That has not happened to date. We have hundreds of charities that have failed to submit their annual reports on time, which is a criminal offence under the Charities Act, but to date nobody has been taken off the register. The reason is that we appreciate and understand who we are regulating and our sector. We deal with hundreds or thousands of charities every year directly on the phone, at face-to-face meetings and through emails and other forms of correspondence. We are very much alive to the issue.
We view taking charities off the register and appointing inspectors and so on as being similar to the nuclear option. There will be cases where that will be an appropriate response on the part of the Charities Regulator but there is no question that there would not be a full process before that. The charities concerned would be given every opportunity to engage with us and remedy the compliance issue. It will never be the case that charities will find themselves taken off the register suddenly. That is not the approach of the Charities Regulator. Our record proves that we have not done that.
The only charities taken off the register to date were those taken off by operation of the Act because they lost their charitable tax status. It is provided for in the Act that once that status is lost, they must automatically be taken off the register. It applies only to a particular cohort of charities, namely those that never had to apply to the Charities Regulator. They got on the register of charities because they already existed and had a charitable tax number at the time the regulator was established. A charity registered by us will not necessarily be taken off the register, because the Act does not operate in that way.
The next point concerns the appeals process. As I said in the opening statement, we very much support and absolutely understand, particularly since we are a regulator subject to administrative law, that where we are making these kinds of decisions, there has to be an avenue of appeal. In our proposal, and as I see has been done in the general scheme, we have tried to make the appeals process more accessible. At the moment, many decisions can be appealed only to the High Court. We would like to see more decisions appealable to the Charity Appeals Tribunal because the latter is far more cost-effective for the Charities Regulator in terms of its public funds and how it spends them. Also, we are acutely aware of the stress and strain on charities owing to their finances. Someone said recently that the cost of High Court proceedings per day is in the region of €40,000, if not more. Therefore, this is really important to us. We fully support an accessible appeals process. When the Minister was here talking to the members, he said these were exactly the kinds of reasons the legislative scrutiny process is so important. It is so we can identify the issues. Ultimately, we are discussing a general scheme, but the actual legislation will be drafted by parliamentary counsel in the Office of the Attorney General, who will be absolutely up to speed with the kinds of administrative law requirements that any regulator should have in legislation.
The next point concerns significant events. I am conscious that many queries have been raised in this regard. What we are talking about when we talk about significant events are really those that have a catastrophic effect on a charity, whether that effect is financial or reputational, because of something that happens in the provision of services, or whether its beneficiaries or employees are suddenly at risk, for whatever reason. There is no question that this area in the general scheme needs to be refined. The Minister acknowledged that when he was with the members. We absolutely support that. Ultimately, we do not want charities to be in any doubt about what they need to do. In our view, the amending legislation is about clarifying and enhancing what is already in place. The last thing we want to do is introduce provisions that in themselves are not clear.
We have spent a huge amount of time over the years on the supportive element of our approach to regulation. We have extensive guidance. We are reviewing it at present with plain English in mind. We review it constantly. In addition, we have direct day-to-day engagement with charities. From our perspective, with regard to any obligation that comes in, regardless of how clear it is, we will likely have some guidance to assist charities around it to make sure that what we expect is absolutely clear. I would not expect charities to be left in any doubt about that or in any way feel inhibited in terms of their discussions at board meetings, which I believe was suggested by a witness on a previous occasion.
With regard to the constitutional changes, we absolutely appreciate the position. The general scheme is very broad. To echo what the Minister said, the main things we need to know about as the Charities Regulator are any changes to a charity’s main object. That is what the charity has been set up to do. I will come back to why it is essential that charities do not change their main object without getting the approval of the regulator.
The other issue concerns the income and property clauses, in addition to any changes to the winding-up clause. The income and property clauses concern how a charity spends its money. Members will appreciate that this is of relevance to the Charities Regulator but also to every member of the public.
Our position on the winding-up process is similar. It is a matter of what happens to the charity’s assets when it winds up. Any assets that are left over should be going to another charity with a similar charitable purpose. It is important that this be made very clear.
