Charities Amendment Act 2024 – What You Need to Know

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Charities Amendment Act 2024

What is the Charities (Amendment) Act 2024?

In July of this year, the Government passed the Charities Amendment Act 2024. This Act, which introduces a range of amendments and updates to the Charities Act 2009, the Charities Act 1961, and the Taxes Consolidation Act 1997 respectively, amounts to a wide-reaching reform of charity governance. The Act has also expanded the powers of the Charities Regulator with a view to ensuring that financial regulation of the charities sector, as well as regulation of the sector broadly, can be conducted on an appropriate basis.

The Amendment Act is an extensive document and contains 38 separate amendment areas. Tracking these amendments across the Acts will be a complex process. In this article we go through a few key areas covered in the Act, including:

  • Duties and definitions of trustees
  • Financial regulations
  • Role of “Human Rights” in charity sector
  • Charities Regulator

What are some key changes?

Trustee Definitions:

Under the Amendment Act, new definitions of who counts as a charity trustee and what their duties are, have been established. Section 3A of the Act makes explicit that a company secretary is not considered to be a charity trustee, unless they are also a Board member or sit on the governing body. This clarifies an ambiguity in the previous Act. The Act also sets out the duties falling to charity trustees. The duties include requirements to act in good faith for the charity’s best interests and to avoid conflict between personal and charity interests.

Financial Reporting:

There have been a range of changes to how charities must conduct financial reporting. Reporting thresholds and exemptions have been moved or redefined, new regulations have been introduced, and new alternative reporting methods are now available.

For instance, a charitable organisation, that is not a company and which also falls below a gross income or expenditure threshold of €250,000, is no longer obliged to prepare a statement of accounts. Such an organisation may instead prepare an income and expenditure account in respect of, and a statement of the assets and liabilities of, the charitable organisation.

On the other hand, a charitable organisation that is a company must now prepare financial statements in accordance with the Companies Act 2014.

Many of the financial reporting requirements included in the Amendment Act are similar to the requirements of the Charities SORP (Statement of Recommended Practice). However, the Charities SORP is not explicitly referenced in the Amendment Act and so Charities are not currently required to meet it. Charities should continue to be aware of the Charities SORP, as the Amendment Act does leave room for further regulatory changes that could include introducing the Charities SORP.

Definition of Charity:

The new Act provides an expanded definition of the activities which can be considered to be done for a charitable purpose. The phrase “any other purpose that is of benefit to the community” which was previously used in this definition has been replaced by a list of fourteen (14) activities. These include, for example, protection of the natural environment and the advancement of human rights. Organisations engaged in these activities will now count as charities.

Charities Regulator:

The Charities Regulator has also acquired new powers under the Amendment Act. Any Charity wishing to change its constitution, for example to alter its charitable purpose or its income and property clause, must now apply to the Regulator.

New powers of enforcement and punishment have also been provided to the Regulator, where a Charity fails to meet the new requirements.

What should you do to respond?

The changes brought about by the Amendment Act are extensive and will require adjustment from Charities. Listed below are some actions you may consider taking now to help ease the transition into the new regulatory environment:

Are you a Charity?

Bodies should review the new definitions of what is considered a charity. The Act requires that any organisation that becomes a charitable organisation by virtue of these new definitions must apply to the Regulator to register as a Charity within six months. In turn this will also require that organisations now falling under the Charity Act may have to amend their internal organisation to meet the Act’s requirements.

Who are your trustees?

Changes to the definitions of who is and is not a trustee will require charities to update their register of trustees and other governing documents to account for this.

How do you conduct financial reporting?

Charities should review the amended requirements for financial reporting and determine where they fall on the new thresholds for reporting. For instance, the Amendment Act has raised the threshold requiring that the accounts of a charitable organisation be audited from €500,000 to €1,000,000. On the other hand, while the previous Act exempted a charitable organisation that is a company from this audit requirement, this exemption has now been removed.

Conclusion

Tracking these amendments will be pressing work. It should be noted as well that these requirements are coming into effect immediately. The deadline to register as a charity, under the new definitions, is already approaching.

Crowleys DFK are on hand with their subject matter specialists to provide expert guidance and support in maintaining compliance with the Amendment Act. Please contact us for further information.

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Are you ready for mandatory Charities SORP compliance?

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As you may be aware, the Charities (Amendment) Bill 2022 is with the Oireachtas to be passed into legislation. Upon the passing of this bill, this will bring significant changes to the Charities’ Act 2009.

The bill will make Charities SORP (FRS 102) mandatory for organisations who meet certain thresholds.

The proposed thresholds are as follows:

Charities SORP

The updated legislation will apply to all registered charities in Ireland. Please note the following:

  • There is an understanding that the exemption in place regarding educational bodies will remain, however university foundations will no longer be exempt.
  • It is also expected that a charity will be able to prepare in accordance with another industry wide recommended practice e.g. Housing SORP.

The Bill is expected to pass by the end of 2023 with the expected applicable dates to be accounting periods starting 01 January 2025. This will mean mandatory Charities SORP will be applicable for year ends 31 December 2025.

