Trustees’ Week 2023 Day 3 - Are you prepared for the new charity Annual Return 2023?

The Charity Commission’s role is integral to the charity sector as regulator and also through the guidance it provides. The Commission has recognised that it must work together with the sector to refine its policies and be a more proactive regulator. In order to do so, it has amended the questions in the annual return for 2023 in order to collect specific information so that it can be a more proactive regulator and provide more targeted guidance to charities.

Looking ahead, the new questions dive deeper into the governance and management of your charity and may prompt you to re-examine your charity’s risks and risk management. Giving yourself time to do this before your filing deadline could be key.

Why is the annual return so important?

The Charity Commission regularly opens statutory enquiries into charities who repeated fail to file their annual returns. This demonstrates what an integral part of charity governance accounts are. Preparing your charity’s accounts is not just an administrative task, if you spent time on them then your accounts can help you.

Registered charities with annual income above £10,000, and all charitable incorporated organisations (CIOs), need to file an annual return with the Charity Commission through the charity’s ‘My Charity Commission Account’. The annual return is important for many reasons, including transparency and accountability, as some of the information which the trustees provide as part of their annual return is publicly available on the charity’s Charity Commission page so that donors, beneficiaries and the general public can learn about a charity’s income and expenditure. It also helps to build trust and credibility which can instil confidence in donors, encouraging continued support.

For those charities who are required to file accounts, the Trustees’ Annual Report is a way for the trustees to tell the Charity Commission, beneficiaries and funders about what the charity has done in that financial year. It is important that you include sufficient detail about the activities you have carried out to demonstrate how the charity’s assets have been used in furtherance of the charity’s objects. During a recent Charity Commission investigation, failure to provide full information about the charity’s activities was one of the things which led to the need for an investigation as the Commission explained to the Trustees that when it reviewed its annual return it did not know what activities the charity was carrying out.

What changes have been made?

The Charity Commission has changed the questions in the annual return to collate specific information about charities and to try to reduce the administrative burden for smaller charities. The questions will be tailored to the charity depending on its income, the legal structure and what the charity does. The annual return now includes questions on nine key areas being income, expenditure, activities outside the UK, trading subsidiaries, charity address and property, structure and membership, employees and volunteers, governance and finally safeguarding and risk.

The questions are more specific to allow the Commission to identify any potential risks charities will face, for example if all or the majority of its income is from a single income source or to ensure appropriate safeguarding measure are in place if charities work with vulnerable individuals. The questions will also help the Commission ensure charities are complying with the Commission’s guidance and with their trustee duties such as managing conflicts of interest in relation to trading subsidiaries.

One of the most significant changes is that the trustees now have to confirm which policies the charity has in place. There are 13 suggested policies in the annual return which correspond to specific guidance published by the Charity Commission. Although the Commission does not expect charities to have all thirteen policies, it does expect charities to have policies and procedures on:

• internal charity financial controls (CC8)
• finance and reserves (CC19)
• risk management (CC26)
• trustee expenses (CC11)
• trustee conflicts of interest (CC29)
• serious incident reporting policy

The Commission also asks trustees to consider policies on investing charity funds, engaging in political activity and bullying and harassment. The list of policies also includes safeguarding, complaints policy, social media policy and engaging external speakers at charity events. This is a non-exhaustive list and there are other policies which may be relevant to the work your charity does, for example a grant making policy.

What can you do ahead of filing your annual return?

It is essential that your charity’s annual accounts and annual return are accurate, detailed and filed with the Charity Commission on time.

Some of the new questions may prompt you to re-examine your charity’s risks and risk management. Make sure that you have all the appropriate policies in place and that you regularly review and update those policies to demonstrate to the Commission that you are managing potential risks to your charity’s operations and governance.

Please get in touch with the Charities Team if you would like assistance with any policies or if you have any other governance concerns.