Annual reports - Charity Commission consultation

Good regulation is enabling, proportionate, inclusive and transparent. It is carried out by strong regulators who balance their enforcement and support functions. How well the proposed changes to the annual return form 2018 (AR18) meet these principles form the basis of ACEVO’s consultation response.

The annual return form is important because it enables the Charity Commission to carry out two of its statutory requirements: to maintain an accurate register of charities, and to understand and regulate the sector effectively. The Commission is consulting on changes to the AR18 which it hopes will help it better tackle new regulatory risks as they emerge, strengthen accountability and reduce the reporting burden on smaller charities. ACEVO supports these aims: however, we do not think the Charity Commission has provided sufficient information in the consultation documents to explain how the new data requested in the AR18 will be processed, assessed and actioned. It is also unclear why the Charity Commission is asking for several pieces of information which charities already submit to them in the form of annual accounts and reports. Further to this the Commission plans to introduce questions covering 10 different business areas including government contracts, gift aid, safeguarding and charity assets. Cumulatively these questions represent a significant increase in reporting requirements for charities.

In the consultation document, the Commission states that the information provided by charities in the AR18 will be assessed against the Charity Commission’s risk framework to enable it to engage in more reactive casework and to understand potential regulatory challenges as they emerge. For transparency we request more detail from the Charity Commission about how it plans to process, analyse, share and assess the data collected.

Considering that in recent years the Charity Commission has faced increased demand, reduced budget and reduced staff numbers, it is also unclear if the Commission has the resource systematically to review data submitted as part of the AR18. This will enable charities to take a view as to whether the new information requested by the Commission is necessary and proportionate for the regulator to hold.

Alongside questions about process we also disagree with the Charity Commission’s assumption that publishing additional financial figures about charities without contextual information will lead to an increase in trust and confidence. The charity sector is committed to improving transparency and trust, evidenced through projects like howcharitieswork.com. There are also a number of charities who already publish executive pay levels, however they do this alongside remuneration policies and/or an explanation of how decisions about pay meet their ethos and values, see for example MSF UK and British Heart Foundation. It is simplistic to assume that publishing raw data without context or narrative will help achieve greater transparency or public confidence. We invite the Charity Commission to work with ACEVO and its members to discuss ways in which we can work with charities to present additional information about their operational activity, sources of income and fundraising activity in a balanced and fair way.

Whilst we support the inclusion of some of the questions (see our consultation response), we also have several outstanding concerns and ask the Charity Commission to provide answers to the following questions and allow for a further discussion with the sector to take place before changes to AR18 are made.

  • How will the Charity Commission analyse, store and process information submitted in the AR18?
  • Will the data be shared with other regulators, for example the Fundraising Regulator, and under what circumstances would that happen?
  • How does the Charity Commission plan to use this additional information to underpin its support and enforcement functions?
  • Why has the Commission asked charities to provide information in the AR18 that is already submitted with annual accounts to the Commission?

 

 

 

 

For further information please contact Grace Freeman grace.freeman@acevo.org.uk or 020 7014 4600.

ACEVO’s response to the Charity Commission’s consultation on changes to information collected for the Annual Return 2018 (AR18)

 

About ACEVO

ACEVO is the Association of Chief Executives of Voluntary Organisations. Our network is formed of over 1,100 individuals and includes the leaders of small, community based groups, ambitious medium-sized organisations, and well known, well-loved national and international not-for-profits. For 30 years, we have provided support, development and a collective campaigning voice for our members across the UK.

ACEVO’s vision is to see great leaders making the biggest difference. Through our network, we inspire and empower civil society leaders to provide the vision, energy and leadership needed to change the world for the better.

Summary of ACEVO’s response

Good regulation is enabling, proportionate, inclusive and transparent. It is carried out by strong regulators who balance their enforcement and support functions. How well the proposed changes to the annual return form 2018 (AR18) meet these principles form the basis of ACEVO’s consultation response.

