On 1 September 2017, the Charity Commission published a consultation on the proposed changes to the annual return 2018 (AR18). After considering responses from charities throughout the autumn, the Commission published its response to the consultation on 2 January 2018.
ACEVO’s response to the consultation
We were primarily concerned with four questions.
- 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?
Charity Commission response
With the updated annual report, the Charity Commission hopes to make the annual return more proportionate and to remove regulatory burden where it is able to do so. We are pleased that the Commission has listened to concerns raised by ACEVO and other sector bodies and removed two of the proposed questions in order to minimise unnecessary regulatory burden. But we are still concerned about the additional administrative burden on charities, particularly those in receipt of overseas funding, who are being asked to submit more data without the opportunity to explain or give contextual detail. We are also concerned about how the Commission plans to use, store and analyse the additional information it now requires.
Summary of key changes to the annual return
Charities will now be asked to declare the pay of their highest paid employee, which will remain unpublished. However the number of staff receiving pay above £60,000 will be made publicly available in income bands. The Commission believes that charities should provide more information about staff pay, and that this information should be easily accessible on the public register of charities to increase public accountability. We believe that publishing pay without any accompanying context or narrative won’t improve transparency or public trust. These figures alone are open to misinterpretation, and could be damaging to public trust and confidence.
The Commission has also decided to include a number of questions on overseas funding in order to gain a better understanding of the flow of funding into and out of the UK. The new measure will require charities to list all countries they receive income from, and report all funding from overseas governments, charities, non-governmental organisations and civil society groups.
Charities with an annual income of more than £25,000 will also be asked to give the total value of donations received from individuals and other institutional donors outside the UK which are more than £25,000. Charities with an annual income of less than £25,000 will be asked to report these donations if they amount to more than 80% of the charity’s gross annual income. This new question puts an additional burden on charities receiving overseas funding. Some organisations responding to the consultation reported that in order to collect this information they will have to make significant changes to their financial systems. Because system alterations may be required, the Commission has made the parts of the question relating to institutions and donors outside the UK voluntary for the annual return 2018. They will be mandatory from annual return 2019 onwards.
Also included in the new annual return are a set of questions on types of fundraising and a second set on income from central and local government. The Commission hopes a better understanding of funding streams will enable it to identify when a charity is at risk. In the Commission’s response we would have liked to see a fuller explanation of how this information will be used. Our response emphasised that this data alone will not give it the information it needs. In order to analyse a charity’s reliance on a funding stream, the Commission would also need to gather information on the charity’s other funding sources.
Although we are pleased that the Commission has listened and responded to some of the recommendations put forward by the sector, we would have also liked to see more information on how the additional information will be stored and shared. We hope the Commission will continue to engage with the sector as the AR18 is rolled out in order to ensure the new form fulfils its stated aims. We would also like the Commission to remain open to further amendments should charities report significant concerns or difficulties.