happens relates to the financial statements of the university itself, which is provided for in the Universities Act. Similarly, for institutes of technology, the accounting basis is set out in the Institutes of Technology Act. There is a question as to whether a foundation which is operating with a charity is excluded or included within any directions the Charities Regulator would give.
This is a huge issue and we have gone around the houses on it. I thank Mr. McCarthy for the information he provided. I am glad we teased the matter out this morning because there seems to be a big hole here in terms of accountability. We spent years, on and off, dealing with issues relating to the third level sector. Indeed, we did a whole programme on it. Will Ms Martin confirm that funds that are brought through a foundation for charitable purposes do not come within the remit of the Charities Regulator?
We need to get a holistic picture of where funds are going. Universities are audited by the Comptroller and Auditor General and we now know of other sources of income. These foundations are outside the remit of the Comptroller and Auditor General but do come under the Charities Regulator. The funding goes through these foundations and comes out the other end, so we should be able to create a whole and transparent picture of what is going through all the third level colleges. When Ms Martin can provide us with that information, we will have a clearer view of where all that funding is going, how it is being spent and how it is being matched with taxpayers' money. I hope Ms Martin can provide us with as much information as possible, including totals and percentages across all third level colleges, in tabular form, and a commentary on each foundation or other organisation that is in place. All of that would be useful.
Has the Charities Regulator considered running a public awareness campaign in regard to its work? As a public representative, people often tell me that they do not donate to charities other than those which are local to them because they are confident of their bona fides. I am concerned that a lot of charities are being painted in the wrong way. There have been issues with the sector in the past, which I will not detail today. There are one or two organisations that stand out at a national level because they are so large and well known, such as the Irish Cancer Society. Some charities, however, are being damaged by association with what went on in the past, and potential funds are not coming to them because of this. Could the Charities Regulator devise some type of campaign to engage and inform people? It will be challenging because of the range of charities in operation, but it would be helpful. We have discovered in the past that where people were collecting on street corners for certain charitable organisations, a large percentage of the funds raised were given to the collectors and only a small percentage to the charities themselves.
Ms Helen Martin:
The Deputy has hit upon one of our main strategic priorities. Specifically, priority No. 4 in our current statement of strategy is all about the need to ensure there is public awareness of what the Charities Regulator does and how the sector is regulated. There is a focus on increasing standards of governance across the sector and working with charities to highlight how they can make the most of being a registered charity. We are currently in the middle of a Meet the Regulator roadshow.
One of the key messages we are trying to get across to charities and registered charities is that not every not-for-profit is a registered charity and that charities should be utilising their registered charity number to let people know they are regulated. We are working very closely with the charities. I believe there is a piece of work there and we will be focusing on that.
First, I welcome Ms Martin and her team, and I offer them best wishes in their work. I am aware that Ms Martin is bedding down the organisation. I have gone through the opening statement and the corporate plan and have done some research on some of the work done by the Charities Regulator. In her opening statement, Ms Martin referred to a number of "statements of strategy". Initially, for the period of 2016 to 2018 the regulator was bedding down organisational structures, looking at processes and procedures in order to ensure compliance with the code of practice for the governance of State bodies. The next part of the strategy for 2019 to 2021 will be, in Ms Martin's terms, to move "closer to realising our vision of a vibrant trusted charity sector [and] ... strengthening public trust and confidence in charities". On that second piece of the strategy from 2019 to 2021, will Ms Martin clarify what the Charities Regulator will be looking at specifically?
Ms Helen Martin:
When we talk about trust and confidence one of the main areas, and our main tool at the moment, is the register. The work is about ensuring the register has as much information as possible relating to charities in order that members of the public can check out the individual charity in which they might be interested and can see what the charity is about. Hopefully, the public can also take some confidence that the sector is regulated.
We are also working with the charities on the charities' governance code. This is a huge part of our strategic priorities over the next two years in particular when we will work with the charities on that. This is about getting the charities to engage with the tool that is available to them, which is the charities' governance code, and to increase standards of best practice in governance. We would hope to see that reflected in levels of trust and confidence.
We will be monitoring and doing our own research to establish a baseline early next year for what are the levels of trust and confidence. The members may be aware that in 2012 it was at the highest rate, which was 74%, but it had fallen quite considerably over the last years. In 2017 the level of trust and confidence was at 46%. I want to ensure that we establish a baseline and then look at that in subsequent years. In that way we can see if we can work out the impact of the work we are doing and see how it has assisted the charity sector.
On the other side, which is the compliance and enforcement piece, charities themselves will agree that they want to see the Charities Regulator holding charities to account when things are not being done correctly. This is a key focus over the coming years also, and especially on the resources side. New resources we get in over the next year certainly will be going into the compliance and enforcement area. I have said before that one of the big things is that we would have access to the accounts of all charities and that they would be presented in a very particular way that is specific to charities. This would give certain disclosures to charities with regard to what is suitable for them.
With reporting, is there any obligation on an auditor if it found a difficulty to report that to the regulator or is there a responsibility on the charity to report that? My questions will focus more on reporting and who does the reporting and how is it acted upon. Consider an example of charity A, where the auditor finds there have been lapses in financial controls or finds some other problem or challenge. Obviously, that would then be included in the audited report. Does the Charities Regulator get a copy of those audited reports?
Why does the Regulator not get a copy of the audited report? The Comptroller and Auditor General does an audit of a Department or an organisation that comes under his remit. He does the audit, reports and there is an audited opinion. If an issue arises, it is there for everybody to see. In this situation, if one has a charity that has to carry out an audit - which they have to do - there may be a report or there has to be a report as a consequence of that, and it may well flag a problem. If the Charities Regulator, however, does not see that audit report how does it know there is a problem?
I will give Ms Martin one example, because this worries me. Console was a real controversy. All of us accept that the vast majority of charities do an excellent job where there are no difficulties and they provide an excellent service. There are some, however, whether they were outliers or not, that had very serious challenges. Console's problems were only highlighted when the HSE's internal audit looked more deeply at what was happening. Flags had been raised, missed and not acted upon over a long period. When they were acted upon it was the internal audit that established what was happening. If the regulator does not have access to internal audit reports of organisations that could be flagging up some problems, then I am worried that the regulator is not across what might be happening in some charities in the way it should be.
-----as opposed to the regulator getting a copy of the internal audit report as a matter of routine, which should be the case, and seeing for itself if there are problems. If they are flagged up, then there is even more reason for the regulator to have them. They would be in plain sight and the regulator could see them; it would not need any work done by the regulator.
I want to get on to the concerns process. Ms Martin has said there is an online concerns process and a concerns unit. It strikes me that this is based more on individuals, such as whistleblowers or service users who would perhaps highlight concerns, but this is different to actual processes where people go in to do audits and examine the financial controls that might be in place in organisations. Earlier, I asked about an internal or external auditor who sees a problem. Is he or she obliged to report this to the regulator or not, or is the organisation obliged to report this to the regulator? If a problem has been flagged by the auditor to the organisation, is it then obliged to inform the regulator of the problem? Does this happen or are they obliged to do that?