I will come back to the main object. It is important because we have had situations where charities were aware of their company law obligations and submitted the change in their constitution to the Companies Office but did not tell the Charities Regulator. There is a charity test provided for in the Charities Act. It has several elements, one of which is that a charity may have a charitable purpose only. If a charity has a charitable purpose and other purposes that are not charitable purposes under the Charities Act, it is not entitled to be registered as a charitable organisation under the 2009 Act. I hope members can see what I am getting at there. There could be people who do not understand that the change they have made has taken them outside the Charities Act. That is very serious because, if it were to happen, what would happen to the assets up to that point? The public would have donated to a charity that was registered but suddenly the charity unwittingly made what it thought was a minor change to its main object. We have experience of that and have dealt with those situations in a pragmatic way. We have not taken any bodies off the register. We will work with charities to try to get the issue rectified but, to be honest, it is not good enough for that to happen when the main object is so important to what a body does as a charity. That is why one of the main principles of the governance code is that charities must only advance their charitable purpose. Every activity they do relates to their charitable purpose. In addition, it is not open to any charity trustee, having collected money from the public for a particular charitable purpose, such as helping those with disabilities, to unilaterally and suddenly decide, without giving notice to anybody and certainly not to the Charities Regulator or the public, that the charity is going to spend those donated funds on something else. Charities are entrusted with funds. When people donate, they do so for a particular purpose and the money must go to that purpose. The charity trustees cannot suddenly decide they are going to spend it on a completely different area of charitable work, no matter how well intentioned that might be. That is a fundamental principle.
My final point relates to investigations and the reputational aspect thereof. The reputational aspect goes across all statutory sanctions because where we impose statutory sanctions, there will be a publication element to that in many cases. For example, if we impose an intermediate sanction, the nature of the sanction is that the non-compliance becomes public knowledge and the public is made aware of it. The benefit of the intermediate sanction is that we get the body to work with the Charities Regulator and we publicise how proactive the charity has been in addressing any issues that have arisen. We are always heartened when a charity comes to us after a concern has been raised, for example by a member of the public, to tell us they knew about the issue and took certain steps, and to set out exactly what they did and how they have already addressed it. In such case, we are delighted because we can see that governance is working well and they understand their obligations, and we can close the concern. Similarly, if we go to a charity and find that it was not aware of a breach and does not understand what it has done wrong, we are always happy if we can work with it to come up with a plan.
A big aspect of the investigations piece that members will have seen in the general scheme is the ability for the Charities Regulator, having gone to the expense of using public moneys to appoint inspectors in those challenging cases where we have significant concerns - we only appoint inspectors when we have considerable concerns and the charity has been given an opportunity to engage with us but has not been able to assure us - to have a statutory tool available to it to follow up when the inspectors deliver those reports. That is important. At the moment, when we publish an inspector's report, we are often asked what comes next. We are asked what we are going to do about the issue, given that the inspector has said all of these things that should not have been happening were happening. In such cases, the Charities Regulator currently has to try to engage with the charity voluntarily. We are reliant on the charity voluntarily fixing the things that have been identified. That should not be the case. The public would expect that the regulator would be able to follow up on the issue on foot of the inspector's report. Without these additional powers of direction, we could end up in a situation where an issue is not rectified and the only way we can try to combat it and address the non-compliance is to appoint inspectors again. We do not want that. It would be a waste of the public's money, our resources and the resources of the charity if that were the case. The voluntary approach that we adopt to the situations where we have inspectors' reports generally involves people having come to us with a plan. They will have engaged with the inspector and seen what the issues are. It will not come as a surprise to them. Due process is followed. The charities and charity trustees and anybody who is concerned and is mentioned in the report will be given an opportunity to see the report in advance of its publication and to provide comments on it to us. That is an important part of the process. It should not come as a surprise to anybody and we would not want it to. In most cases, the charities volunteer a plan. We have been lucky in that regard, although it is also because of the positivity in the sector we are regulating and its willingness to engage with us. If a charity has not already addressed things, by the time an inspector's report has gone through the whole process it is generally happy to provide a plan. It is a missing piece and it is certainly something we have scrutinised. We have been left in positions where a charity may not have engaged with us on foot of an inspector's report and we have been left scratching our heads and wondering what to do and whether to start again. The measures proposed in the general scheme are based on our extensive experience of regulating the sector and wanting to continue to apply the proportionate and balanced approach that we believe it requires.