The annual return form is important because it enables the Charity Commission to carry out two of its statutory requirements: to maintain an accurate register of charities, and to understand and regulate the sector effectively. The Commission is consulting on changes to the AR18 which it hopes will help it better tackle new regulatory risks as they emerge, strengthen accountability and reduce the reporting burden on smaller charities. ACEVO supports these aims: however, we do not think the Charity Commission has provided sufficient information in the consultation documents to explain how the new data requested in the AR18 will be processed, assessed and actioned. It is also unclear why the Charity Commission is asking for several pieces of information which charities already submit to them in the form of annual accounts and reports. Further to this the Commission plans to introduce questions covering 10 different business areas including government contracts, gift aid, safeguarding and charity assets. Cumulatively these questions represent a significant increase in reporting requirements for charities.

In the consultation document, the Commission states that the information provided by charities in the AR18 will be assessed against the Charity Commission’s risk framework to enable it to engage in more reactive casework and to understand potential regulatory challenges as they emerge. For transparency we request more detail from the Charity Commission about how it plans to process, analyse, share and assess the data collected.

Considering that in recent years the Charity Commission has faced increased demand, reduced budget and reduced staff numbers, it is also unclear if the Commission has the resource systematically to review data submitted as part of the AR18. This will enable charities to take a view as to whether the new information requested by the Commission is necessary and proportionate for the regulator to hold.

Alongside questions about process we also disagree with the Charity Commission’s assumption that publishing additional financial figures about charities without contextual information will lead to an increase in trust and confidence. The charity sector is committed to improving transparency and trust, evidenced through projects like howcharitieswork.com. There are also a number of charities who already publish executive pay levels, however they do this alongside remuneration policies and/or an explanation of how decisions about pay meet their ethos and values, see for example MSF UK and British Heart Foundation. It is simplistic to assume that publishing raw data without context or narrative will help achieve greater transparency or public confidence. We invite the Charity Commission to work with ACEVO and its members to discuss ways in which we can work with charities to present additional information about their operational activity, sources of income and fundraising activity in a balanced and fair way.

Whilst we support the inclusion of some of the questions (see our consultation response), we also have several outstanding concerns and ask the Charity Commission to provide answers to the following questions and allow for a further discussion with the sector to take place before changes to AR18 are made.

How will the Charity Commission analyse, store and process information submitted in the AR18?

Will the data be shared with other regulators, for example the Fundraising Regulator, and under what circumstances would that happen?

How does the Charity Commission plan to use this additional information to underpin its support and enforcement functions?

Why has the Commission asked charities to provide information in the AR18 that is already submitted with annual accounts to the Commission?

For further information please contact Grace Freeman grace.freeman@acevo.org.uk or 020 7014 4600.


 

ACEVO’s response to questions in the AR18 consultation

Fundraising

Proposed new questions:

A.2 Does the charity work with a professional fundraiser?

A.1.2 Does the charity have a signed contract with the professional fundraiser?

Consultation questions:

1.      

Do you agree with the proposal to introduce this series of questions about the arrangements which charities have when they work with professional fundraisers? If no please say why.

Yes

2.      

If you have any suggested amended wording for the proposed question please provide this:

 

N/A

 

3.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

Many charities have this information available on their website, however as not all do we agree that publishing this information would aid transparency about an issue on which there has been much public interest. We would however in the first instance encourage anyone with questions about a charity’s fundraising methods to talk to that organisation directly to get as much information as they can.

4.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions? Yes / No / Don’t know If ‘yes’, please provide details.

Many charities already provide this information on their website and/or in their annual reports and accounts which are submitted to the Charity Commission and available on the current charity register.

5.      

If your charity would have to provide this further information about professional fundraisers, is there a cost in putting this together? Yes / No / Don’t know - comments Please explain the reasons for your answer.

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation.

 

Government Funding

Proposed questions:

Question B.1 How many contracts did the charity receive from central or local government? Question B.2 What was the total value of the contracts received from central or local government?

Question C.1 How many grants did the charity receive from central and local government?

Question C.2 What was the total value of the grants received from central and local government?

 

Consultation questions

1.      