Is that not one of the problems? If one considers the history of the Console issue, it went on for so long and people were trying to figure out how did it happen for so long. It was because people were asleep at the wheel and it was not being examined in the way it should have been: credit card expenditure was off the chart; duplicate accounts were different for the same time period; and directors were also employees. There were huge issues that were all missed but which were eventually found to be the case. I am struggling to understand, as this happened. There are other examples we could go into and while I do not want to spend time talking about the bad examples - as there are so many good examples of charities - we do know there was very bad practice. This has an impact on the people who gave the money to those charities. If the regulator is not across this, if there is no obligation on the auditor to inform the regulator that there is a difficulty, if there is no obligation on the organisation or charity itself to inform the regulator and if the regulator is not seeing the audited accounts, then I am concerned that we do not have the oversight we should have around financial governance and governance generally in charities. When are we going to get to a point when this will be the case?
Ms Helen Martin:
We share that concern. This is the difference between being reactive in our compliance work and being proactive in monitoring. To have proactive monitoring, there are several elements and we have geared ourselves up for it with the new IT systems, in order we can have a system to interrogate the information we get.
First, we need amendments to the Charities Act to enable us to introduce regulations on accounting and reporting. Once those are in place, there would be a proportionate requirement for certain standards of reporting and auditing for certain sized charities. There would be a somewhat different standard for the slightly smaller charities and then the really small ones that have an income of under €25,000-----
I get that but let us stick with Console for a second. Those concerns and that scandal emerged in 2018 as a consequence of internal HSE controls and complaints that were made. Did the HSE at any time inform the regulator that there were difficulties?
Was that not the start of the process in 2016? The Committee on Public Accounts dealt with this in 2018. During the period between 2016 and 2018, did the HSE contact the Charities Regulator at any point to say there were major problems? When the committee looked at that report, it categorised all the problems by severity as yellow or red. I think the Comptroller and Auditor General will agree that it was quite severe at all levels.
It actually said that it raised systemic problems for the HSE. What I am trying to establish is whether, throughout that process, the HSE ever contacted the regulator to say here is a copy of its internal audit and this is what it shows up. Did it suggest that such information would be of value to the regulator when it looks at what is happening and how it could put in place best practice and learn from the dreadful mistakes that happened in Console? Did the HSE make any formal contact with the regulator during the period from 2016 to 2018?
I will get to the concerns unit. How many complaints were made? Ms Martin gave us figures from 2018 where there were 686 concerns. What would these concerns have centred on? Where would they have come from generally? Would it have been from staff within the organisations, or service users or members of the public?
Ms Helen Martin:
The main sources of concerns would be from people who were working in charities and members of the public. We also have internally generated sources, that is, situations where another regulator might contact us with a concern about a charity and we might start looking into it at that point but that would be in a minority of cases. The cases tend to come in from the public.
Of the concerns raised, how many times did any State body, be it the HSE or any other body, raise a concern with the regulator through formal processes? That is separate from people who work in the organisation or members of the public.
That is the point. Surely there is an obligation. Take the HSE for example. Some of these are section 39 organisations which have service level agreements to provide certain services. Separately from that, if a charity was not such an organisation, it would be a charity that would be audited independently and an external audit would have to be done. There is, however, an element of an audit for the moneys paid by the State to these organisations. Given we have had problems with some of the section 39 organisations - I will not go through them all but I believe there was a difficulty in Harold's Cross and elsewhere - I would be surprised if at no point has the HSE or any other body approached the regulator to say it is coming across these problems and here is how those organisations were able to evade responsibility and accountability. Going back to what Ms Martin said earlier, 2019 to 2021 is supposed to be about strengthening public trust and confidence in charities and looking at ways in which the charity sector can provide the trust that people need. Part of that would be that the regulator learns lessons. Whatever about any mistakes that are made, if we are not learning lessons there is a problem. How is it the case that through all these scandals, and I gave two examples, that Ms Martin cannot tell me today she is clear that none of the organisations, whether the HSE or otherwise, has at any point alerted the regulator to any of the problems? It is no good for Ms Martin to read about any of this in the newspaper or hearing it on the news. What good is that to her organisation?
Ms Helen Martin:
We would be alert. I took the question to relate to Console. There would be other issues where, if they relate to charities, we would have contact from the likes of the HSE, Revenue or something like that.
I am looking for a breakdown of that. Will Ms Martin write to the committee to outline a full breakdown of the source of the 686 concerns raised in 2018 and the State bodies involved? There is a lot of work to be done.
I wish to make one final point on university foundations. There seems to be an issue. While we get the accounts from universities, the Comptroller and Auditor General audits the money that comes from the voted expenditure but not the money that comes into the foundation accounts.
I thank Ms Martin for all the documentation. I am glad that the Comptroller and Auditor General mentioned Trinity. It decided to consolidate its accounts in the past few years; it is a new step and is an example to other universities.
Ms Martin has an extremely important job. The figures she gave in her opening statement are extraordinary, with over 10,000 charities, almost 66,000 trustees and €14.5 billion, not to mention almost 190,000 volunteers. It is an extremely important area on every level, both on an economic level and on a psychological level for the work being carried out, and there is also what volunteers get out of it.
I will follow on from the last Deputy's concerns. In her opening statement, Ms Martin noted "In 2018, we received ... 686 concerns, which was an increase of 29% on the previous year." If we have learned anything in recent years, it is how difficult it is for someone to complain. It is not in the interest of someone living here to complain, they suffer as a consequence. That is why the processes and procedures need to be robust. The breakdown of the figures as to where the concerns are coming from is key to help the regulator, as an organisation, to deal in a more proactive way.
We should be relying on whistleblowers and individuals to come forward as a tiny piece of the jigsaw. The regulator is the vital piece in this and the Act is from 2009. It is no reflection on the witnesses but it was years before the regulator became operational. We are still waiting on amending legislation, and that is our fault. Within this, what risk assessment has the organisation carried out to identify the areas that are suffering or exposed because the regulator does not have a full staff complement?
Ms Helen Martin:
On the compliance side, we have a resourced team and it is dealing with a large number of concerns. I would not put other resources into the concerns team as it exists; I would put them in the proactive monitoring piece. We will have people in the area working with the systems to see what other information we might have while waiting for the accounting and reporting regulations to come in.
My question is not of a personal nature at all. Ms Martin is doing a great job and it is brilliant on paper. She identified the necessary full complement but the organisation does not have it. What are the risks associated with no having the full complement of staff? What is the organisation ignoring and what could it do if it had the staff?
