Changes to annual return for charities

The Charity Commission has announced changes to the annual return, the tool it uses to hold charities accountable to the public.

The regulator states that the changes, which will apply when charities report on their financial years ending in 2015, will strengthen its ability to identify risk and will ensure people have access to the information they need to make confident decisions about charities.

The announcement follows a full consultation on proposed changes. The commission has stated that it listened carefully to the arguments made by charities and its decisions take into account concerns that were raised about some of the proposals. A summary of the consultation responses has been published at www.gov.uk/government/consultations/charity-commission-launches-consultation-on-annual-return-2015 alongside the commission’s analysis.

The annual return 2015 will include three new question areas, which received broad support in the consultation:

• In the reporting period, how much income did you receive from contracts from central or local government to deliver services; and grants from central or local government?
• Does your charity have a policy on paying its staff?
• Has your charity reviewed its financial controls during the reporting period?

The consultation also proposed a question on charities’ campaigning expenditure. The regulator states that it reflected on the concerns raised during the consultation and recognises that including such a question at this time would create a significant amount of work for charities. That question will therefore not be reflected in the annual return for 2015, but the commission maintains that charities’ campaigning expenditure is a matter of public interest and will revisit the issue when it considers changes to the annual return for 2016.

The commission states that it has also taken into account concerns raised about a proposal to ask charities with incomes of between £10,000 and £500,000 for key financial information. It states that it recognises that including this question would impact particularly on charities with smaller incomes, and that it will therefore not require charities to supply this information in the annual return. Instead, it will explore whether a technological solution, for example the introduction of accounting software, might allow it to gather the information it needs to regulate charities effectively, without putting too great a burden on smaller charities.

The commission is also reminding charities that it is getting tougher on those that fail to file annual returns and accounts on time. In September 2013 it launched a class inquiry to investigate charities that had not submitted accounts for two or more financial years. That investigation continues.