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Charity

The Charities Act - 10 Steps To Take Before Commencement

Oct 9, 2014
The Charities Act, which was enacted in February 2009, was established to ensure greater accountability, to protect against abuse of charitable status and fraud, to enhancing public trust and confidence in charities, while also increasing transparency within the charitable sector.  While The Charities Act was enacted in 2009 it has not yet commenced, however with the recent controversy surrounding some Irish charities it is anticipated that such commencement will be sooner rather than later. While there is still time for charities to prepare themselves, this time is now limited.  It is recommended that all charities review their operations with a view to taking the necessary steps required to ensure they are ready.  To assist you in this regard we have outlined below 10 key steps which your charity should consider as part of your preparations for The Charities Act:  

 1.  Register Your Charity

If your charity is currently registered with Revenue you will already have a CHY number and will therefore automatically be registered with the Charity Authority.  For those who are not registered, your registration will be required to be completed within 6 months of the establishment of the Charity Authority.  It is therefore recommended that charities complete their registration with the Revenue prior to the establishment of The Charity Authority, as it is believed to be easier to obtain a CHY number from the Revenue.  

 2.  Identify Your Assets

It is important for charities to compile a listing of assets held.  This can be completed by conducting a full review of items such as land and buildings, machinery or vehicles to produce a formal record of the assets held.  Often assets which have been made available to charities for many years may in fact belong to individuals or entities other than the charity and therefore should not be included on the formal register of assets held.  

3.  Review Your List of Members

The members of a charity are those that are entitled to vote at meetings and with the commencement of The Charities Act there will be a number of important decisions that all charities will have to make.  It is important that charities have a concise listing of its members for when such decisions are being made.  

 4.  Review Company Secretarial or Trustee Lists

If your charity is a limited company you are required to have seven guarantors.  While many charities may have listed these when they were established the original guarantors may no longer be involved in the charity and therefore the listing will need to be amended or updated to reflect the current guarantors.  Alternatively, for a trust you should obtain a copy of the trust document to ensure it is being complied with and to confirm that all trustees are still willing and able to act as trustees.  

 5.  Review Administrative Costs

With the introduction of The Charities Act, charities will now be required to publish their financial statements in the public domain.  If you are paying too much for your administrative costs, in comparison with the amounts available for charitable purposes, you may lose funding as you will be viewed as an inefficient organisation.  

 6.  Review Fundraising Methods

Another factor of The Charities Act will be the level of controls required to be put in place over how your charity can fundraise.  It is important that your charity adopts best practice for fundraising to ensure the highest level of controls.  Further information on Guiding Principles for Fundraising can be found at www.ictr.ie.  

7.  Review your Accounting System

As outlined above, Financial Statements of charities will now be made available in the public domain so it is vital that you have controls in place for how your charity maintains it books and records.  It might be advisable for the board of management to discuss how possible improvements in internal controls with your auditor or financial advisor as they will have an understanding of how your charity operates and can guide you on the implementation and management of such controls. In addition to the above you should be aware that a new Financial Reporting Standard (FRS102) will be introduced for all companies with accounting periods beginning on or after 1 January 2015. This reporting standard will replace current Irish GAAP (generally accepted accounting practice) and will have implications on the presentation of your Financial Statements.  Furthermore, with the appointment of a Charities Regulator earlier this year you may also need to consider the requirements to comply with Charities SORP (Charities Statement of Recommended Practice) for the preparation of your Financial Statements. The Charities SORP is not mandatory at present but is considered best practice in the sector. To date the regulator has not indicated if the Charities SORP will become mandatory.  It is advisable that boards of management discuss these developments with their auditors prior to their implementation to ensure they are fully informed and ready for the transition.  

8.  Review Your Organisation

There will be a number of requirements which all charities will be required to complete on the commencement of The Charities Act and many small stand along charities will become very complex to manage.  Many charities may consider:
  • merging with a similar charity
  • being taken over by a larger charity
  • ceasing completely
If you are considering any of these options there will be a number of steps required and it is advisable that you speak with your advisors before making any decisions in this regard.  

9.  Review Your Goals

Many charities will have set out to achieve a specific goal but in doing so they are now working towards a number of other goals, which were not included in the original plan.  If you are in this position now would be a good time to review your charities current and future goals and how you going to achieve them.  

10.  Start Now!

The commencement of The Charities Act is imminent, so it is imperative that charities start to prepare for its introduction now, if they have not already done so. Further sources of information on best practice and guidance can be found at the following websites:   There are currently over 8,500 charities registered in Ireland, all of whom will be facing significant changes in how they operate on a day to day basis.  The Charities Act will secure compliance by charities with their legal operations and aims to encourage better administration of all charities. While such requirements will pose an obstacle for the less organised of the charities, it will provide a significant opportunity for those who are complying with and embracing the transparency which will accompany the commencement of The Charities Act. If you would like further information on The Charities Act or guidance on how your charity can prepare for its commencement please do not hesitate to contact a member of our team.   Images: Shutterstock
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