Ms Helen Martin:
-----what information was available from multiple sources and how to drill into it to see if there are risk factors and flags associated with what we are seeing in the financial statements of charities, for example. We have access to some statements of some companies that are charities. If we had more staff, it is an area where we could do more. Currently, we are very focused on concerns and the reactive piece when people come to us.
That is of concern to me. As previous speakers indicated, we come across things by chance when somebody is courageous enough to make a complaint and so on. We stumbled on the issue with foundations when we looked at the accounts of third level institutions. We saw how foundations did not come under anybody's remit, really, but they would now come under the regulator's remit. I think of the Galway case. Although I could be corrected, there was a substantial figure of €64 million-----
With regard to the statutory powers, the regulator asks various organisations to give information but does not use those statutory powers in the first instance. How many times did it have to use statutory powers in 2018?
Ms Helen Martin:
Exactly. We use them if they are not co-operating and also if we are not assured by what is provided. The figure for 2018 was quite high because we did some proactive monitoring in seeking information. This was to establish on the register whether trustee details were being kept up to date.
The report indicates that a significant number of charities continue to file their annual reports late despite the fact that under a section of the Bill, they are required to file on time. What are the percentages?
That is interesting. The Department did a full post project review and set out figures with which I had an issue. We might be coming back to these figures. The regulator did its report and confirmed some donations were not properly accounted for. Is that correct?
Is it the case that no income was recorded after 2007 by the charity when income was generated in the form of donations? That is not clear to me from the Department’s post-project review in any event. Did the regulator confirm in its report that the charity in question raised moneys from donations?
I might come back to that at the next meeting with the Department. I do not see those donations reflected in the post-project review. In the absence of formal documentation, I will not waste any more time. We have been through this and the regulator is confirming what was in the report, with the exception of the Bord Fáilte advertisement for Galway, which hid the real serious issues.
One of the recommendations in the inspectors' report states, “The Charities Regulatory Authority should review the need for guidance in relation to trustees legal duties”. There was a serious problem with - I will put this as mildly as I can - the trustees’ awareness of their duties and responsibilities. The regulator made a general finding that trustees should be ore aware of their duties and it has a role in that. Another of the recommendations states "the Charities Regulatory Authority should consider furnishing a copy of this report as it deems relevant." Did the regulator send a copy of the report to the Department?
My question refers to the line “should consider furnishing a copy of this report as it deems relevant”. Did the regulator deem it relevant to send it to the Department or the Comptroller and Auditor General?
Ms Helen Martin:
The guidance is out there. We had guidance in any event on trustees’ duties published in 2017. In addition to that we have been adding to it. We have internal financial controls, conflicts of interest codes and, most importantly, the governance codes, along with all the materials which underpin that.
Human nature being what it is and trustees doing their best. The mistake was made with the Morris tribunal that we thought those activities were confined to that county. Obviously, this kind of behaviour is not confined to one group of trustees. There are many points to be identified and learned from.
Ms Helen Martin:
The majority of charity trustees are doing their best every day. We are trying to support them to ensure they have the relevant information available to them and are up to speed on what is required. The Charities Regulator is regulating behaviour but we need engagement by the sector with us. The sector is very much engaging with the charity governance code.
Several times Ms Martin indicated that the regulator’s role is reactive and is more a case of when issues are raised. Thinking back to the Console scandal, there is nothing to say that it could not happen again in light of what Ms Martin said about sufficient powers when it comes to companies, etc. There is nothing to indicate that this could be happening now. Is that a concern?
Ms Helen Martin:
It would be. That is why we are focused on the next stage of developing the compliance and enforcement team, as well as introducing proactive monitoring. We need certain tools to do that. We need the information to be made available to us. That is why we require the amendments to the Act and the accounting-reporting regulations. To be able to do that proactive monitoring piece would be a massive move for us. Hopefully, we would see flags and particular points in accounts where we would know there is something not right. It would raise a flag and then we could hone in on it ourselves without anyone having to raise a concern with us. We would be able to identify those charities ourselves.
Ms Helen Martin:
Absolutely not. We have a whole compliance team which is working on concerns everyday and carrying out inquires. We got over 600 concerns. All of those were looked into. We closed 722 concerns which means they were issues which were looked into by the staff. There is a significant amount of compliance and enforcement work going on. Charities themselves are aware that they are regulated. That would not be the case if this were just purely a box-ticking exercise.
Ms Helen Martin:
I cannot give a specific example. The kinds of cases might be where a charity is refusing to engage with us or, for example, if a charity is not keeping proper books of account. It could be a case where the charity’s trustees do not have the skill set to know what they should be doing in that regard.
Ms Helen Martin:
I suppose it is a range. There was a charity shop, Good and New, which was not keeping proper books of account. We have the ability to impose an intermediate sanction where the contravention is publicised. In some cases, we can remove the charity from the register for a period. An intermediate sanction is used in a situation where there has been a breach and an offence committed under the Act in place of a prosecution. We would see that as being more proportionate, particularly when it comes to charities. We tend not to see charities doing things on purpose. It tends to be an oversight or a case of simply not being informed. We take a proportionate approach to those matters.
Ms Helen Martin:
For intermediate sanctions in 2018, there was one occasion when we had to go that far. I am not sure we record information on the cases in which we do not take statutory actions because we close so many concerns.
We can close them quite easily. We can contact a charity that is not keeping proper books of account, and as soon as it tells us it has engaged a bookkeeper and we are sure it has done so and is progressing, then we will close the concern.
Ms Helen Martin:
We will oversee it for a period and we would follow up after a number of months to see whether it was the case and it still has its bookkeeper. We have had situations where an intermediate sanction was imposed. One particular organisation got a bookkeeper and was keeping a proper book of accounts but then it just did not return its annual report on time. That raised a flag for us as to why it was not doing so. When we got in touch with the charity it became apparent that it had lapsed again and was not keeping proper books of account. That particular charity wound up in the end.
Back in June 2017, when the Charities Regulator investigation had secured its first prosecution, it was stated that the regulator was planning to introduce a system in the coming years whereby people could track who was running a charity and exactly how charities were spending donations. Has this been done?
Ms Helen Martin:
The names of the trustees of every charity are on our registers. Those 66,000 names are there for everybody to see and people can see who is involved. What we do not have is information on the financials. We have a breakdown of sources of funding but we do not have detailed information on our register as of yet.
Going back to the Console scandal, does the regulator not see this as something important for it to ensure is there and is available? In 2017, there were discussions about the regulator providing information on who is running a charity and how donations are spent. It provides information on the who but not on the donations. It could provide that information if it chose to do so but it has not done so yet. This is a matter of public concern or public interest. People could see how charities spend their donations. It would also help to ease the suspicion that has arisen because of the Console scandal. If people could see where their donations were being spent they would not have those suspicions about charities. I am surprised the regulator has not done it.
