Seanad Éireann debate -
Thursday, 30 Apr 2009

Vol. 195 No. 4

Adjournment Matters.

Charities Regulation.

Senator Dominic Hannigan

Companies limited by guarantee are regularly formed by local associations, charities, resource centres and residents' associations because it offers them a separate legal entity and identity and avoids the need to issue shares to individuals involved. Under the Companies Act, companies limited by guarantee are considered public companies, and as such, must have an annual statutory audit irrespective of the amount of annual income and expenditure incurred. The costs of such an audit can be as high as €1,700, plus VAT, and can often be the largest item of expenditure to many of these organisations.

In contrast, if the local development association were a private limited company, it would have to issue shares to its members but would be exempt from a statutory audit if its annual turnover was less than €7.3 million, its asset base less than €3.65 million and it had fewer than 50 staff members. Many small charities fit right into these criteria.

The need for an annual statutory audit is becoming increasingly prohibitive for many small charities and development associations. Will the Minister consider a change in the Companies Act whereby companies limited by guarantee with an annual income of less than €100,000 would be exempt from an annual statutory audit? Such an exemption would benefit a local small charity, residents' association or local development association by freeing up valuable income for them to pursue their main objectives. Auditors would be relieved of what is a boring and meaningless task of completing pages of audit reports to satisfy regulators that a proper and full statutory audit has taken place for a company with very a small annual income. Will the Minister consider the introduction of such an exemption?

Minister of State at the Department of Education and Science (Deputy Seán Haughey)

I am taking this Adjournment matter on behalf of the Minister for Finance, Deputy Brian Lenihan.

The regulation and auditing of charities is the responsibility of the Minister for Community, Rural and Gaeltacht Affairs. Section 50 of the Charities Act 2009 stipulates the accounts of a charitable organisation should be audited within nine months of the end of the appropriate financial year where the gross income of such an organisation exceeds an amount proscribed by the Minister for Community, Rural and Gaeltacht Affairs. The Minister cannot proscribe an amount greater than €500,000 under the legislation.

However, the Charities Act 2009 has not yet been commenced as it will happen when the charities regulatory authority is established. In addition, for those charities that are companies, the provisions of company law and the auditing requirements of such law also apply. Responsibility for company law rests with the Minister for Enterprise, Trade and Employment. The company law review group is reviewing the area of exemption from the provisions of company law for companies limited by guarantee.

Charitable organisations can also, of course, apply for charitable tax exemption from the Revenue Commissioners. This is a valuable status for a charity to have because, once granted, the charity can then benefit from the various tax exemptions for charities included in the tax code. These cover income tax and corporation tax in the case of an incorporated charitable body and also extend to capital gains tax, stamp duty, capital acquisitions tax and several other taxes.

A charity may also apply for authorisation as an eligible charity under the provisions of section 848A of the Taxes Consolidation Act 1997 after it has been granted exemption from tax by the Revenue Commissioners for a period of not less than two years. This allows the charity to benefit from the scheme of tax relief for donations to charities and other approved bodies. The relief can be beneficial to charities and such bodies, as it can increase a donation by a top rate taxpayer by over 69%.

The Revenue Commissioners' role in this regard is to consider applications from bodies of persons or trusts claiming exemption from these taxes on the basis they have been established for charitable purposes only and to operate controls and monitoring procedures to ensure exemptions, once granted, are not abused. In determining the appropriate level of controls, Revenue must get the balance right between the opportunities for malfeasance and misuse of moneys donated by the public or grants paid by other Government agencies and the important contribution that voluntary organisations make to society. It is, therefore, necessary to ensure the monitoring procedures and controls are commensurate with the risks involved.

Revenue adopts a two-pronged approach to compliance, consisting of the vetting of applications from bodies of persons or trusts claiming exemption from certain taxes to ensure they are entitled to the exemption, and operating controls and monitoring procedures. The first element is the vetting of applications from bodies seeking charitable tax exemption. This is considered the key element in ensuring compliance with charity tax exemption conditions. The second element is the controls and monitoring that bodies that have been granted charitable exemption are subject to after the exemptions have been granted.

Once an exemption has been granted, each body is required to provide a copy of its first year's financial accounts, as well as details of activities actually carried out. This information is normally requested within two years of the grant of exemption. Bodies with an income in excess of €100,000 are required to submit audited accounts. In addition, the Revenue Commissioners carry out several long-term reviews based on risk rating. As part of the long-term review process, bodies with an income in excess of €100,000 are required to submit audited accounts on request.

Given the thresholds used by the Revenue Commissioners, the auditing of charitable bodies for tax exemption purposes cannot be considered onerous for smaller charities. It is considered that the practice is both balanced and reasonable.

As regards the wider issues of regulation and general audit, these are issues primarily for the Minister for Community, Rural and Gaeltacht Affairs and the Minister for Enterprise, Trade and Employment.

State Examinations.

Senator Frances Fitzgerald

I wish to raise the matter of leaving certificate result appeals, the delay in giving them out to colleges and third level institutions, the impact this has on college places and the implications for individual students. It can mean that they do not get to take up the course they want in the year they do their leaving certificate. A constituent of mine, Charlotte Joyce, has been in correspondence with the Minister's Department and I would be grateful if she could get a comprehensive reply from the Department on the points that she researched and forwarded to it.

I am glad to have the opportunity to raise the matter on the Adjournment. The Minister for Education and Science needs to review the timeframe for leaving certificate results, which can mean that students do not get an opportunity to appeal their results in time to obtain a college place of their choice. I hope the Minister will take an interest in the issue. With some goodwill and perhaps some changes to procedures, the Department could deal with the issue and remove the stress involved for individuals and families.

