Annual Return 2018
Annual Return 2018
With the 2018 Annual Return form, charities are given the option to answer a number of new questions relating to overseas income and expenditure as well as funding and employee benefits. With the Charity Commission making these questions compulsory from 2019, charities should ensure they will be able to provide the information requested.
Each year, the Charity Commission reviews and updates the annual return form so that it gathers the data that will enable the Commission to target support and guidance or, if necessary, regulatory action towards those charities that are more likely to be at risk, reflecting the aims set out in its Regulatory and Risk Framework.
In this note we provide an overview of the new questions introduced as part of the Annual Return 2018 along with our recommended action points to help ensure your charity will have the additional information to hand that will be needed next year.
| New Annual Return Question | Action Points |
|---|---|
| Fundraising – this section asks charities to provide information about any arrangements they have with commercial participators and professional fundraisers. Where such arrangements exist, the annual return asks the charity to confirm that a written agreement is in place. The response will appear in the register of charities. | Charities must keep records of any agreements made and the Commission may ask charities for details. |
| Government Funding – with the new annual return, charities are asked to provide details of the number and total value of contracts and grants they receive from both central and local government in each financial period.
The Charity Commission has explained that it intends to identify those charities who may rely solely or primarily on public sources of funding and that it aims to provide advice and assistance where appropriate. This is because these charities are seen as particularly vulnerable to financial distress. Information collected about charities’ reliance on government funding will be publicly accessible. |
Trustees of charities which rely heavily on government funding may wish to consider how they would respond if the Commission were to query their financial stability.
There is nothing intrinsically wrong with charities relying solely or primarily on government funding, but a charity can strengthen its financial position by diversifying income streams. |
| Overseas Income – the government’s aim to expressly identify those organisations financing terrorist activity and carrying out money laundering has led to a number of questions concerning overseas income being added to the latest annual return.
The Charity Commission understands that the information needed will vary depending on the size of the charity. This means that:
Charities are not required to provide a breakdown of payments which might identify individual donors or institutions. The Commission has also confirmed that answers to these questions will not be published. |
Of the questions introduced as part of the new annual return, this is the most complex and can be difficult for charities to answer with confidence, particularly where the charity has an income exceeding £25,000. Charities may therefore need to put new measures in place to identify funds from overseas sources.
Charities are already required to report any payments of over £25,000 from unknown, unverified or suspicious sources to the Commission as a serious incident. This could be integrated into a charity’s procedures for measuring overseas income. |
| Employees’ Salaries – charities are asked to provide details of the numbers of employees whose benefits total over £60,000, with the total number of employees being placed into bands up to “£500k and over” and published by the Commission.
They will also be asked to provide a total value of benefits received by the charity’s highest paid employee, which will not be published. |
It is vital that charities keep a detailed record of its employees, their wages and any other benefits provided so that this information can be provided clearly. |
| Payments to Trustees – charities are required to confirm whether any trustees were paid during the financial period for being a trustee or for providing any professional advice as well as whether they were in receipt of other benefits. This information will be published. | Unauthorised benefits to trustees are of considerable concern to the Charity Commission. Any benefit must be authorised by the charity’s constitution or the Commission. A clear record of how the decision was reached to pay the trustee is key to ensuring charities are seen to be complying. |
| Overseas Expenditure – in addition to overseas income, the new annual return also includes questions regarding the charity’s overseas expenditure particularly where money has been transferred outside the regulated banking system. This includes how much was transferred and risk management policies the charity has in place to manage this. These questions exist, in part at least, in order to locate and eliminate possible terrorist financing. None of the information collected will be shared publicly. | The Charity Commission expects charities to use regulated banking systems where available and, where this is not possible, charities should have in place a clear system for logging transfers made overseas. Precautions should also be taken to identify where money has been sent and how it has been managed. |
| Trading Subsidiaries – where a charity has subsidiaries, any charity trustees who are also directors of a subsidiary must be identified so the Commission can determine any possible risks. This information will be shared publicly with the aim of preventing unmanaged conflicts of interest from arising. | While this information may also be collected by Companies House, charities should ensure that there are enough unconflicted trustees to consider and approve any decision which may benefit a conflicted trustee within the subsidiary. |
| Safeguarding – the charity must also provide information on DBS checks where they work with vulnerable beneficiaries. This only needs to be completed if the charity does not answer to another regulator other than the Disclosure and Barring Service. | The Charity Commission’s concern is to ensure vulnerable beneficiaries are protected, and charities need comprehensive safeguarding policies and records if they work with vulnerable beneficiaries. |
If you would like any guidance on the issues raised in this article, please contact our charity law solicitors on 03456 381381 or email charities@ibblaw.co.uk