Ms Helen Martin:
The Deputy is absolutely right and it is crucial. It is one of the reasons that in 2017 we proposed amendments to a courts and civil law (miscellaneous provisions) Bill and we managed to get our amendments included in the Bill. We need further amendments to introduce standardised forms of financial reporting for all charities. If we had those standards, we would have the detail the Deputy is speaking about. Unfortunately, the courts and civil law (miscellaneous provisions) Bill in which our provisions were included did not go anywhere. It has since been carved out into a separate charities (amendment) Bill which we hope will progress shortly.
The documentation and the briefing pack states the advancement of religion is considered to be a reason for having charitable status. The purpose carries the presumption of public benefit. That is a statutory matter but there is nothing there for the advancement of human rights. The church has better rights than Amnesty international. I presume that would be a legislative matter. It could possibly allow a lot of scope for bogus religions or religions that turn profits while not paying tax. It is something that stood out for me. Does Ms Martin have an opinion on this? Does she think it would allow for that scope?
Ms Helen Martin:
The advancement of religion is a charitable purpose and the Deputy has rightly pointed out that Ireland decided not to have human rights as a charitable purpose. That is absolutely the case. With regard to the advancement of religion, we receive applications from organisations that are religions but even though there is a presumption of public benefit, they go through a rigorous application process in the same way as all other types of charities. I cannot comment on charities that are religious organisations that existed prior to our establishment. They are also on our register but they came onto it along with thousands of other charities because they held a charitable tax exemption. They were entitled to be deemed registered at that time.
Mr. Eamonn Confrey:
Schools have almost all of the tax exemptions already by virtue of being a school. DIRT might be the only one to which they are not entitled by virtue of being a school. Many schools may not apply for the charitable tax exemption because they do not need it. Most charities that have charitable status go on to apply for the tax exemption.
I see Belvedere College is registered as a charity. It does not pay tax on the fees paid by parents. I can only presume this is because it offers a handful of scholarships a year. This type of college is in receipt of huge fees, pays no tax on any of them, is registered with charitable status and is in receipt of a substantial Government subsidy. Is this an area that could be reviewed?
Ms Helen Martin:
Ultimately, it is an issue of policy. Once an organisation fulfils the charity test, ends up with a charitable tax exemption or was deemed registered back in 2014, it is on the register as a charity. I am not aware of the particular example and whether the school was deemed registered. I think it was deemed registered so it came onto the register automatically. The advancement of education is a charitable purpose under the Act.
I am wondering about the benefit to the public. I presume it is the handful of scholarships each year, but it would be well worth the school's while not to pay any tax and give out a handful of scholarships.
My next question is on bogus charities, which can be prevalent at this time of the year in the lead-up to Christmas. What oversight does the regulator have in this regard? People may be collecting for something that is not registered as a charity. How does the regulator manage this?
Ms Helen Martin:
More than 44% of the concerns raised with us relate to organisations that are not charities. This is why we speak about the more than 50% that are registered charities. We are reliant on concerns being raised. Either we spot it or somebody comes to us having spotted it. We will immediately try to contact the individuals concerned.
Obviously, it is an offence if it is holding itself out as a charity when it is not a registered charity. When we follow it up, sometimes it transpires that the organisation is simply unaware that it was supposed to be registered. Such cases are passed on to the registration team to enable the organisations in question to engage in the full registration process.
We work with An Garda Síochána on much more difficult areas like the house-to-house collection of clothing bags by bogus charities. When we use the contact details on the plastic bags that are provided to households, we often find that the number rings out and we cannot get through to anybody. We intend to undertake a public awareness campaign in this area. We previously issued a public notice to let the public know specifically about this problem. Ultimately, the public plays a role in this area. When people think they are donating to a charity, we want them to check the register first to make sure it is a registered charity. We have engaged in some publicity in this regard. Next week, we will issue some public notices to alert people to the phenomenon of bogus clothing collections. One of the reasons bogus organisations get involved in this area is that there is money to be made. If people were not donating bags of clothes to these organisations and were instead ensuring they donated to charities only, some of this bogus activity would be curtailed.
The witnesses are very welcome. It is really important that people feel confident in this incredibly important sector. The work of the witnesses is incredibly important from that point of view. When I went through the list of charities, I noticed that some of them have 19th century names. People know the names of many of the big charities, but there are also local charities like schools that crop up on the list. The number of charities is incredibly large for the size of the country. Perhaps this is a reflection of the fact that the charitable sector in this country is providing services that would normally be public services in some other countries. I refer to charities like Rehab, Enable Ireland and the Irish Heart Foundation. Some of their work is promotional. It is understandable that they would have charitable status. In many other countries, the services being provided by a charity like Enable Ireland would be a matter of public provision. I think there is a gap being filled. Some confidence was lost when attention was focused on the amounts of money being paid to the CEOs of charitable organisations. I assume that does not come under the remit of the Charities Regulator. At a time when the public is being very generous but is seeing very large salaries being paid to CEOs, it is very difficult to retain public confidence in this sector. Is any guidance available in this regard? Some of these companies are very big and need to have good personnel. Is there any guidance on engagement with some of the bigger charities?
Ms Helen Martin:
I can answer that more generally because it comes under the charities governance code and the whole area of private benefit. When salaries are paid to the people involved in running charities, that is considered to be a private benefit. The Act provides that the private benefit must be reasonable in all the circumstances, must be ancillary and must be necessary to the furthering of the public benefit that the charity entails. We tell charities they must ensure the amounts of money they pay to members of staff should be benchmarked and should be reasonable. They have to be reasonable and necessary. It is obvious that a charity which provides healthcare services in the home will need nurses. We consider that to be a private benefit which is absolutely required and is permissible under the Charities Act. The charity would have to make sure it is benchmarked against what a nurse would be paid elsewhere. That is where we would come across that. People would be asking about that, and that would be our general advice in this area.
I would like to refer to research that has been done on salaries more generally. We might consider a salary of more than €70,000 to be a high salary for these purposes. Research indicates that less than 1% of the workforce in the not-for-profit sector, which obviously is wider than the charitable sector, is paid more than €70,000. The relevant percentage is much higher in other areas. I believe it is 13% in the rest of the economy. There is certainly a perception out there. We often see it when the results of research come back. People want charities to be well run, but at the same time they do not think people in charities should be paid the same as they might be paid elsewhere. Our view is that a nurse who is working in a charity should be paid the same as a nurse who is working in a hospital, if they are doing the same job.
I have been looking at the authority's organisational chart. We have been told that it has 37 staff on its books at the moment, but I can count 43 people on its organisational chart. There are some vacancies as well. The higher up the ladder one goes, the greater the proportion of vacancies. There are vacancies for positions like head of legal affairs, regulatory lawyer and head of corporate affairs. There are no vacancies down at the clerical officer end. That is the point I am making. Where would the additional staff up to the full complement of 53 fit in on the organisational chart?
