Charitable institution

The public and other stakeholders, including legal professionals, need greater awareness about charity regulation, Madeleine Delaney tells the Gazette

Since the 2009 Charities Act came into force, the word ‘charity’ is a protected term. This means that only entities that are officially registered and meet regulatory criteria – known as the ‘charity test’ – can use the term.

“You can’t call yourself a charity unless you’re actually registered,” says Madeleine Delaney, the chief executive of the statutory body charged with regulating the charity sector.

There is often public confusion between non-profits doing good work and charities that are registered and regulated by the authority. 

“Charities are one type of not-for-profit organisation, and what distinguishes them is that there must be an actual benefit from a charity’s activities, and the benefit must be to the public in general or a sufficient section of the public. This is a key part of the test that is set out in the legislation and applied by us as part of the registration process.”

The chief executive sees a large body of educational effort ahead to clarify the role of charities, stressing the importance of good governance and how to navigate issues such as charity succession planning and regulatory compliance.

Closer collaboration

She hopes for closer collaboration between the Charities Regulator and the legal profession, especially to ensure that legal advisors understand charity law and governance obligations and how to properly advise their clients.

Education is also essential to help charity trustees – especially those in volunteer-only charities – to understand their governance responsibilities.

It’s important to educate trustees about their duties and the legal requirements, particularly in relation to governance, managing charitable funds, and making key decisions, the chief executive says.

Trustees are responsible for ensuring that their charity operates within its defined purpose, and in the best interests of its beneficiaries.

Most importantly, this includes avoiding any ‘drift’ in the charity’s purpose over time, which can happen when the original mission shifts or changes.

Avoiding ‘drift’

Sometimes, charity volunteers can become distracted from their initial goal as fresh needs pop up, but Delaney says that staying ‘on mission’ is crucial.

“It’s about people keeping sight of basic principles of what they are supposed to be doing. It’s about running your organisation effectively so that it sustains into the future,” she warns.

Delaney notes that some trustees may be unaware of their full responsibilities, especially in larger organisations with employees, and may mistakenly think their only accountability is to funders.

“In some ways, it’s conceptually easier for smaller charities, where the trustee is doing everything, to understand what the obligations are.”

There can be an assumption that paid charity employees are taking care of everything in respect of compliance, when this isn’t always the case.

Notable failures

The Irish charity sector has seen some very public and notable failures of honesty and good governance, accompanied by a betrayal of public goodwill.

Delaney’s perspective is that most volunteers, trustees, and charity employees work hard at governance, while doing worthwhile work.

“The vast majority of charities operate in good faith and work hard to meet their responsibilities. Over 90% are compliant and performing well,” she says.

As part of the regulator’s awareness drive to promote good governance, the Charities Governance Code has been developed in collaboration with the sector.

It sets out six principles to guide trustees, such as fulfilling the charity’s purpose, ensuring the charity’s activities are aligned with its mission, managing conflicts of interest, and ensuring accountability.

The code should not be seen as just a compliance checklist, but as a way to run charities effectively and ensure long-term sustainability, the chief executive says.
Trustees need to understand that governance isn’t just about avoiding penalties, but about creating an environment where the charity can thrive and meet its mission.
Basic documentation and meeting practices (such as written and circulated agendas, records of decision-making, and conflict-of-interest policies) are key to managing governance.

Conflicts of interest

The regulator encourages trustees to embed these practices into their day-to-day operations, so they become second nature.

Conflict-of-interest policies are particularly important, especially in smaller, volunteer-run charities, where trustees might have personal or professional ties to people or organisations involved in the charity. Such conflicts of interest must be managed by clearly documenting them and discussing them openly at meetings.

Delaney points out that having a clear policy on conflicts of interest helps to normalise the process of addressing potential conflicts, and makes it easier for trustees to handle issues without fear of damaging relationships. The regulator has updated its guidance on this issue to help charities to handle conflicts effectively.

Conflicts should be a regular agenda item at board meetings, so that it becomes part of the routine and isn’t viewed as a taboo subject, she advises.

While some trustees may feel that governance codes are an unnecessary burden, especially in smaller organisations, the regulator stresses that these practices protect both the charity and the trustees themselves.

“Good governance practices reduce risks and make charities more resilient,” she says.

Financial statements

It’s also about ensuring financial transparency. She points to the practice by some large charities of publishing abridged financial statements, which they are entitled to do under company law.

As regulator, she hopes this practice – often accountant-advised – will end with an upcoming amendment to the existing legislation. This is important in order to build trust with donors, regulators, and the public at large, she believes.

The regulator sees public trust in the charities’ sector as key to its continued success in this country. She wants to drill home the message that money must be spent carefully and thriftily, and always with the end goal of the charitable purpose in mind.