Do you agree with the proposal to revise the questions which we ask about the income which charities receive from central and local government as shown above?

The consultation document states that the information gathered in response to these questions is required to help the Commission identify charities which disproportionately rely on a single source of funding. However, these questions will not be able to provide the Charity Commission with that information unless the information is compared to information about the charity’s other income streams.

Further to this, should the Charity Commission decide to include a question on the number of contracts received by charities, they would need to provide clarification regarding which information should be included. For example, would it be only those contracts on which the charity was a lead partner, or all those contracts in which a charity has benefitted from funding from commissioned services? Local and national government also currently regularly renegotiate contracts and reduce the amount awarded during the contracted period, or contracts are promised but not paid out. This means that the award of one contract could have multiple revisions and therefore appear as multiple contracts causing confusion rather than clarity.

2.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

Details of contracts awarded to all organisations, including their name and the size of the contract is already a matter of public record through local and national government. We therefore do not think this data would provide greater transparency or accountability.

The stated purpose of this question is to improve accountability and transparency by making it clearer how financially stable a charity is based on how reliant it is on any one income stream. A more effective way of finding out this information is to read the charity’s annual accounts and annual report.

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions?

 

Details about income diversity are usually available in a charity’s annual accounts for those who wish to view them. This would mean that information about whether a charity is overly reliant on a single source of funding is already available to the Charity Commission. It is unclear why they would need to ask this specific question given that this is already publicly available for charities.

4.      

If your charity would have to provide this further information about grant and contract income from central and local government, is there a cost in putting this together?

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation.

Gift Aid

Proposed question:

Question D During the financial period for this annual return how much Gift Aid did the charity claim?

Consultation question:

1.      

Do you agree with the proposal to introduce this question about Gift Aid?

The consultation document states that the addition of this single question on gift aid will allow the commission to do the following:

“Firstly, it will enable us to carry out proactive, informed risk assessments of individual charities where we will ensure that trustees are compliant with their duties in the administration of charities. Secondly, it will enable us to deal more efficiently with cases where there is evidence of poor administrative practice indicating a failure by the trustees to comply with their trustee duties or where there could be abuse or mismanagement. Thirdly, we will use this information to identify where there are trends in Gift Aid claims either across all registered charities which file returns, or in certain groups of registered charities. This will assist in ensuring that charitable funds are applied properly and trust and confidence in the sector is retained.” 

It is unclear to us how question D as currently drafted will enable the Charity Commission to gather the information described above. Further detail should be provided by the Charity Commission to explain how responses to this question will be processed and analysed to meet the Commission’s objectives.  

2.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

 

I do not see how this information presented on its own would aid general transparency and accountability. Presented as a raw figure devoid of context tells the public very little about the charity, its activity or how well governed that activity is.

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions? Yes / No / Don’t know If ‘yes’, please provide details.

No

4.      

If your charity would have to provide this further information about Gift Aid, is there a cost in putting this together?

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation.

Income received from overseas

Proposed questions:

Question E During the financial period for this annual return, did the charity receive income from outside of the UK? If the answer is yes the following two questions will be asked:

Question E.1 Select countries the charity received income from during the financial period for this annual return or select ‘unknown/don’t know – a drop down list will be shown

Question E.2 What is the value of income by country? For each country specify the source and amount of income from the options:

a) Overseas Governments or quasi government bodies;

b) Overseas Charities, NGOs or NPOs

c) Other overseas institutions

d) Individual donors resident overseas

e) Unknown/don't know

Consultation questions:

1.      

Do you agree with the proposal to introduce this series of questions about the income which a charity receives from countries outside the UK?

The threshold of £10,000 for reporting is too low and small charities should not have this administrative burden.

We are also concerned with the difficulty involved in reporting the country of origin of donations that have been received through online giving platforms. With many charities of all sizes using technology to have a global presence it will likely become increasingly difficult to trace where individual donations have been sent from.

2.      

We do not intend to publish information resulting from this question on the charity’s public register page. Do you agree that data provided by individual charities in response to this question should not be published?

