Spotlight on Charities
Although charity law varies across the UK, charity governance is very much in the spotlight.
In a recent report, the Charity Commission for England and Wales (CCEW) suggested that nearly 40% of small charities were submitting inaccurate financial information. Small charities are defined as those with annual income below £25,000, and this category makes up two thirds of those on the CCEW’s register. The CCEW is concerned that some of those given the job of submitting a charity’s annual return – particularly in the small charity category – are not sufficiently skilled to perform the role accurately.
Against this background, charities registered in England and Wales should be aware of developments regarding annual returns. Returns must be submitted no later than ten months after the end of the financial year and charity trustees must keep the charity’s registered details up to date.
From November 2018, the service to update these details changed. All charities must now check and update their details online before they can submit their annual return. Charities will only need to provide missing information the first time they sign in, or when they need to update their charity details. Charities will be able to choose which sections or information to edit and update.
Information required includes all current trustee names, their contact details (including an email address), and details of the charity’s UK bank/building society accounts. Bank/building society details will not be available publicly.
From 1 April 2019, full legal names will show to the public and trustees will not be able to use a ‘public display’ name on the charity register. If, however, this would cause personal danger to an individual, it is possible to apply for a dispensation.
New questions are introduced in the 2018 return, and these can be previewed before signing in. Some questions are optional for 2018, but mandatory from 2019 onwards. They are intended to allay public concerns, for example about high levels of pay in charities: or to highlight possible areas of risk, say in relation to money transfer overseas.
New questions for 2018 include a breakdown of salaries across income bands, and the amount of total employee benefits for the highest paid member of staff. Details of this, however, will not be published on the public register. There are also questions asking about use of professional fundraisers, receipt of grants and contracts from central government and local authorities, as well as questions on safeguarding children and adults at risk.
Overseas expenditure is another area where the detail is being expanded. If a charity has spent money outside England and Wales, it will need to explain if it has transferred money overseas by a means other than the regulated banking system. There are questions about whether controls exist to monitor overseas expenditure, and others asking if the trustees are satisfied that risk management policies and procedures are adequate for the charity’s activities and for its place of operations. These are mandatory for returns from 2019 onwards, but optional for 2018.
Questions about income received from outside the UK are also introduced. These include which countries income was from; the value of income by country; the source and amount of such income, analysed into categories such as overseas governments or quasi government bodies; overseas institutional donors; and individual donors resident overseas. Some of this information will be optional for 2018, but mandatory thereafter.
These changes mean some additional work for charities, and may require changes to financial systems to capture relevant detail.
Please do not hesitate to contact us for further advice.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.