August-04-2016 in Commercial & Business
The Charities Regulatory Authority will have increased statutory powers when Part 4 of the Charities Act 2009 comes into force on 5 September 2016. The commencement is a timely confidence boost for the charities sector following high profile governance controversies in recent months. A tougher regulatory regime should help address public confidence issues and strengthen the position of well-run, responsible organisations.
The Charities Act was passed in 2009. Several key sections were never commenced, however, thus depriving the legislation of many fundamental powers. Part 4 will vest new powers in the Charities Regulatory Authority to investigate allegations of fraud and financial mismanagement in any Irish charity, of which there are approximately 8,000. The Regulator will be given new powers to investigate charities, compel the production of documents and impose sanctions.
Current situation
Currently under the Act there is an absence of regulation as to the form and content of charities’ annual activity reports and accounts. The requirement to keep audited accounts is restricted to charities with a turnover greater than €100,000 per annum.
Investigation powers
Under Part 4 of the Act, where the Regulator believes that there has been an intention to defraud or that a charity’s actions have been unlawful, it will have the power to appoint an investigator to investigate the charity’s affairs and prepare a report.
An inspector will make reports to the Regulator which can also be sent to the Director of Public Prosecutions, the Central Bank or to the Revenue Commissioners. The Regulator can also publish the report.
An inspector may examine a charity trustee or a member of staff on oath. If a charity fails to comply with the request to produce documents each of the charity trustees shall be guilty of an offence under the Act which is punishable by a fine and/or imprisonment.
Compulsory production of documents
A charity trustee or agent of a charitable organisation will be required to produce to the inspector all relevant books, documents and records and give the inspector assistance in connection with the investigation. An inspector may also require that a charity trustee produce documents in relation to any bank account of a charity trustee within or outside Ireland if the inspector believes that it is connected with the misconduct of a charity.
If a charity trustee or charity fails to observe this requirement the inspector or Regulator can apply for a District Court warrant to enter and search a premises and take all relevant books and documents.
Sanctions
If there is a breach of certain conditions under the Act such as a failure to submit an annual report or a failure to produce proper accounts then intermediate sanctions may be imposed by the Regulator on charities which include removing a charity from the Registrar and publishing the infringement on the Regulator’s website.
Protection of charitable organisations
The Regulator may apply for a High Court order to suspend or remove staff members of a charity and disallow the sale of charity property where there has been misconduct or mismanagement of a charity’s affairs or where the property of a charity is being misapplied.
Fresh start
After the enactment of the new provisions of the Act the pendulum will swing towards tougher accountability for charities. It is hoped that, following recent scandals, the new regime will promote greater compliance and increased public confidence in the regulation of the charities sector.
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