Ms Helen Martin:
They would fit in around the area of compliance and enforcement. There are certain areas we need to develop when we are talking about proactive monitoring. They would certainly be going in there. Ultimately, we are looking to resource the whole area of operations, IT and research as well.
I do not see that. It has been set out as a hierarchy in the organisational chart. I am not saying that the organisation is hierarchical. Ms Martin has spoken about teams. I am trying to visualise how the 37 people who have been mentioned fit into these teams. There is an overall administration as well. The administrative staff are probably not part of one of the teams in question. I am trying to visualise how the organisation is run. The top two areas that are named before the chart moves on to the next tier are head of compliance and enforcement, and head of legal affairs. Are all of the areas named there? Will there be an additional stream that will go along with the authority's senior staff, even if they are not employed?
Ms Helen Martin:
No. These are all of the areas that we will have in the organisation. There is probably some confusion here. At the moment, I am re-examining the organisational structure. I can send the committee the original structure if it would like to see it. The original structure was based on the preferred operating model. Having gained experience over recent years, and having considered where we want to go with our strategy, my view is that we need more senior decision-makers in the organisation. The review has not yet been completed. That is why I do not have the updated organisational chart.
Okay. Are they direct employees, or potentially direct employees, as opposed to agency employees? Another organisation that was set up recently had more people in on contract than direct employees. I hope we are talking about direct employees.
A number of things cropped up in the earlier discussions that I wish to go back over. There are quite a number of small charities where there is an overhead to have an audit, and yet they are very small organisations and there are multiple charities in the same sector. That can be seen in the list of charities and their functions. Is consolidation discouraged, or if a body comes along and meets the criteria, is it automatically granted charitable status?
Ms Helen Martin:
Yes, once it meets the charity test. We do not seek to control the numbers that are registering. If people apply and meet the charity test, then they will be registered as a charity. We take the view that charities, as was mentioned earlier, are stepping into gaps. Particular individuals who are setting them up can perceive a gap and want to step into that. While on the face of it, it may look like charities are very similar, sometimes when one looks behind them, for example, in the area of animal welfare, it will be found that there are very different philosophies behind those particular charities.
When answering Deputy Kelly, Ms Martin talked about the Probate Office, and that there is this reactive prompt, where somebody brings something to the regulator's attention. Obviously people are asked, when making a will, to think of charities and such things. There may well be people, in some cases, who do not have family members who will follow things up, and these are the ones who will be aware. What would it take to be proactive rather than reactive in that particular sector, because it is likely to be a growing sector?
Ms Helen Martin:
Once we receive the forms from the Probate Office and the original form will have been lodged, that is what starts our process. We do and we will follow this up with executors. There is a proactive element in that. If we have received a form from the Probate Office and we have not received a receipt from a solicitor, for example, from a charity stating that they have received the money, we will follow that up, so we absolutely do follow that up.
One of the issues we had and that I mentioned earlier is around the whole area of paper and the fact that it was very hard to deal with the masses of paper that we were receiving. We worked with the Probate Office and have put that whole system online now. That will enable us to do that proactive monitoring piece more easily as we will be capturing those data at source from the solicitors or executors who are putting the forms in. That means we can analyse that, and it will also be useful for the Probate Office down the road, when it modernises its systems.
The way our education system is set up probably comes as a big surprise to the vast majority of people. It is publicly funded in terms of the building of schools and the payment of teachers. There is an inadequate amount of money provided to run schools, hence the reason fundraising is required. It is would come as a surprise to people and they would not think that their national school, for example, was a charity. Does the Charities Regulator's office look at comparisons with other countries in terms of what ends up being a charity in this country as opposed to, say, our European counterparts? Is there a remit from that point of view that the Charities Regulator's office will fulfil?
Ms Helen Martin:
We feed back our comments to the Minister on any areas that we think may require reform or may need to be looked at. We have done that through the charities (amendment) Bill. On the types of purposes that are considered to be charitable, we consider that to be a matter of Government policy.
Ms Helen Martin:
The fund came about as a result of the 1961 Act. It was set up in the 1980s or 1990s by the then Commissioners of Charitable Bequests and Donations for Ireland. It was set up as a means, particularly for smaller charities, to be able to invest funds and earn a return on those. It was closed, however, by the time we took it over, and before the Charities Regulator came into being. There are no new members in that fund now. We did a review on what we should do with the fund, such as whether we should wind it up, and different options were considered. The preliminary view was that we would maintain it for the moment. We are doing a number of exercises around it. It is quite an old fund and there is a lot of administrative work to be done around it such as data cleansing exercises, anti-money laundering, and making sure we have the right details for people, etc. Once all of that work is done, we will continue with the review and see what the next steps are.
There is €35 million in that fund as of 31 December 2018. Davy Asset Management brokers manage the fund but the Charities Regulator's office is the custodian. Who are the beneficiaries of that fund?
Ms Helen Martin:
If there were compliance issues, to be honest, it is a completely separate statutory scheme. In fact, under the 1961 Act, there was no requirement for registration because it did not exist at the time. It is not something where we can hold back. They are entitled to the dividends out of it. Where we have had situations where we have held back, it has been where we could not contact somebody in the charity. We did not have proper bank details for them, etc.
That would be of concern. I know that, very often, things cannot be done in retrospect. If an organisation is not in the area of compliance, however, that puts the regulator in a very precarious position, I would have thought.
My apologies, as I was in the Dáil Chamber and was not here for the witnesses' presentation. If I cover ground that has already been dealt with, the Chairman might stop me, because I do not want to repeat material. From a governance perspective, who appoints people to the Charities Regulator's board?
That is public procurement. If the regulator's office has a slot on the board, it advertises, and I or anybody else can apply, and the usual process follows. Are there any prescribed appointees or appointments?
I am just trying to think. If it was the banks, would the CEO of AIB be on the regulator staff? Does Ms Martin think that would be good governance? Without prejudice of the person's qualifications, I am talking about optics at the absolute minimum. In terms of best practice in governance across any organisations or any regulated activity, how appropriate is it to have an operator who is the regulated on the board of the regulatory authority?
As the CEO of an organisation, if the recruitment was up to Ms Martin and she sought to recruit the board, would she recruit people who were active from the sector? Does she think that would be good practice?
Ms Helen Martin:
I can only base it on my own experience of the individuals concerned with whom we have dealt. They bring an excellent perspective in terms of the regulator, particularly in this sector where, in the main, we are talking about very small, mainly volunteer-led, organisations. I welcome the perspective they bring on regulatory activities and their own experience of the charities sector.
Is there any law relevant to it that we are aware of? I am sorry to put the Comptroller and Auditor General on the spot, it may not be his area at all. There are also Department representatives before the committee. I would be interested in the Department's thinking on appointing the regulated to be a member of the regulatory authority.
