Charity Commission plans overhaul of annual return
The Charity Commission has launched a consultation on plans to collect additional information in the annual return to reduce risk and conflicts of interest
This will see a series of new questions added to the annual return, which the Commission says will allow it to tighten up its regulation of charities.
The additional questions will see the annual return become more comprehensive, with an increase from the current 36 questions to 52, although not all will be compulsory or relevant for all charities. Going forward there will be 32 compulsory questions.
The Commission estimates that the changes will cost charities £4.95m to implement.
Most of the proposed questions would be asked every year. However, the consultation also considers whether the data could be collected on a less frequent basis, with the ability to include or omit certain questions in the annual return in each particular year.
The changes will apply to registered charities in England and Wales with income over £10,000 and all charitable incorporated organisations (CIOs). There are approximately 169,000 registered charities in England and Wales. The very smallest unincorporated charities, which amount to over 70,000 of these, are not affected by the proposed changes.
New questions will look at the diversity of the charity’s income streams including any income from corporate or individual donors or connected parties. The reporting burden will be reduced by using yes/no answers rather than requiring specific values. The questions are also more targeted to obtain data in relation to specific risks.
The proposed questions focus on connected party donations as the Charity Commission says it has evidence that suggests that ‘without proper management, donations from connected parties can indicate a conflict of interest’.
There will also be questions about the role of trustees, focusing on whether trustees were paid for being a trustee, paid for a role within any of the charity’s trading subsidiaries or connected organisations, or paid for providing goods and/or services to the charity, its trading subsidiaries or any connected organisations.
Transparency about grants is another area the Charity Commission is focusing on to manage any potential conflicts of interest, while the section on sources of overseas income will be expanded.
The Commission also plans to add a question to identify any properties belonging to unincorporated charities (trusts and unincorporated associations) held or controlled by holding or custodian trustees, other than the official custodian. It has identified a recurring factor in disputes leading to risk to property where there are separate holding trustees who hold property or land for an unincorporated charity. This will help manage risks appropriately in relevant cases.
There will also be questions about whether the charity uses overseas hosting companies for its website, and potential cybercrime risks; more detail on the number of staff and volunteers, as well as total payroll costs, and
The Charity Commission said: ‘We are looking to ensure the overall burden on charities is proportionate and have offset the impact of the new questions by removing redundant questions and simplifying those questions we are retaining where possible, to make them clearer and easier to complete.
‘We aim to ensure that the annual return enables charities to share information with us more easily, so we can get a fuller picture of the sector, without imposing undue regulatory burden, as additional questions are offset by improvements in question usability.’
The changes will apply to charities’ financial years starting on or after 1 January 2023.
The annual return currently has four component parts. Requirements are tiered so that the smallest charities submit minimal information, while there is more reporting from larger charities. This includes:
- a survey to collect baseline details about all registered charities with income over £10,000 and all charitable incorporated organisations (CIOs);
- a survey to collect structured financial data; all charities with an income over £500,000 are required to respond;
- copies of charity financial accounts – all charities with income over £25,000 must provide this; and
- a charities annual report for all charities with income over £25,000.
The consultation will close for comment on 1 September 2022.
Useful links
Charity Commission consultation, Annual Return 2023