Charity Commission Annual Return: What is the regulator really interested in?
Julian Lomas
In late 2022 the Charity Commission published the questions it will be asking charities in their annual returns from 1 January 2023. This follows consideration of the 456 responses received to the Commission’s 2022 consultation on proposed revisions to the annual return.
The welcome news is that the Commission has reduced the number of questions it was proposing to ask and simplified many of the remaining questions. Some new questions will only be asked of charities with a gross annual income of £100,000 or more (as well as many questions continuing not to be asked of charities with gross annual income below £10,000 and others only being asked of charities with income of £500,000 or more). Some questions will be pre-populated with the prior year’s response and others will only be asked once (where the response should not normally change from year to year). The data requested in some questions have also been aligned with other requirements such as the Charities’ SORP, the Fundraising Regulator etc.
There will still be a lot of work involved in completing the return for most charities but it won’t be as bad as it could have been. The Commission has also said it is looking for ways to simplify data collection further, for example by automated “scraping” of data from other regulatory sources, but this is likely to be some way off.
This might seem like a very dull regulatory matter but the changes from the previous annual return offer some insights into the matters that most concern the Charity Commission. In particular, there is more scrutiny of
Income sources: with questions asking about large donations from corporates, individuals or related parties, perhaps reflecting concerns about the influence of dominant funders, which can be the case for family trusts and corporate foundations.
Payments to Trustees: perhaps reflecting the prevalence of unauthorised private benefit in Charity Commission investigation reports.
Trading subsidiaries and group structures: with more depth of information sought about the any charity group structure and relationships between a parent charity and any trading subsidiary. This perhaps reflects concerns about the risk of tax evasion using complex group structures.
Property: perhaps reflecting concerns about charities not providing accurate, up to date contact details.
Employees: with more questions about employees’ contracts, the cost of employees and overseas employment.
Policy governance: asking about a significantly longer list of policies, perhaps reflecting growing concern that charities are not adopting policies where they need to or only paying lip service to policies when they are adopted.
Safeguarding: with details now requested on DBS checks and serious incidents, reflecting continued concern from the Commission on safeguarding matters.
External risk: with new questions on the positive and negative impacts of major external events (such as a pandemic).
The important thing to note is that to give satisfactory answers to many of these questions is not simply a matter of having information to hand when completing the annual return; it will require charities to have done things properly in the first place (e.g. conducting DBS checks, keeping records of overseas donations and activities, adopting and maintaining appropriate policies, structuring trading subsidiaries properly etc.). Getting things right could help your charity avoid unwelcome regulatory attention.
To find out more about the governance support and training we offer, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.