John Curran (Dublin Mid West, Fianna Fail)

The absence of a proper regulatory framework for the charities sector has been a matter of concern to this and previous Governments and to the charities sector. It is fair to say the sector welcomes appropriate regulation as a lack of regulation leaves it potentially open to abuse. The charities sector depends to a large extent on public confidence. It is estimated that currently more than €2 billion passes through charities in Ireland, yet there is no oversight of this vast sum of money. The Bill seeks to address this situation and to ensure that charities are subject to an appropriate level of scrutiny, but not to the extent that the resources of the charity that should be spent towards achieving the charitable purpose are expended on regulatory compliance. For this reason — I will highlight where the relevant measures are included — the Bill has been drafted to provide proportionate regulation, principally in recognition of the fact that the majority of charities operating in Ireland are small organisations operating on a largely voluntary basis.

I will now go through the Bill in more detail, focussing particularly on what might be regarded as the key provisions. Part 1, while largely technical in nature, contains a number of key provisions. Sections 1 and 2 are quite standard in that they set out, respectively, the Short Title and the definitions of terminology contained within the Bill. Different provisions of the Bill may be commenced on different dates, which will assist in developing the regulatory regime in a structured and strategic way. It is not anticipated that the Bill will come into force immediately after enactment. In other common-law jurisdictions, such as Scotland, it has taken some time — approximately two years after enactment — for the regulatory framework to be put in place on a statutory basis and a similar scenario is likely here. Key definitions in section 2 include a "charitable organisation" and an "excluded body" for the purposes of the Bill. These definitions will form the basis for determinations of charitable status by the new regulatory authority that is to be established. Section 3 is a most important section as it specifies the purposes to be regarded as charitable by the new authority. Every charity will be required to have been established for charitable purposes only. I will briefly outline how these purposes have emerged. The purposes listed in the Bill are based on what are known as the Pemsel categories of charitable purposes. The preamble to the Statute of Charitable Uses 1601, sometimes known as the Statute of Elizabeth I, contained a list of purposes or activities which the State believed were of general benefit to society and to which the State wanted to encourage private contributions. To date there has been no definition of "charitable purposes" in statute law.

The list in the preamble to the 1601 statute, which has formed the foundation of the modern definition of "charitable purposes", has developed entirely through case law. Case law has interpreted this as giving rise to four categories of purposes and these are the four categories listed in section 3(1) of the Bill, with some necessary contemporary interpretations. The Revenue Commissioners have referred to these categories when deciding whether an organisation is eligible for charitable tax exemptions. Section 3(10) sets out in greater detail than has been done before what are to be considered "other purposes that are of benefit to the community", which is the fourth Pemsel category. In enshrining these "charitable purposes" in primary legislation for the first time, the Bill is seeking neither to narrow nor to broaden the purposes that have emerged through case law over the years.

As well as being required to be established for a charitable purpose only, section 3 provides that charities will need to show that there is a public benefit to their activities. This is a longstanding requirement of charities. This provision is to deter charities being set up to benefit only a limited number of persons who may have a personal connection with the founder of the organisation.

Traditionally, and uniquely, there has been a presumption of public benefit for religious charities, which if retained would have effectively tied the hands of the authority in dealing with applications particularly from newer religious organisations that have emerged in recent years. To counteract this, on Report Stage in the Dáil this automatic presumption was removed and replaced by a rebuttable presumption. Quite simply, the authority would not have been in a position to refuse an application for registration from any organisation claiming to be advancing religion. This is not acceptable particularly in a context where so many new religions and churches are being established. However, this provision should not affect existing religious charities which will be automatically deemed to be registered, as I will explain later.

Section 4 is a technical section allowing the Minister to make regulations under the Bill as enacted while section 5 provides that the authority shall be funded from the Exchequer. Section 6 allows for a mandatory review of the operation of the Act after five years in operation. This Bill is the first step only in the regulation of charities in Ireland. This review will allow the opportunity for any issues relating to the regulatory system that may have emerged — I am sure some will have — to be identified and addressed.

Section 7 clearly separates the functions of the new authority, which will be to consider the charitable status of organisations, from that of the Revenue Commissioners, which will remain fully responsible for deciding whether an organisation is eligible for charitable tax exemptions.