What steps should I take now?

  • As SORP will require two years of comparative figures with the breakdown of figures between restricted / unrestricted, you should ensure that from the 2024 accounting period, the information recorded in the accounts package is posted in line with SORP or presented in the SORP format in charities management accounts. This information will be essential for the annual audit.
  • A working should be prepared to ensure reserves are split between restricted and unrestricted as appropriate.
  • Ensure your current accounts package is adequate for the needs of Charities SORP postings.
  • Attend any webinars available over the coming months hosted to help you become familiar with the legislation and requirements.

While your organisation may be already preparing the financial statements in accordance with Charities SORP, you may need to review available resources to ensure FULL compliance is being met once Charities SORP is introduced.

Please contact Elaine Murphy, Assistant Manager in our Audit & Assurance department if you have any queries regarding the migration to SORP.

Disclaimer: The information contained above is accurate at the time of publication and as the Bill has not been fully published, the information is subject to final changes.

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Charities Governance Code – Reporting on Compliance in 2021

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In 2021, all charities registered in Ireland must complete their first annual Compliance Record Form to comply with the Charities Regulatory Authority (CRA) Governance Code (the Code). 

How to demonstrate compliance with the Code

  1. The Code sets out the minimum standards that charity trustees should meet to effectively manage and control their charity.
  2. To demonstrate compliance with the Code, charities must complete the Compliance Record Form and subsequently update the Compliance Record Form every year.
  3. The Code operates on a ‘comply or explain’ basis, meaning that charities must comply with the Code or else explain why they have not done so.
  4. Compliance with each specific standard must be demonstrated as part of the Compliance Record Form. Organisations must record the actions that the charity has taken to meet each standard of the Code and reference the evidence that backs this up. The Compliance Record can also be used to explain why a charity is not in compliance with any particular standard in the Code.

Reporting on compliance with the Code in 2021

Under the Charities Act 2009, every registered charity in Ireland is required to submit an Annual Report to the Charities Regulator within ten months of the charity’s financial year-end. From 2021, charities will be required to submit a declaration in relation to compliance with the Code with their Annual Report.

A charity will be required to determine if:

  1. It does not need to meet the Additional Standards of the Charities Governance Code.
  2. It does need to meet the Additional Standards of the Charities Governance Code.
  3. It has not yet commenced compliance with the Charities Governance Code.

Additional standards of the code are those standards which a charity that is considered “complex” should meet or charities who are not complex but decided to apply the additional standards.

The CRA has not defined what is considered a “complex” charity and the charities trustees of each organisation are best placed to make that decision. Charity trustees can base this decision on indicators such as income streams, number of employees, complexity of activities, working with vulnerable people or operating overseas.

The charity will be required to declare if, at the time of filing its Annual Report, they have:

  1. Complied with all sections of the Charities Governance Code.
  2. Complied with some of the sections of the Charities Governance Code.

Formal adoption of the Code at Board meetings

All charities are expected is to discuss and agree at board meetings how they will meet the standards of the Code and to document their decisions in the minutes. The Compliance Record Form should record the actions taken to meet each standard of the Code and all minutes of meetings relevant to each standard of the Code.

Monitoring

The Charities Regulator will adopt a balanced and proportionate response in relation to any charity which is not in full compliance with the Code in 2021, with an emphasis on understanding common reasons for partial or non-compliance. This will enable the Regulator to identify common reasons for non-compliance and provide further guidance to charities on meeting the standards set out in the Code.

How Crowleys DFK can help

We recognise that completing the Compliance Record Form and ensuring compliance is properly documented is a time-consuming task and the process will be challenging for many organisations. At Crowleys DFK, we can assist you through the process of completing the Compliance Record Form. We have developed a suite of templates for the Compliance Record Form and the various policies and documents needed as evidence of compliance.

For more information and expert advice, contact a member of our Charities & Not-for-Profit team.

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Budget 2018 – VAT Compensation Scheme for Charities

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Budget 2018 introduced a Charities VAT Compensation Scheme. This will take effect from 1 January 2018 but will be paid one year in arrears i.e. in 2019 charities will be able to reclaim some element of the VAT costs arising in 2018.

Charities will be entitled to a refund of a proportion of their VAT costs based on the level of non-public funding they receive.

For example, where a charity’s gross income for 2018 involves 30% funding from State/EU/international organisations and 70% privately sourced income including fundraising, subscriptions and donations, they may claim 70% of their VAT input costs for the year.

Not eligible for relief under the scheme will be VAT incurred on private non-charity-related expenses; VAT incurred that is subject to an existing VAT refund order and VAT incurred that is otherwise deductible.

From 2018 onwards, charities will need to ensure that their accounting systems are designed to enable them quantify the total VAT cost and the proportion that is eligible for refund.

We would be happy to assist charities with implementing/upgrading their accounting systems to identify VAT costs so they can easily be reclaimed and on how best to structure their activities to ensure they maximise the amount of VAT they can reclaim.

You can view the Department of Finance’s document in full here.

If you would like further information, please contact us.

 

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