Ms Ciara Bates:
As Ms Martin noted already, appointments to the board go through the Public Appointments Service in line with the code for the appointment of the boards to State bodies, and not-for-profit State bodies. At the same time, we must be cognisant of the skills requirement of every board. The board is responsible for the strategic direction of the Charities Regulatory Authority, CRA, and in terms of that it is how they engage with the charity sector, how they regulate it, and governance. One of the key criteria for being a board member is having knowledge of that sector.
Ms Ciara Bates:
To bring back perspective and knowledge, one of the key things the Department is looking at in policy in the area - and it has been mentioned many times by the sector itself - is that we did not create an unduly complex regulatory environment or governance burden on the charity sector.
That is great. However, on this occasion the decision was to get someone who was an active CEO of the Irish Wheelchair Association. Again, this is not about the individual at all. I am sure they are more qualified than anyone else in the whole country but that is not the point; the point is that it is poor practice.
There is nothing to restrict them from applying but we look to the Department and perhaps, ultimately, the Minister, to apply a bit of common sense that the regulated does not become the regulator while continuing to be regulated. Does anyone agree with me or am I on a different planet?
Mr. Seamus McCarthy:
There are situations, if one looks at other State bodies, where, say, those who would be beneficiaries of a body issuing grants would be members of the body making the determination. It does create a potential conflict of interest. Care must be taken that people are not involved, that they are not briefed on matters in which they might have an interest as an executive or a board member of an entity body.
We are talking about oversight and the making of the rules of the game. I must say as a member of the committee, I think that it is shocking governance, without prejudice to the wonderful expertise of the individual we are talking about. As a matter of basic rules, to give people the peace of mind to which they are entitled, the regulated should never, while continuing to be regulated, have a seat on the board of the regulator. I ask the Department to give the committee a formal response as to why this has happened. It would also be useful to know how many people applied for this position and what assessment criteria was used to make the appointment. In terms of ticking boxes of expertise and qualifications, I have no doubt but there is a fundamental flaw in what has occurred here.
It it ironic that Members in the Roscommon area including Deputy Eugene Murphy and Senator Leyden have raised the issue of the Cuisle centre which is a holiday resort for people with disabilities and particularly wheelchair users. That facility is set to close. Say in the case where, for example, the IWA is a fantastic association, and Cuisle is a particularly fantastic part of the national infrastructure for people who are wheelchair users and so on, does the regulator have any competence on issues like that where it can liaise with the charity to ask that it keep such a facility open? Can it ask what are the problems and why such a facility is being closed?
Ms Helen Martin:
That came up earlier on the information that is currently made available to us by charities. Where a charity is a company we have access to their financial details as they are filed with the companies office. However, charities do not have a requirement to file directly with us at present as we are waiting on amendments to the Act so that we can introduce it across the board.
The regulator is waiting for an amendment. The regulator does not have the full suite of powers and tools which a regulator should have, and amendments and additions to legislation are pending, is that the case?
Ms Helen Martin:
Yes, there is a power in there to get accounts but the problem is it only applies to those charities that are not companies. If we were to introduce it it would only apply to approximately 40% of registered charities. In order to ensure that it is brought in in a fair manner and applies across the board to all charities we are looking for the carve out that is currently there in relation to companies to be removed.
Mr. Eamonn Confrey:
To add to that, if their income is over €100,000 per year, they are required by Revenue to carry out an audit each year because they have a tax exemption. That requirement is for the larger cohort who came on to the register by being deemed registered in 2014. Any of them that has a charitable tax exemption is required to have an audit done for anything over €100,000.
Ms Helen Martin:
Those charities would have been taken off the register because they were inactive. They would have come off the charities register automatically by virtue of the Revenue Commissioners removing their charitable tax status. We have 6,500 charities on our register at the moment that are deemed registered charities. They are there because at the time that we were established, they held a charitable tax exemption from Revenue. If they happen to lose it, they get automatically removed from the register.
Is it the case that Revenue communicates with the Charities Regulator's office periodically indicating that it has removed charitable tax status from organisation A and then the regulator's office delists that organisation?
In terms of powers versus staff, does the office have enough staff to execute its current powers, notwithstanding the fact that we have already identified the fact that the regulator does not have enough power?
Before we move on, I want to take up an earlier point about the board of directors. I ask Ms Martin to go through the membership of the current board, indicating when each member was appointed and the mechanism under which the appointment was made. We will start with the chairman, Mr. Patrick Hopkins.
I have the regulator's report here, which lists appointment dates for some members but there are gaps. The information is provided for some but not for others. I ask Ms. Martin to tell us what she can about each member and any missing details can be provided later.
Then I should be asking the Department to go through the members of the board of the Charities Regulator. The Minister makes the appointments and the regulator's office is at the receiving end. It is the Department that deals with ministerial appointees. Mr. Patrick Hopkins was reappointed on 16 October 2018 as chairman. Did that go through the PAS?
Mr. Kevin Power:
Next on the list is Mr. Graham Richards, who was reappointed in 2018 by the Minister. Ms Katie Cadden was originally appointed in 2014 and was reappointed in 2018 by the Minister. Ms Máire McMahon was appointed in 2018 through the PAS. Mr. Martin Sisk was appointed in 2019 through the PAS.
Mr. Kevin Power:
Next is Ms Niamh Cahill who was appointed in 2018 through the PAS. Ms Patricia Cronin was originally appointed in 2014 and was reappointed in 2017 by the Minister. Ms Rosemary Keogh was appointed this year through the PAS. Mr. Tom Costello was originally appointed in 2014 and reappointed by the Minister in 2017.
In terms of the €39.7 million fund that is being managed, Ms. Martin said that there are 392 players in the mix. Some of them are not regulated because their involvement predates registration. Is that correct? There are entities in the mix, whose money is in that fund, that are not registered charities. Did I understand that correctly?
What proportion of the money or the groups are we talking about? Is half of it held by unregistered entities? Does the regulator have a breakdown on that? I would find it quite shocking if such a large amount of money was just sitting somewhere but if only a small amount of it relates to unregulated entities, I would not be so worried. It is important to know whose money is in that fund.
Specifically what I would like to know regarding the fund of almost €40 million, which seems to be performing quite well, is how many of the 392 companies involved are not registered. What proportion of that fund is in the custody of unregistered charities?
Is there information on how long the money has been there? Is it historic money that has not been touched? Are unregistered charities still putting money into the fund? Is there any activity?
Unregistered entities are getting dividends. Maybe this is beyond the scope of this committee. When this fund is marketed, is it marketed as a positive, ethical, philanthropic thing which people invest in for different reasons?
I imagine that people who give money to charities would expect that the money is not being invested in something that is unethical. I am not saying that it is, but one would expect there to be oversight.
That is the sort of thing I am asking about. It would seem bizarre to me if, for example, the Irish Cancer Society had money in that fund which was being invested in vaping, cigarettes, cannabis production or such.
Does the Charities Regulator have a document or parameters in which it is prepared to work regarding responsible investment policy? What other red line issues are there? Did Davy say there was no problem or did it say it would invest in what it wanted to? Is it obliged to listen to the regulator when it directs the investment.
