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’s not clear 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.