Tsunami response puts focus on charities sector

Opinion: The exceptionally generous response to the tsunami disaster, with funds flowing from virtually all sectors, should put a renewed focus on our totally inadequate controls over charities.

Virtually anyone can set up a charity without registering with an authority and plead for money. In this day of transparency, it beggars belief that there is no regulatory body. And because of this deficiency, no one knows the exact number of charities that exist.

So who are they answerable to? No one, unless the Garda are presented with proof that an offence has been committed.

Is that an acceptable situation? Or do we just shake our heads in disapproval, have a debate, and do nothing?

Of course, much is not hidden. Those charities claiming charitable status to avail of tax concessions are known to the Revenue Commissioners.

Companies and self-employed individuals can claim tax relief on donations in excess of €250. PAYE taxpayers do not have this facility; instead, the relevant charities can claim this relief, provided the €250 per annum target is reached.

The Revenue reckons that 29,761 PAYE taxpayers availed of the scheme in 2004, to the benefit of the charities, at a cost of €14.8 million to the Exchequer. Because of the different tax treatments, it is clear that euro for euro, PAYE taxpayers are more generous (it comes out of their after-tax income) than corporations and the self-employed.

The high-profile charities are not only visible in what they are doing, but also produce full annual accounts. And a glance at some of their latest accounts shows that the recent fundraising will boost their resources considerably.

Trócaire, for example, has raised more than €20 million, and, in conjunction with some of the other charities, is no longer actively seeking funds. Its latest accounts showed a total income of €44.7 million (mostly grants) for the year ended February 29th, 2004, down on the €47.5 million in the previous year.

In financial terms, the cost of managing the charity amounted to €0.9 million - 2 per cent of income.

GOAL had a total income of €51.5 million in 2003, up from €43.7 million in the previous year. With an estimated €10 million earmarked for tsunami relief, it will also have a big boost in 2005. The cost of managing that charity was €0.9 million in 2003, representing just 1.8 per cent of income.

Concern had a total income of €98.8 million in 2003, up from €74.5 million in 2002. Management and administration costs came to €0.88 million, representing less than 1 per cent.

These examples should not breed complacency about the industry. What constitutes a charity is unclear under our dated legislation. That and the fact that the industry is unregulated have been cause for concern for some time. But nothing concrete has happened.

There are plenty of reports which are good for discussions. Research on reforms has been going on for more than 14 years - the Costello report (in 1990), the Burton report ( 1996), Law Society report and the review of the existing law (2002).

The sad part of it all is that there is a general acceptance that the industry should be regulated. The White Paper on Supporting Voluntary Activity in 2000, for example, was supportive of regulating charitable fundraising.

An Agreed Programme for Government in 2002 gave a commitment that "a comprehensive reform of the law relating to charities will be enacted to ensure accountability and to protect abuse of charitable status and fraud".

Responsibility for its implementation was given to the Department of Community, Rural and Gaeltacht Affairs in June 2002.

Since then, some positive moves have been made. A charities regulation unit has been set up by the Department, and a year ago the Department suggested radical reforms of charity law in a consultation paper. That paper recommends the establishment of a public register of charities, and wants an integrated system of registration and regulation, including the regulation of fundraising. This should address public concern about the often unknown percentage of donations that goes to the direct fund raisers.

Regulation of the industry would also control questionable practices. A "charity", for example, can sell tokens such as toys and flowers without the need of a permit from the Garda.

Another loophole is a practice of donations in the form of direct debits and standing orders without the need for permits. The paper also suggests ways of defining "charity" in the context of this transparency era. This should be welcomed by the legal profession.

Importantly, it suggests the setting up of a regulatory framework, to be managed by an existing regulatory agency or a new one.

The Attorney General is the protector of charities under the charities acts, the Revenue Commissioners administer the charity tax laws, and the Commissioners of Charitable Donations and Bequests for Ireland is merely an enabling body.

The Department of Community, Rural and Gaeltacht Affairs received 79 submissions within the first public consultation period.

A second public consultation on the aspects of updating charitable trust law, under the aegis of the Law Reform Commission, is expected to be launched shortly. But draft legislation on charities is not expected until the end of this year.

Other common jurisdictions are in the process of introducing legislation. However, we are behind England and Wales, whose Charity Commission was set up 40 years ago to regulate charities, and is now planning improvements.

By the time our legislation is in place there will have been plenty of tales of corruption and misuse of the tsunami fund in the countries to which donations were made. Already Indonesia is probing the alleged misuse of these funds.

Such malpractices are well outside domestic legislation. But a strongly-regulated home market and a transparent industry is a first step to giving contributors increased confidence that funds are going where they should and at an acceptable cost.