If a private company is managing a fund, who decides to write that letter? Who decides, for example, to focus on tobacco? Investment funds support many nasty things. Who decided that was the nastiest thing to put in the letter?
We spoke about standardised forms of reporting. Deputy Catherine Murphy might have mentioned it. The witnesses referred to less than 1% of people in the charitable sector being paid more than €70,000. That compares to the private sector, where 13% are paid more than €70,000. The witnesses used a nurse as an example. I do not think that anybody would expect that a nurse who is working for a cancer charity would be on less money than a nurse in a hospital. The concern is the pay of the people at the top. I do not think it really answers our questions to say that less than 1% are on more than €70,000. Could we look at that 1% and get the list of people and the jobs that the 1% accounts for?
Ms Helen Martin:
As part of the application process, a charity will indicate how many employees it will have. It will not yet have started its activities. If there is a very small charity which is talking about taking on 20 people and is not really talking about many other activities, that would flag for us that there may not be public benefit.
Ms Helen Martin:
We will query it with the charity and see if there is a public benefit. If there is no public benefit associated with the charity and it is all about private benefit and what it will pay to individuals, it will not be registered because it will not meet the charity test, which requires a public benefit.
What is the punishment? An inspector comes in and the person is called out, but that person is still going home with €500,000. How does one fix it? I think Ms Martin is saying that the Charities Regulator cannot fix it.
What is the role of the Charities Regulator with unregistered charities, where people are purporting to be a charity but they are not registered? If I put up a website and say that I am going to do a run with Deputy Fleming for charity, then we pocket the money, having advertised myself as a charity, what can the regulator do in that case even though I am not registered? What is the regulator's role in such a case?
There is a case of a company, Gianna Care, that advertises itself on its website as a charitable organisation. There was a complaint about it six months ago or longer. It describes itself as providing crisis pregnancy care. It has the Gianna Care walk for hope, love and support, and so on. It is not a registered charity. A complaint was made to the Charities Regulator and was brought to my attention.
It is still holding itself as a charity and soliciting donations from the public. It had more than €76,000 in bank accounts since the end of 2018. The name is Gianna Care. Is Ms Martin familiar with the group?
Without Ms Martin commenting, it seems clear from the evidence I have been given that this charity is working completely outside the rules. It is not registered but it is active and collecting money. It has cash on hand. It is flouting some of the recent legislative changes in this country, which is a serious problem. The Charities Regulator was contacted some months ago about it. I cannot understand the delay in stopping it. It is still active and live. It is still collecting money. How long would Ms Martin expect an investigation such as this to take? It is a little complicated if a fund has been in existence since the 1960s, 1970s and 1980s but surely it is the job of the Charities Regulator to sort out a group that is not registered but marketing itself online as a charity today.
Ms Martin cannot comment on it. Does the Charities Regulator have parameters or rules from point of complaint to point of processing to point of response? Does it work within timelines or does it take as long as it takes?
Ms Helen Martin:
It takes as long as it takes, unfortunately, in some cases because it is not possible. We issue acknowledgements within a certain period but with regard to the investigation itself, we have a risk rating process that we apply to all concerns we receive. Something like a charity that claims to be a charity when it is not would be a high risk.
Very high risk, I would imagine. That would be the highest risk. There would be an assumption that a charity would be out for the good of people and operating within best practice. There is no question that there is a charity that purports to offer professional care to people under a charitable heading when it is not a charity. This is extremely serious.
What role does the Charities Regulator have in highlighting risks to the public? What comes to mind is the financial regulator advertisement from many years ago. What does the Charities Regulator do to highlight to the public that they could be giving money to dodgy things? What is the role of the Charities Regulator in advertising public awareness?
Ms Helen Martin:
We have done work on public awareness with regard to registered charities and urging the public to check the register before they give to any organisation that they think is a charity. Earlier, I mentioned that we have a campaign due out next week on clothing collection, with regard to making sure people check the register to ensure the entity is a registered charity. This is something we regularly do. We try to come at it from different angles depending on the number of concerns, which are very high with regard to clothing collections. It is something on which we focused because we could see a particular risk there. Certainly, public awareness around these issues and people checking the register is one of our key focuses.
At the end of the day, people walking down the street at Christmas who have a bucket shoved in front of them will not go onto the phone to check the register. They will just throw the money in the bucket and keep going.
Ms Helen Martin:
That is what we are trying to change. We are trying to get the public to be more proactive themselves about managing who they give money to. It is about telling people there is a facility available for them if they want to check and that they should be aware there are organisations that are registered and other organisations that are not registered.
With regard to the board, similar to Deputy MacSharry, I am uncomfortable with the fact that somebody on the board of a charitable organisation also sits on the board of the regulator. I was not aware of this until this meeting and I do not believe it is in any way appropriate. Is there any other example where the regulated are on the board of the regulator? It is concerning if it is a widespread practice.
We have had many groups here but this is a regulator. It is a statutory role. I believe that even a family member or spouse on the board would be inappropriate. We need expertise on boards and retired people and people to come from other places but if somebody is actively sitting on the board of a charity and actively sitting on the board of the regulator that is supposed to be regulating the charity, that is just wrong and not acceptable.
Mr. Eamon O'Halloran:
It is not a registered charity. With regard to process, where a body applies to us on top of its constitution, we look for a document that sets out its principles, tenets and faith to understand what it does in terms of worship, for example, where it holds worship. We look for a lot more information from an organisation that sets itself out for the advancement of religion than we do in some other areas where the charitable purpose might be quite clear. This is something we are aware of and we focus on the registration side where risks might occur.
In terms of religious entities getting charitable status in recent years, how many more religions are in the mix now as opposed to a few years ago? Is the Charities Regulator constantly getting applications or is it just every so often? How significant is this new religion stuff?
Mr. Eamon O'Halloran:
If we look at where there has been proportional growth, it has not been in the advancement of religion, although we do have quite a number of new ones. Many of them come from new communities, who might be of a Baptist religion, for example. Other areas where we see growth are animal welfare charities and environmental charities and this reflects what is happening in society. That is where we see growth. There are people in new church organisations that may not be involved in the traditional Catholic or Church of Ireland churches. This will occur. The register will always reflect what is happening in society. Whatever is happening in society will be reflected in the types of new applications we see.
There is a push now to grab the world market and there is a lot of money to be made out of climate issues by some companies. How does the Charities Regulator assess what is on the right or wrong side? Whose skill set is that? It is a bit like the religion issue. It is subjective. If a company purports to be the greenest of them all, who assesses this? What is the level of expertise? High level people would be needed to be able to work out whether a charity would help to save the environment or whether it is just making a few euro.
This is the problem; we do not have governance over how much people are paid. We can all make no profit if we pay ourselves enough, as I have said here before. If the regulator does not have any remit in determining a standard for what people are paid, it is very easy for people to not make a profit if they pay themselves enough.
