pp presentation re proposed amendments to the charities act 1978

Proposed Amendments17th January 2012

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BackgroundThe first Charities Act was enacted in August

1965.This Act was Repealed by the current 1978

Charities Act enacted in February, 1979.Since then there has been a significant increase in

the number of registered charities operating in Bermuda.

There has also been a widening of the scope of charitable purposes.

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BackgroundIt is the age of terrorism and money

laundering. We must take steps to ensure that charities cannot be misused to finance unlawful activities.

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What does this mean to you, the small charity?First of all, what is a small charity?The Institute of Chartered Accountants here

in Bermuda has recommended that a small charity be defined as one which has an operating budget of less then $30,000 per year.

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The proposed amendments fall under one of three objectives:

1. To give the Charity Commissioners increased regulatory authority with respect to the administration of registered charities;

Objectives2. To increase the statutory powers of the

Charity Commissioners with respect to monitoring the functions of charities;

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Objectives3. To strengthen the reporting requirements of

charities operating within and outside of the jurisdiction of Bermuda.

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AdministrationCurrent ActOnly charities soliciting funds from the public

are required to register.

Proposed Change (1)All organisations operating in Bermuda as

charities must be registered, including those which receive funding from private sources.

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Charitable PurposesCharitable Purposes are currently defined as

purposed which are beneficial to the public in general or to a section of the public, whether in Bermuda or elsewhere.

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Charitable PurposesThe scope of Charitable Purposes will be expanded

to include such matters as:-Prevention or relief of poverty;Advancement of the arts, culture, heritage or

science;Advancement of amateur sport and recreation;Advancement of youth and community development;Advancement of health and relief of sickness;Relief of needy persons due to ill-health, disability

or financial hardship;Promotion of education and religion.

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AdministrationCurrent ActThe Charity Commissioners consist of

between five and seven persons.

Proposed Change (2)The Charity Commissioners will consist of a

minimum of five persons who have experience in legal matters relating to charities; financial accounting of charities and governance of charitable organisations.

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AdministrationCurrent ActThe law does not provide for a charity to

raise funds on behalf of an individual.

Proposed Change (3)The Charity Commissioners will have the

ability to grant exemptions from the definition of charitable purpose in order to assist an individual.

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Proposed Change (3)In other words, the Charity Commissioners

will have the authority to, in exceptional circumstances, allow a charity to raise funds on behalf of an individual.

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AdministrationCurrent ActWhere a Charity is dissatisfied with a

decision of the Charity Commissioners, an appeal can be made directly to the Minister responsible for charities.

Proposed Change (4) An Appeals Tribunal will be established.

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Proposed Change (4)An extra ‘layer' will be inserted between the

Charity Commissioners and the Minister where a charity wants to appeal a decision of the Charity Commissioners.

The Minister will be able to appoint, from a group of experienced individuals, a Tribunal who will hear and decide upon the appeal.

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AdministrationCurrent ActThe Charity Commissioners have no

legally prescribed mechanism by which the relevance of a charity to Bermuda can be determined.

Proposed Change (5)The Charity Commissioners will use a

Public Benefit Test in order to determine how relevant a charity is to Bermuda.

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Proposed Change (5) (1)The Four Principles or Foundations of the

Public Benefit Test are:- 1. There must be an identifiable benefit; 2. Benefit must be to the public, or a section

of the public; 3. People on low incomes must be able to

benefit; 4. Any private benefit must be incidental.

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Proposed Change (5) (1)

Public Benefit Test (cont’d)Through consultation, charities will have the

opportunity to assist in determining how this test be constructed.

Also, charities, before making an application of registration, will be asked to determine whether or not they intend to offer a service already provided by a charitable organisation.

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Administration Purposed Change (5) (2)Notification of Tag Days. The Minister will

also require the Registrar General to keep a register of the number and frequency of the tag days held in Bermuda by registered charities.

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AdministrationCurrent ActThere is no provision for the distribution of

funds on the winding-up of charities.

Proposed Change (6)The constitution of the registering charity will

be required to include provisions for winding up which are consistent with the stated charitable purpose.

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AdministrationCurrent ActThere is no provision to allow the publication

in the Official Gazette of registration or deregistration (or suspension) of charities.

Proposed Change (7) The Registrar General will be required to

gazette the registration, deregistration (or suspension) of charities.

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PowersCurrent ActThe Charity Commissioners do not have the

power to monitor and investigate complaints against individuals or charities that may be in contravention of the Act.

Proposed Change (8)Where the Charity Commissioners have a reason

for inquiring into the charitable operations of a charity, the Charity Commissioners will have the power to carry out an inquiry or appoint someone to investigate a charity on their behalf.

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Proposed Change (8)Charities could also be placed on probation if

they have repeatedly failed to submit the required/requested documentation to the Charity Commissioners.

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PowersCurrent ActThe Charity Commissioners do not have the

power to intervene into the charitable operations of an existing operating charity.

Proposed Change (9)The Charity Commissioners will have the

power to, including but not limited to, restricting the transactions into which the charity can enter.

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Proposed Change (9)The Government should have the power to

protect the interests of the public with respect to the charitable operations of an organisation which have been brought to the attention of the Registrar General or the Charity Commissioners.

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PowersCurrent Act The Charity Commissioners can only require

an auditfor the preceding financial year.

Proposed Act (10)The Charity Commissioners will be given the

power to order forensic accounting reviews to examine the sources and uses of charitable funds managed by charities.

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PowersCurrent ActThere are neither offences nor associated

penalties for the non-disclosure or non-distribution of funds collected from the public by or on behalf of charities.

Proposed Change (11)Offences and associated penalties that

deal with fraudulent activity with respect to non-distribution or non-disclosure of funds will be created.

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Reporting RequirementsCurrent ActThere are no prescribed minimum periods

during which registered charities must keep financial records.

Proposed Changes (12)Registered charities will be required to

maintain and keep their financial records for a minimum of five years.

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Reporting RequirementsProposed Change (13)A three-tiered structure for financial

reporting will be introduced.

Small charities, managing $30,000 or less per year, will be required to provide annual financial reports;

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Reporting RequirementsMedium sized charities, managing between

$30,000 and $300,000 per year, will be required to submit annual unaudited financial statements.

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Reporting RequirementsLarge charities, managing over $300,000 per

year, will be required to submit annual audited financial statements.

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Proposed Change (13)The Government does not propose to place a

burden on the small charities with respect to their financial requirements.

Small charities will continue to be required to keep good records of income and expenditure and to be financially responsible to the people that their organisations were created to serve.

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FeedbackBy email: charities@gov.bm

By mail: Ministry of Government Estates and

Information Services Government Administration Building

30 Parliament StreetHamilton HM 12

Attn: Robert Horton, Permanent Secretary

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