The Charity Commission’s Annual Return 2018 consultation: A mixed bag

Last Friday we responded to the Charity Commission’s consultation on the Annual Return 2018.

A reminder of what the consultation is about is available in this blog post.

As you can see, the Commission is proposing to add quite a lot of new questions to the Annual Return. At NCVO, we know the Commission has a difficult balance to strike. It has to make sure it has the information it needs to assess risk and to spot concerns. It also has to make sure the burden it places on charities, especially smaller charities, is reasonable.

So when we were thinking about the new questions, we had five questions in mind:

• Is it the Commission’s job to seek information for transparency purposes (rather than because it needs it in its role as a regulator)?
• Is the Annual Return the best place to display this information?
• Is the Commission asking for information that is already available elsewhere, and if so should it really ask charities to provide it again?
• How much of a burden would these questions impose on charities taken together?
• Why is the Commission asking for some of this information, and how will it use it?

Employee salaries: Ask the questions, but let us answer properly

NCVO has championed transparency in pay. We set up an inquiry into senior executive pay, which urged charities to go beyond the current requirements for annual reports. We think charities should publish the exact salaries of named senior staff members in an accessible place on their websites, giving donors ‘two clicks to clarity’. (Obviously, we do this ourselves.)

So we’re not afraid of being open – and we supported asking about charity pay and publishing the answers. However, we also think there should also be a way for charities to explain the figures and put them into context. Otherwise, they may be misinterpreted and damage public trust and confidence, rather than informing people about how modern charities operate.

We also think the Commission should be clearer about what it’s asking: does it only want to know about salaries, or should expenses and allowances be included? And rather than focusing on the chief executive, we think it would be better to ask how much the highest-paid member of staff earns.

Overseas expenditure and rate relief: Explain why you’re asking us

A number of the proposals have raised the question as to why the Commission is asking for certain information. In particular, on overseas expenditure, the Commission is proposing to ask about money being transferred without using banks but other methods such as cash couriers, Paypal, etc. By its nature, this is a relatively high-risk activity, and we can see why the Charity Commission might wish to be aware of cases where it is happening. But before agreeing to such a question, we think the Commission needs to be clearer about how it plans to use this information. Especially considering how much detail is being required, and the administrative burden it is likely to create.

Similarly, why is the Commission asking charities whether they have received charitable rate relief, when it is not responsible for regulating this area? There is a risk that by asking for this information the Commission creates wrong expectations about its remit. We also struggled to see how such a binary yes/no answer would help the Commission in deciding whether there is a regulatory issue to address.

If the Commission is interested in which charities receive rate relief, there’s already a lot of data available – and a growing number of councils are publishing lists of charities who get rate relief.

Central and local government income and Gift Aid: Please look elsewhere

The point about information being already available elsewhere can also be made in relation to the questions about central and local government income. This is an area where NCVO has been pushing for greater transparency for a long time: we want to get to a point where figures for grants and contracts can be cross-referenced. But we think greater government transparency is a better way to address this than getting charities to answer extra questions in their Annual Returns. There is also the risk that different people could interpret ‘grants’ and ‘contracts’ differently, which would prevent the information being accurate and useful to the Commission .

Similarly, the question of Gift Aid income raises the longstanding issue of better information-sharing between the Charity Commission and HMRC. The Public Accounts Committee has been emphatic about this. We can see why Gift Aid could be relevant to Commission investigations. But wouldn’t appropriate access to HMRC data for the Commission (reformatted if necessary) be a better way to deal with concerns, rather than asking charities to submit the information multiple times?

Safeguarding: Think about the unintended consequences

We were also unsure about the questions relating to safeguarding for charities who don’t have to give this information to another regulator. Safeguarding is vital, but there’s a lot more to it than DBS checks, and no one would want to see them treated as a guarantee of good practice on their own. There is also the risk of encouraging charities to DBS check people who don’t need to – and shouldn’t – be checked.

Overseas income: Some worrying precedents

The questions about overseas income are the ones that have been met with most concern by our members and other sector bodies we have been talking to.

The concern has not been so much about the regulatory burden this might create (even though that burden could be high) but about why the Commission is asking for this information in the first place.

Charities are likely to be mindful of how similar legislation introduced in Hungary, India and Russia requiring NGOs to declare their foreign funding has been used to restrict their ability to operate in civil society. The Commission is viewed by many as a real example of good practice in charity regulation, and we understand the worry that this change could send a strong, and damaging, message to other countries around the world.

There is some overlap with the banks’ de-risking agenda and requirements for Suspicious Activity Reports to the National Crime Agency. While of course this information is not available to the Commission, it is not clear that it is necessary or proportionate to place further burdens upon charities – especially when evidence doesn’t seem to show a particularly high risk.

The overall view

These are our views on the most contentious issues raised by the consultation, but you can see our full response here.

Overall, we think the new questions are a mixed bag. While broadly supportive of new questions about charity pay, trustee payments and trading subsidiaries, there are other questions that require more clarity from the Commission.

We know charities want to comply with their obligations, and are willing to do their bit. But quite reasonably, they want to know why they’re being asked for more and more information, especially if they’ve given it to other public bodies already. If the Charity Commission is going to put more burdens on charities, it’s important it takes time to explain why.