The appeals process for the leaving certificate examination is riddled with delays, which can result in students being excluded from taking up their preferred college place in that year through no fault of their own. The system seems unfair. If students appeal their result and a marking error is found when the script is rechecked, they will be awarded the additional points, but at that stage it will be too late for them to take up their college place and they must wait an entire academic year, with all the implications of that for the individual.

I will outline to the Minister the timeline for the results and highlight the difficulties posed to students. Leaving certificate results will be issued on 13 August. If students are not happy with their results and they or their teachers believe they should have done better, they can lodge an appeal, but the result of the appeal will not be issued until 8 October. That is too late for them to be included in the universities as their numbers are capped for the academic year. Even though students have achieved the required marks, they will be advised to wait until the following year. That seems unfair on a student who has worked tirelessly to obtain the place and has achieved the required marks. I ask the Government to examine the issue and find a way in which to deal with it so that students can take up their place in the same year they do their exam.

I hope the Department and the Minister will engage with teachers, school management bodies, the State Examinations Commission and the Higher Education Authority and that collectively they will generate innovative ideas to overcome this inequity in our education system, which could be remedied fairly easily.

Deputy Seán Haughey

I am taking this Adjournment matter on behalf of my colleague, the Minister for Education and Science, Deputy Batt O'Keeffe. I am pleased that Senator Fitzgerald has given me an opportunity to clarify the position on the matter she raised.

The leaving certificate is a terminal and externally examined examination. Individual subjects are examined under a number of modes of assessment including oral, practical test and coursework, and aural and written examinations. Some tests, such as oral and practical examinations, are conducted during sixth year, and written examinations take place during a 13-day period in early June each year. Following the conclusion of the written examinations, candidates' scripts are returned to the State Examinations Commission in Athlone for allocation to examiners. The SEC then arranges preparation of the marking scheme and comprehensive briefing and training of the team of examiners. Enough time is required for the examiners to conduct the marking to a high standard and for the SEC to put in place quality assurance processes. Leaving certificate results are finalised by the SEC and issued to candidates seven and a half weeks after the conclusion of the written examinations. The results then feed into the third level college entry process, which is conducted by the Central Applications Office and college admissions departments in mid-August.

The results of the leaving certificate examinations, which issue in August each year, are only provisional and this is clearly stated in all correspondence issued by the SEC. The reason is that any result may be subject to further check and alteration, usually through the appeals system. This system is in place precisely because the SEC accepts that errors in correcting papers can occur. Last year, for example, over 380,000 grades were issued by more than 3,000 examiners in the leaving certificate. The SEC's objective is to ensure that the process of marking papers is as free from error as practicable and that a transparent, easily accessible and effective appeals process is available to all students who feel aggrieved at the result they achieved. Last year, leaving certificate results were issued on Wednesday, 13 August, and the CAO issued its first round of offers the following Monday, 18 August.

As an aid to leaving certificate candidates who consider appealing a result, the SEC makes all written scripts available for viewing along with the marking schemes that were used by the examiners who marked their work. Candidates can then make an informed judgment about whether to appeal a result. The closing date to apply to schools to view scripts was Tuesday, 19 August.

To facilitate this viewing process the SEC transports all higher level leaving certificate and ordinary level mathematics scripts and copies of the marking schemes to schools, a major logistical exercise which involves full track-and-trace capacity. The viewing of scripts took place on Friday and Saturday, 29 and 30 August 2008, and the closing date for the submission of appeals was the following Tuesday, 3 September. Scripts that are the subject of appeal are returned from schools to the SEC to be made available to examiners at briefing conferences on the following two Saturdays. In 2008, the first of those took place on the Saturday immediately following the appeals closing date — that is, Saturday, 7 September. I understand that there were 11,500 subject grade appeals in the leaving certificate, many for subjects with a number of components.

The SEC leaving certificate appeals process is undertaken by experienced examiners who, as serving teachers, are tasked with undertaking this work outside school time. The appeals process involves significant levels of quality assurance by the SEC including the monitoring — that is, a further remarking — of 20% of the work of appeal examiners. All scripts that might lead to a change of grade are remarked in this quality assurance process. The appeal results were issued on 8 October 2008.

While the difficulties of students in the position that the Senator described are appreciated, the SEC has assured the Minister that the appeals process is delivered to the tightest possible timescale and deadlines. From time to time, concerns arise about the impact of this schedule on students who wish to take up offers of third level college places following the leaving certificate appeals process. In this regard, third level institutions respond as flexibly and positively as they can in relation to accommodating leaving certificate appeal results and make arrangements to admit students to courses on the basis of upgraded leaving certificates. In a small number of courses, such as medicine, difficulties or constraints can arise from existing class sizes and expanding numbers can have implications for laboratory and clinical capacity. When it is not practicable to take students into a course at that point, the students in question are offered a deferred place for the following year.

The Minister appreciates that there can be concerns about this situation, but it is not possible to guarantee a completely error-free examinations system. The SEC's objective is to minimise the potential for error and ensure that errors that do occur are quickly identified and remedied. The SEC has assured the Minister that it constantly reviews its procedures to ensure that, as far as practicable, problems such as this are minimised. However, it is clear that to attempt to expedite a process whereby appeals could take place in a shorter timeframe would impact on the quality of the system and would therefore not be in candidates' best interests. The timeframes involved are required to ensure the high quality and transparency of the leaving certificate examinations process, which are internationally recognised hallmarks of the system in Ireland. I thank the Senator again for raising this important matter.

The Seanad adjourned at 2.10 p.m. until 2.30 p.m. on Wednesday, 6 May 2009.