We agree that the individual charity should be allowed to decide whether to make this information publicly available or not.  

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions?

Some charities which receive funding from overseas already disclose the sources of their funding in their annual accounts and/or on their website.

4.      

Do you agree that all charities with an income in excess of £10,000 should be asked these questions about income from overseas? Yes / No / Don’t know If you disagree it would be helpful if you could say what the threshold should be and give the reasons why

No, this threshold is very low and will place undue burden on small charities.

5.      

If your charity would have to answer these questions about income from overseas, is there a cost in putting this together?

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation

6.      

We propose to ask for the value of the income from each question to be given in Pounds Sterling. Do you agree that this is appropriate? 

No response

7.      

Some charities may find it easier to report the income received in US Dollars. Do you think that there should be an option to report in either Pounds Sterling or US Dollars? know If you disagree with this proposed option, it would be helpful if you could give the reasons why

No response

 

Employee salaries

Proposed questions:

Question F During the financial period for this Annual Return, did any of your charity’s staff receive a salary of £60,000 or more? Yes/No

If the answer to Question F is Yes the charity will be asked for further information in the two questions below Question:

Question F.1 Enter the number of staff for each of the following salary bands:

Question F.2 How much is the CEO paid?

Consultation questions:

1.      

Do you agree that charities should be asked for this information about staff pay?

At this point we do not believe it is justified for the Charity Commission to ask for this additional information because it is unclear as to how the information will be used. In the consultation document the Charity Commission state that: “The Commission is unclear as to what extent concerns about salary in the sector are justified, and securing this information will be a clear way of both helping the Commission’s understanding of the matter as well as enabling targeted guidance and intervention if there are individual charity issues.” However the Commission also says that it will not intervene with a charity simply because a salary is in a certain band and that it will “continue to operate in accordance with its risk framework.” More transparency is required about how the Commission plans to use this information and what targeted intervention or guidance it is considering. 

ACEVO’s opinion is that executive salaries should be awarded fairly, consistently and in line with performance. This is something that many charities already do. We think that the best way to meet the aforementioned pay principles and to encourage transparency is to allow charities to decide how to report their executive pay. MSF UK is an example of a charity providing both the salary of its executive director and the ethos, values and policy which lead to the pay decision. If chief executive pay is published on the charity register without this context it risks harming trust and confidence rather than promoting it.

2.      

Do you have suggestions for the framing of the questions and guidance to help charities recognise that they are within the intended scope of these questions?

We do not support the inclusion of question F.2 without the option for charities to provide and/or link to further contextual information.

3.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

 

Publishing senior pay could aid accountability and transparency if there is contextual information to go alongside it and the opportunity for charities to explain how they reached their decision. Without this we do not believe it will aid transparency or trust.

4.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions? Yes / No/ Don’t know If ‘yes’, please provide details.

Some charities publish this information on their websites but we are unaware of any single source where this information is gathered collectively. The current annual return form also asks for information about executive pay according to pay bands which we believe provides the Commission with sufficient information to carry out its regulatory duties.

5.      

If your charity would have to answer these questions about staff salaries, is there a cost in putting this together?

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation.

Payment to trustees

Proposed questions:

Question G During the financial period for this annual return, were any of the trustees paid:

a) for being a trustee

b) for providing professional advice e.g. accountancy or legal advice

c) in receipt of other benefits e.g. renting property from the charity below market value?

Question G1 During the financial period for this annual return, were any employees formerly trustees of the charity

Consultation questions:

1.      

Do you agree that charities should be asked for this further information about trustee payments?

Yes. However information should be provided to explain what reasonable expenses can be reimbursed to trustees to avoid confusion.

2.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

Yes

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions?

No.

4.      

If your charity would have to answer these questions about trustee payments, is there a cost in putting this together?

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation.

