For those with financial years
ending on or after 1st January this year, that process has become a
little more onerous.
Charities enjoy a special status,
so it is right that the regulator has accurate information about their
financial and governance situation. As a
result, charities’ Annual Returns are more detailed than those filed by
companies, and the new return introduced this year requires a new level of
detail.
One of the biggest changes is that
smaller charities now have to provide a detailed breakdown of where their
income originates from, something which larger charities already had to
do. As well as reporting gross income,
every charity must now detail the sources of that income: government contracts
and grants, donations and legacies, charitable activities, other trading
activities and investments.
Asking for this level of detail is
all about the Charity Commission being able to assess a charity’s resilience,
and where any financial risks arising from over-reliance on one source of
income may lie.
The new Return also asks about the
sources of large donations (both corporate and individual), and whether any
donations have come from a ‘related party’.
This is to help the Commission identify any potential conflicts of
interest.
For charities whose main purpose is
grant-giving, there is an enhanced focus on the detail of grants given. In a time of economic squeeze in the
charitable sector, the Commission is concerned about the effect grant-making
charities experiencing financial difficulties might have on the stability of
the wider sector.
Information about income which
comes from outside the UK is also required, including (for example) interest
from non-UK bonds or donations from a non-UK private company. The focus here is on income coming from
outside the UK via methods other than the regulated banking system.
In the same way, charities spending
and delivering charitable activities outside the UK are now required to provide
details of how funds are transferred, for reasons of accountability and
prevention of fraud.
The new return asks about property
held by the charity, and in particular any property held on the charity’s
behalf by trustees. There are also
questions about the structure of the organisation, numbers of employees and the
nature of their contracts, and numbers of volunteers. A new question here requires the numbers to
be split into fixed-term, temporary and self-employed workers, which is
significantly more onerous than what came before.
The final section is about
safeguarding and risk, with wide-ranging questions about the positive and/or
negative impact during the reporting period of a number of risk factors.
This may seem like an onerous
requirement each year, but charities providing this information will enable the
Charity Commission to build a much more accurate picture of the sector, and of
the challenges it faces, which in turn will enable the regulator to put in
place policies to mitigate those risks and help all charities become more
resilient.
