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Charity Commission Annual Return 2018 consultation

Charities

The Charity Commission has recently issued a consultation on the proposed contents of the 2018 version of the Annual Return (“AR18”) that charities with income over £10,000 have to file with them. If this sounds familiar, it is because it is the second part of a two year project to review the annual return, which started in late 2016.

The consultation is open until late November 2017, with the new format AR18 expected to apply for financial years beginning on or after 1 January 2018. It is worth charities and their advisors reading the consultation now and taking the time to respond to it, since there are several areas where feedback could make a difference.

One key feature of the proposals is the introduction of a new UCD (Update Charity Detail) service which charities can use to inform the Charity Commission about changes to their registered details, and which will also be used to tailor the questions each charity then has to answer in the first section of its AR18. So the hope is that smaller, less complex charities will not have to wade through pages of questions that are not applicable, but anything in a charity’s processes or activities that indicates a risk area will trigger more detailed questions that will let the Commission decide if they have more work to do. The other two sections of the Annual Return – part B on key financial aspects for higher-income charities, and part C declaring the submission of accurate data and uploading accounts – are not discussed in the consultation.

For all of the proposed changes, the Commission is actively seeking feedback not just on whether the questions are helpful, but also whether answering them would be too onerous or costly for charities, and whether the information they cover might be obtained from elsewhere (to prevent the charity from having to report it twice).

The thinking is that this should save work for simple charities, and that more complex charities with activities related to the extra questions really should have the controls and governance in place already to be able to answer them readily. But in some cases different reports could be required, and it is usually easier to capture all information at one time rather than attempting to recreate historical reports.

New or changed questions are being proposed covering the following subjects.

Fundraising  – asking for more information from charities that use agreements with commercial participators or professional fundraisers. These have been identified as a controls risk area and also a topic of public interest.

Government funding – the annual return already asks about contracts with and grants from central or local government, but the proposed AR18 would ask more about it where this income stream is a significant part of the charity’s total.

Gift aid and income from outside the UK – in both cases, it is proposed to ask for more information (charities were already required to disclose spending outside the UK).

Payments to employees and trustees  – a new question about whether anyone is paid more than £60,000, and if so a requirement to break down the numbers of employees in a range of higher salary bands. There is also a proposal to ask more about payments to trustees for example in respect of other services performed (eg a trustee who performs accounting services for the charity and is paid for this). Again this is an issue that is fueled by public interest and the reporting of it would be likely to attract attention.

Expenditure in countries outside England and Wales  – the old annual return already had a question on this, but the proposal is to ask for more detail about whether funds are transferred outside of the regulated banking system, what controls are in place to monitor overseas expenditure, and whether the trustees are satisfied with the management of the risks associated with where the charity operates.

Managing charity assetsthis will ask about rate relief claims, which are often a source of error.

Trading subsidiaries ­- charities are already asked whether they have trading subsidiaries, and those that do will now be asked more about the relationship, including how many (if any) trustees of the charity are also directors of the subsidiary.

Safeguardsthe proposal is to ask about volunteers working with vulnerable beneficiaries, and whether the charity requires them to have DBS checks in place (and, if so, whether they actually do!). It would not seem excessively paranoid to assume that a charity answering “yes” to the first question and then “no” to the second or third might have some work to do to explain its position.

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