Expenditure outside of England and Wales

Proposed questions:

Question H - Did your charity operate outside England and Wales during the financial period covered by this annual return

Question H.1 Select countries the charity operated in during the financial period covered by this annual return – a drop down list will be shown

Question H.2 Record the total expenditure by country

Question H.3 When spending money outside England and Wales, did your charity transfer money outside of the regulated banking system? Yes/No If the answer to Question

Question H.4 is answer to H.3 is yes the charity will be asked Question H.4 What methods to transfer money did the charity use and what was the value? – a drop down list will be shown

a) Cash courier

b) Other charities or NGOs/NPOs 21

c) Money Service Business (MSB) d) Informal Money Transfer Systems

e) Online payment methods eg PayPal

f) Other Question

Question H.5 Are the trustees satisfied that the charity’s risk management policy and procedures adequately address the risks to the charity arising from its activities and/or where it operates? Yes/No

 

 

Consultation questions:

1.      

Do you agree with the proposal to introduce this series of questions about a charity’s use of alternative/informal financial systems to hold or move charity money in countries outside England and Wales and the ways in which it manages risk?

We would like to see further information about how the Charity Commission will systemically view and assess this information, without which we cannot judge whether the inclusion of the question is necessary and proportionate

2.      

We do not intend to publish information resulting from this question on the charity’s public register page. Do you agree that data provided by individual charities in response to this question should not be published?

 

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions?              

 

4.      

If your charity would have to provide this further information about its use of alternative/informal financial systems to hold or move charity money in countries outside England and Wales and the ways in which it manages risk , is there a cost in putting this together? Yes / No / Don’t know - comments Please explain the reasons for your answer.

 

5.      

Some charities may find it easier to report the income received in US Dollars. Do you think that there should be an option to report in either Pounds Sterling or Dollars?

Managing charity assets

Proposed question:

Question I: Does the charity get rate relief on the premises?

Consultation question:

1.      

Do you agree with the proposal to ask charities which own or lease land and/or buildings if they receive rate relief?

We would like to see further information about how the Charity Commission will systemically view and assess this information, without which we cannot judge whether the inclusion of the question is necessary and proportionate.

2.      

We do not intend to publish information resulting from this question on the charity’s public register page. Do you agree that data provided by individual charities in response to this question should not be published?

No response

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions?

No response

 

4.      

If your charity would have to provide this further information about rate relief, is there a cost in putting this together? Yes / No / Don’t know - comments Please explain the reasons for your answer

No response

Trading subsidiaries

Proposed question:

Question J How many trustees are also Directors of the subsidiary? Charities will only be asked this question if they have identified that they have a trading subsidiary.

Consultation question:

1.      

Do you agree with the proposal to ask charities about whether trustees are also directors of the subsidiary company?

No response

2.      

Do you consider that this question should be widened in scope to cover other types of non-charitable organisation that have a close link to the charity? 

No response

3.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

No response

4.      

Are you aware of any other sources from which the Commission can obtain the information being sought in this new question?

No response

5.      

If your charity would have to answer this question about trading subsidiaries, is there a cost in putting this together?

Safeguarding

Question K Do any trustees, staff or volunteers work directly with vulnerable beneficiaries? Yes/No

Question K.1 Have DBS checks been carried out on these individuals? Yes/No

1.      

Do you agree with the proposal to ask charities further questions about safeguarding?

Yes, we agree with the need to prioritise the safeguarding of vulnerable beneficiaries. We also suggest including a question about whether the charity has a whistle-blowing policy in place.

We recommend that the guidance notes for this question include a definition of ‘vulnerable’ when used in the context of requiring a DBS check and links to the government’s documents on eligibility criteria for DBS checks.

2.      

We intend to publish the information resulting from this question on the charity’s public register page. Do you consider that publishing the information resulting from this question would aid general transparency and accountability?

Yes.

3.      

Are you aware of any other sources from which the Commission can obtain the information being sought in these new questions?

Some charities publish their safeguarding policies on their websites but we are not aware of any place where this information could be gathered for the sector as a whole.

4.      

If your charity would have to answer these questions about safeguarding checks, is there a cost in putting this together?

There is a cost associated with every new reporting requirement as all require additional staff time and resource. The cost associated with this will depend on the structure and process of the individual organisation.