Charity trustees are responsible for ensuring that the charity uses its resources effectively and that funds are spent only in alignment with its charitable purpose.

This includes making sure that any payments to employees, contractors, or service providers are reasonable, necessary, and transparent.

While such expenditure is perfectly permissible, each charity must ensure it is getting the best value for money and that all its decisions are properly documented and justified.

This is why all charitable endeavour must keep its purpose ‘front and centre’, the regulator says.

Self-sufficient

In 2022, the Charities Regulator became a mature, self-sufficient organisation with a staff cohort of 44, following a lengthy initial gestation process whereby it was run by civil servants, many on secondment.

“It was a massive effort, but it was very worthwhile once we got there,” Delaney says. “A lot of seconded staff stayed on, which is a compliment to us, to be honest.”

Many staff at the regulator work at executive-officer grade, handling casework, including processing charity-registration applications and liaising with solicitors, trustees, and applicants.

Delaney herself moved from private practice with Beauchamps into the public sector, drawn by the opportunity to have a greater impact through strategic problem-solving.

Her career path has been diverse, from an initial focus on criminal law and regulation, to working as a solicitor in various public-sector bodies.

She ultimately transitioned to leading the Charities Regulator because it allowed her to blend legal work with high-level strategic decision-making.

Critical thinking

She regards problem-solving as a key solicitor skill. She also values the critical thinking and organisational skills that solicitors can bring to public-sector and regulatory roles.

Legal advisors and solicitors play a crucial role in the charity sector, particularly in applications for charity services or in cases where a charity is winding up or transferring assets.

As regulator, Delaney is keen to deepen engagement with the profession, whether that is at PPC or post-qualification level, with specialist education about charity regulation, especially in areas such as wills, probate, and conveyancing.

She sees a real opportunity to engage solicitors early in their training, potentially offering credit for understanding charity law and encouraging them to contribute to the sector in a more strategic manner.

Lawyers have an immense contribution to make to the sector in ensuring good charity governance, she believes. Charities often struggle with volunteer recruitment and retention, and she would encourage professionals to volunteer as trustees.

This can be an excellent opportunity for people looking to give back or broaden their skill set.

While many charities have a long lifespan, others might have a natural end when their purpose is fulfilled. Some charities on the register might be inactive or not fully engaged.

The regulator encourages them to either become more active or formally wind up, with assets being reinvested into other charities.

Some might not realise that they should wind up or transfer their assets when they no longer serve a clear function. This is where the Charities Regulator can step in with guidance.

Charities that have assets or remain active should engage with the regulator to ensure that those assets are managed properly and in line with their charitable purposes.

Searchable register

One of Delaney’s goals as regulator is to improve the searchability of charity information online, with improved digital infrastructure to make the register more user-friendly, and the wider use of the charity classification standard.

The register has a record of every charity in Ireland, with brief information on their finances and activities, making it the single authoritative source of information on the more than 11,500 charities in this country.

Many charities work in similar fields, and it’s essential for the public and stakeholders to easily find relevant organisations without having to dig deep into complicated structures.

The regulator emphasises the importance of collaboration between established charities and newcomers who want to help.

Rather than duplicating efforts, the goal should be to channel resources effectively where they are needed most.

“A more user-friendly register will make it easier to identify charities and support greater collaboration,” she says.

Defining ‘human rights’

Another task ahead for the Charities Regulator is agreeing a definition of the ‘advancement of human rights’ as a charitable endeavour, which is also now part of the amended legislation.

“People have different views on this – of course they do – on what is and isn’t a human right, and that is potentially contentious. I think everybody should agree, even if it’s with difficulty, on some sort of definition and some parameters around it before it’s commenced.”

‘Human rights’ need to be defined in a way that is both broad enough to be inclusive, and specific enough to be workable as part of a regulatory framework, she adds.

The chief executive expects debate, especially about the boundaries of what constitutes a human right and what kinds of activities should qualify under this new provision.

Where charities become involved in political advocacy, they must ensure that their charitable purpose remains clear and that their activities don’t become entangled in purely political campaigning.

Any changes to the regulatory landscape, especially those relating to human rights, will require wide consultation, and Delaney plans to invite a diverse group of stakeholders to participate in a consultative panel – NGOs, human-rights bodies, legal experts, and others – in creating a fair and workable framework.

Looking to the future, the Charities Regulator’s next statement of strategy, which will run to the end of 2027, focuses on fair and effective regulation, deepening relationships with stakeholders, and developing its organisational capability.

Delaney says: “We aim to learn from what has worked well over the past decade and also what has not worked as well as we intended, and to bring that knowledge into our engagement with charities and our key stakeholders. Our ambition is to develop a regulatory model that is appropriate to the diversity of the sector and that supports good practice in the governance, management, and administration of charities.”

Mary Hallissey is a journalist with the Law Society Gazette.