Mr. Eamon O'Halloran:
I can give the Deputy some more information on this matter afterwards but new entities - new charities - tend to have much lower incomes. They really do not pay much in salaries. As they establish themselves, it takes most new organisations some time before they earn that type of-----
Mr. Eamon O'Halloran:
Before they are in a position to generate that kind of income. We request such organisations to prepare a business plan and a breakdown of their income. We look at the proposed salaries and question them quite aggressively to see if they are appropriate. We seek to ensure that, even at the point at which charities are registered, the private benefit is reasonable in all circumstances, ancillary and necessary. We do that as part of our test.
Mr. Eamon O'Halloran:
We look at everything contained in the form. The organisations will set out those benefits. We might not go into the detail of any other benefits they may offer. They will set out a plan of what they intend to offer but they may not have started trading and so may not have any income at that point.
Mr. Eamon O'Halloran:
The other thing is that, once they are registered, they are regulated in respect of their ongoing requirements. As part of the annual report, they are also required to tell us what proportion of their annual expenditure is used for salaries. All charities are required to do that.
Does the Competition and Consumer Protection Commission, CCPC, have any role in this area? Does the Charities Regulator interface with it? Let us take for example an Irish private hospital that provides counselling services. It pays its taxes and is not a charity, just a private hospital. The company I mentioned, which provides bogus counselling, is pulling people away from this legitimately-run hospital and may be tax-exempt. Does the regulator have any role in that as there may be an uneven playing field, without mentioning the quality of service? I refer to people trying to get ahead of the game by getting charitable status and tax exemptions, thereby disadvantaging a legitimate company operating without charitable status. Does the regulator interface with the CCPC in such circumstances?
I have a few questions. One of the documents we have been given provides a list of purposes that are of benefit to the community, broken down by category. These include the advancement of community welfare and many other categories. The area of human rights is mentioned. Is that allowed as a category?
The reason I ask is that I saw a picture of someone from a Tidy Towns committee in the book the regulator provided. I thought the group must be registered if it is featured in the book. That is fine. That kind of information could be important to local communities. They should know about the financial benefit in respect of tax. Will the representatives give me a flavour of community groups that have registered? The environment and animal welfare were mentioned.
Mr. Eamon O'Halloran:
Yes. Other eligible bodies include organisations involved in education at every level from primary to secondary and on to various types of formal education. That includes a very wide range of bodies. With regard to local communities, we have already discussed animal welfare. Many of the other eligible groups are involved in health promotion. These include groups that provide transport to the local hospital for people who have cancer and groups who fundraise for particular issues. These issues may include an emerging need related to a particular disease or condition. That is another example.
We will make a note of that. Representatives of Revenue will be here next week or the following week. We will specifically ask them about that. The Charities Regulator does not deal with that side of things. I gather that most schools are registered in order to avail of tax relief. Do they need charitable status to avail of tax relief on an extension or new facilities in the school for which funds are raised?
It is because the group is no longer active. We will ask Revenue whether there is a sunset clause involved when it comes before the committee next week. We will make a note of that. The first of the organisations with which the Charities Regulator has a lot of interaction that Ms Martin mentioned was Revenue. The regulator has quite a lot of dealings with it because of the financial side of things. That is why I thought Ms Martin might know about this. We will ask the Revenue representatives when they are in.
I have a few questions on the Charities Regulator's accounts. To follow up on what Deputy O'Connell said, we have heard about the investment policy the NTMA set with respect to tobacco and, a year or two earlier, the armaments industry. It has a clear policy. I believe the Courts Service has a lot of funds invested on behalf of wards of court and it also has a policy not to invest in those areas. Will the witnesses clarify the regulator's policy with regard to investing in those areas? Who manages the fund?
Davy can invest in funds that do not include companies involved in those industries. I ask the witnesses to provide the committee with a note. If those areas are not already excluded, I ask the regulator to follow the example of the other leading State agencies that have already implemented policies on this matter. It does not have to be legal, in that it can be an investment choice. If the regulator does not already have such a policy, it might-----
Mr. O'Halloran mentioned State-funded childcare. With regard to preschool children, the early childhood care and education, ECCE, scheme and so forth, do childcare providers operating under charitable status receive ECCE payments?
I have to go to the House for a division, but perhaps I could submit a question afterwards. If it is, it is definitely an example of an uneven playing field if a private operator is operating the ECCE scheme and it is paying full tax on any income. If the operator has charitable status and is receiving ECCE payments or whatever it is called now - there is a new name for it-----
Are they tax exempt on all the income they get in addition to the three hours of the ECCE scheme per child per day? It could be from 9 a.m. to 12 noon or whatever. If I put my child into the facility for three hours and I decide to pay for another six hours in the day in one of these State-funded charitable places versus a private operator, is one getting preferential tax treatment over another?
Ms Helen Martin:
We only have one in-house legal adviser. Almost all the charity tests we do are legal tests so a large volume of legal advice is required in that area. We have a requirement for three legal advisers, but we only have one at present so we are reliant on using some of our funds to get external legal advice.
Page 8 refers to consultancy costs. Consultancy costs include the cost of external advice to management and exclude outsourced business as usual functions. Can you differentiate between paying somebody on a consultancy basis and an outsourced function? What is the difference?
Ms Helen Martin:
They are both consultants, but the outsourced was identified as a position on our organisational chart some years ago for the preferred operating model. That is where we identified that we needed in-house financial support in terms of having an accountant. It was decided at that time to do it by way of outsourcing, that is, to get somebody in as a consultant to do it for us.
Okay. I was worried that it might be a large number. The CRA has consultancy costs of €388,000. The digital platform, which was mentioned earlier, is €218,000. Page 22 refers to consultancy costs of €333,000. The digital platform is a significant element of that cost. According to page 8, the authority capitalised €212,000 of it and only charged €126,000 of it to its revenue account. How does authority decide what is capitalised and what is charged to the revenue account?
Mr. Niall Scanlon:
It is a matter of accountancy policy. The capitalised element is any of the expenditure directly related to the platform and the project management fees associated with the platform. Of the €218,000 for the digital platform, we capitalised €212,000 of that. Some €6,000 of that related to training, which was put directly to the income statement.
Will Ms Martin send us a note on it? There is quite an amount capitalised out of what the organisation is spending. I realise that if the organisation is building up the system it will want to do that, and some of it is then charged to revenue. I will be happy if she sends a note on that.
We have concluded our work and a division has been called in the Chamber. I thank the witnesses from the CRA and the Department of Rural and Community Development for their attendance and for the information provided as well as for the information they will forward to the secretariat in writing in due course in respect of information sought at the meeting.
We will suspend the meeting until 2.30 p.m. when we will deal with carbon taxation with representatives of the Department of Communications, Climate Action and Environment.