Section 8 is a technical section that excludes organisations that are involved in securitisation activities from the provisions of the Bill. The Bill was never intended to comprehend such organisations which play an important role in the Irish financial services sector. It is considered that placing an additional layer of administration on such organisations might damage Ireland's position as a suitable base for such organisations and threaten jobs in the sector. These organisations do not fundraise directly from the public, and are essentially dormant for the majority of their existence. Section 9 sets out the arrangements for the servicing of documents under the Bill.

Section 10 sets out the penalties for both summary and indictable convictions for an offence under the Bill. Members will note the strong penalties applicable to those convicted on indictment in particular. This is intended particularly to deter serious white-collar crime within charities. Members will also note that costs arising from successful proceedings may be recouped by the authority. Section 11 refers to the elements of the Charities Act 1961 that are repealed by this Bill. The detail is in Schedule 2.

I move now to Part 2 of the Bill, which provides for the establishment and operations of the new charities regulatory authority. Sections 12 and 13 empower the Minister to set an establishment day for the purposes of the Act, on which day the new charities regulatory authority is to be established. The new authority will be the centrepiece of the regulatory framework. Section 14 sets out in detail the functions of the new authority. I will focus on some of these in particular. The authority will be an independent body and will obviously have strong regulatory powers, the specifics of which I will detail later as they emerge in the Bill. However, it will also have a supportive role for charities themselves in recognition of the fact that most charities in Ireland are small volunteer-run entities.

A key function will be to increase public trust and confidence in charities, as enhanced public confidence will benefit the charities sector as a whole. It will also have a role in disseminating information on charities, and of particular importance in this context it will be required to establish and maintain a register of charities. This will be the key interface between the public and the authority and will be of critical importance in increasing transparency. It will also enable donors to make more informed decisions as to which charities they choose to support and to verify the charitable bona fides of any organisation. Quite simply, if an organisation is not on the list, it is not a registered charity. Finally, this section also provides that the functions of the authority may be undertaken by any member of staff authorised to do so.

Section 15 provides that although the authority may be independent in the performance of its functions, the Minister of the time may require it to comply with certain Government policies. These policies would not relate to the day-to-day operations of the authority under the Act, but to general policy areas such as staffing, recruitment, procurement etc. Section 16 clarifies that the authority will be funded from the Exchequer. Section 17 is a standard but necessary provision allowing the authority with the consent of the Minister and Minister for Finance to borrow money.

Section 18 is a technical provision allowing the authority, where it has incurred costs in managing, preserving, administrating or recovering the property of a charitable organisation, to recoup such expenditure from the estate and funds of that organisation. This is merely an enabling provision and it would not be envisaged that it would be invoked in all such cases.

Section 19 relates to the appointment of the chief executive officer. The Minister will have the option of appointing a chief executive officer in advance of the authority itself being set up to prepare the groundwork for the authority. Subsequent CEOs will be appointed by the authority with the consent of the Minister. CEOs cannot hold any other office without the consent of the Minister. Following on from this, section 20 sets out that the CEO will be responsible for the efficient and effective administration of the body and in that context will be accountable to the authority. The CEO may make recommendations to the authority. There is a reserve power in section 20(4) allowing the authority, where the CEO position is vacant, to appoint another member of staff to act as CEO.

Section 21 allows the CEO with certain limitations to delegate with the agreement of the authority one or more of his or her functions to a member of staff of the authority. Sections 22 and 23 copperfasten the accountability of the CEO to both Houses of the Oireachtas. Section 22 relates to the Committee of Public Accounts. Section 23 outlines that the CEO is also answerable to other committees of the Oireachtas apart from the Committee of Public Accounts. Section 24 allows for the appointment of staff for the new authority and that the pay, and terms and conditions of employment shall be subject to the consent of the Minister and the Minister for Finance.

Section 25 allows for the transfer of staff from the Office of the Commissioners of Charitable Donations and Bequests for Ireland, which will be dissolved, to the new authority. It specifies that the terms and conditions applicable to such employees shall not be affected by the transfer, unless any such change has been discussed and agreed with the relevant union or association. Previous service with the dissolved body will be also reckonable under the relevant employment legislation.