Our policy team recently took the unusual step of completing CFG’s annual return (AR). As in most charities, this normally falls to our finance team, so this was relatively new territory for us, and a rather a novel way to get our heads around the Charity Commission’s latest consultation, ‘Developing the content of the annual return and information displayed on the register of charities’.
While not the liveliest of issues we’re working on right now, this stuff matters – our members agree as over 150 of them took the time to send us in their thoughts. Accounts, reports and the annual return are one of the principal ways charities achieve transparency, and for the regulator, they are a means of ensuring compliance. They also feed the charity register and provide the public and research with a wealth of information about the structure, health and makeup of the sector. So from where we sit, it’s worth the extra time to understand and engage in the fullest of possible ways!
So what did we make of the key proposals in the consultation?
1) Farewell to summary information return?
If there’s one reporting issue that gets our members grumbling, it’s the much maligned part c of the annual return, known as the Summary Information Return (SIR). This requires charities to provide overview information about their charity, which is then linked to their details on the register of charities. While the original intention is understandable – to provide easy, accessible and comparable information about charities – in practice it’s time-consuming and duplicates information that could be found elsewhere on the return, charity annual report and charity websites. There are also questions over whether or not the public actually use it compared to other sources of information.
The Commission are now wisely proposing to discontinue it. Our members voiced resounding agreement– over 83% were in favour, and only 5% disagreed. With this strength of feeling, we think the writing may well be on the wall. Instead we have encouraged the Commission to steer users of the register to the charity’s annual report, which has been developed largely with this purpose in mind. In our view, while the register has a crucial part to play in keeping charities transparent, a charity’s own annual report should be elevated, not relegated, as a key document assisting public understanding of a charity’s impact.
2) Nudging charities in the right direction
The Commission’s consultation reflects the sweeping influence of the ‘nudge’ agenda across Whitehall and regulators. ‘Nudge’, for anyone unfamiliar with the term, refers to an approach derived from behavioural economics of positive reinforcement and suggestion to try to achieve non-forced compliance on an issue. In theory, it can work at least as effectively, if not more so than legislation, or enforcement.
The consultation contained proposals asking charities whether they have ‘written policies’ in a number of areas that the Commission recommend as good practice (e.g. risk management). This information would then appear on the public register. But some members had concerns that this addition hints at regulation by stealth and may be onerous on small charities in particular, many of whom are unlikely to have these types of written policy in place.
Generally we support the inclusion of simple questions on whether charities raised funds from the public and had ‘commercial participators’ or trading subsidiaries, their key activity was grant making, their activities were overseen by other regulators and they paid trustees.
3) Making the most of existing information
The third major proposal was to auto fill details of membership of the Fundraising Standards Board and historical information on structural changes to charities on the register. While the concept of drawing on existing information may not sound radical (indeed many would say it is common sense), overall, this is a small step inthe right direction as it’s the first time the charity regulator has done somethign like this. Auto-filling the register with information that is already in the public domain both reduces bureaucracy and creates a more unified regulatory system.
Further potential of this approach could be revealed if the Commission and Companies House could develop a joint filing system that allows common annual returns and joint submission of accounts. CFG have previously called for this development and it was recommended in both Unshackling Good Neighbours and Lord Hodgson’s Review of the Charities’ Act. While we’ve heard rumours that this is being explored, we’ve yet to see much tangible progress. The forthcoming Government response to Lord Hodgson’s review and National Audit Office investigations of the Commission and HMRC may spur this forth.
So on the whole we hope that, despite a few more questions, the annual return will take less time to complete, deliver more for the public, and assist the Charity Commission in performing its regulatory duties. And as to who’ll be filling it out at CFG next year….we’ll be happy to pass this one back!
CFG’s response to the consultation can be found here.