The Charity Commission for NI’s Consultation on Interim Reporting Requirements Briefing

1 Oct 2013 Denise Copeland    Last updated: 15 Aug 2014

The Charity Commission is currently consulting on the interim reporting arrangements for charities. This briefing outlines the objectives, reporting arrangements and content of the annual monitoring return.

Interim reporting requirements

Background / context

The Charities Act (NI) 2008 (the Act) was passed into law in September 2008. A year later the Charity Commission for Northern Ireland (the Commission) was established and in 2011 it was granted its powers of regulation, investigation and enforcement. The Commission is now preparing to register charities and is also planning its monitoring programme. The Commission is a non-departmental public body sponsored by the Department for Social Development (the Department). The Department is responsible for developing the full accounting and reporting regulations which it intends to consult on next year. As the Commission will be establishing the Register of Charities this autumn, it needs also to be able to monitor those charities on the Register. It is therefore proposing reporting requirements for this ‘interim’ period until the full accounting and reporting regulations are in place.

Introduction

The Commission is using this consultation to seek views on:

  • The objectives of its monitoring programme
  •  Interim reporting arrangements
  • Content of the annual monitoring return

General comments

NICVA welcomes this consultation from the Commission on the interim reporting requirements and agrees with the Commission that it should press ahead with requiring information from charities in order to fulfil its powers. While the consultation is called the ‘interim reporting requirements’ the word interim mainly refers to the second point above as the objectives of the monitoring programme are likely to remain the same, save for changes with this consultation, when the full accounting requirements come into effect. The annual monitoring return will also remain as a permanent requirement for all charities registered with the Commission. It is very important therefore that all charitable organisations in Northern Ireland have regard to the content in the proposed annual monitoring return (see attached) as they will have to complete it in the near future.

Objectives of the monitoring programme

The Commission has listed the following objectives for its monitoring programme:

  • Check for compliance with charity law.
  • Discover where there is misconduct, mismanagement and inappropriate use of charitable property and funds.
  • Encourage good practice. 4. Provide information about the charity sector.
  • Provide information on each charity.
  • Provide an up-to-date register of charities in Northern Ireland.

The consultation document gives further explanation for each objective. It highlights that through submission of the annual monitoring return, accounts and reports, the Commission will be able to see that charities are complying, or not, with charity regulations. The Commission states that it aims to be “constructive and proportionate in promoting compliance, particularly in the first few years.” The Commission has also included questions on the monitoring return which it considers are potential risk areas for charities. It highlights that through its monitoring programme it will help to identify ‘areas for concern’. During the charity registration process, there are certain questions which will help the Commission to gather statistics on the size and shape of the charity sector in Northern Ireland. During the monitoring programme these questions are asked again so that the Commission will be able to produce up to date statistics on registered charities. Much of the information collected will be available on the Register on the Commission's website for any interested party to see. As with the registration process, not every piece of information that is collected will be made publicly available, for example, a trustee's personal address or date of birth.

Interim reporting requirements

All charities in Northern Ireland, once registered, will eventually have to report annually to the Commission. As the full accounting and reporting regulations are not yet in place, the Commission is going to introduce 'interim' reporting regulations so that it can require charities on its Register to submit their annual accounts and report in their current form and to complete the annual monitoring return. 

Charities on the 'deemed list' which have not been called forward to register, will not be required to report to the Commission during this interim period - it is only for those that are on the Register of Charities (to be established in late autumn). Once the Department introduces the full accounting and reporting requirements, it will outline the content that will need to be included in the trustee annual report and it will set the audit and independent examination requirements for accounts (depending on income threshold). 

The proposals in this consultation do not require charities to change the format of how they prepare their accounts. For charities that are preparing their accounts on an accruals basis - they should consider introducing SORP (the Statement of Recommended Practice) if they are not already doing so as this is going to be a requirement.

Reporting periods

The Department’s full accounting and reporting regulations are expected to come into force in January 2015 so the interim reporting requirements should not affect too many charities – essentially, those on the Register. It is intended that the annual monitoring programme will apply to registered charities with accounting periods on or after 1 April 2014. So, a charity with a financial year end of 31 March that registers with theCommission this December will be reporting on its accounting period from 1 April 2014 – 31 March 2015. It will then have to submit its accounts and report by 31 January 2016, ten months after the end of the accounting period. The Commission has helpfully illustrated further examples in Table 1.2 of the consultation document, see below:

Reporting Periods
CharityABC
Registration date15.12.1325.4.1416.3.14
Financial period end date31 March30 June30 September
Period of account12 months12 months12 months
Reporting period *31.3.201530.6.201530.9.2015
Filing deadline **31.1.201630.4.201631.7.2016

 

* First full accounting period after registration
** 10 months after the accounting period end

Annual monitoring return

The annual monitoring return will be a permanent requirement; while the Commission may change some of the questions (by consultation) registered charities will always be required to complete and submit an annual monitoring return. 

The annual monitoring return, like the charity registration form, is an online form divided into two parts. Part ‘A’ must be completed by all charities, but part ‘B’ needs only to be completed by charities which have an income over £100,000. During the interim period it is not compulsory for charities to fill out part ‘B’ however this will change when the Department implements the full reporting requirements.

The first section of part A will be pre-populated with information from the time of registration so some of the information will be highlighted to prompt for any changes that need to be made.

On the first monitoring return, registered charities will be asked to include figures for both the latest and for the previous accounting periods so that the comparisons will be available on the Register.

During the interim reporting period, trustees will be required to report on how they are fulfilling the public benefit requirement. Once the full reporting requirements are in place, this reporting will form part of the new trustees’ annual report. They must also declare that they have complied with their duty to have regard to the Commission’s guidance on the public benefit requirement.

The guidance appears to assume that all charities with accrual accounts conform with the charities SORP. While the charities SORP is a UK wide accounting standard, it has not been enforced here in Northern Ireland and there may be quite a few charities with accrual accounts that do not comply with the charities SORP. The results from several ‘Viewfinders’ (periodical NICVA survey) indicate that not all charities were using the charities SORP.

NICVA would seek assurance from the Commission that these charities will not be penalised in any way and would be offered additional guidance so that they may be able to fill out part B of the monitoring return. NICVA would also request that the Commission issues a separate statement on SORP to explain to charities that this is what it expects.

Area of operation

Charities will be asked to give details about the geographic area in which they have applied their resources in the financial period being reported on. In the guidance, the Commission notes that the area of operation may change in different years. Charities will also be asked to state how much they have spent overseas – outside of the UK and Ireland. NICVA will seek clarification on whether question A12g on ‘total spend outside the UK’ also includes Ireland as it could be difficult for cross border charities to quantify a particular amount.

Preparation and audit/independent examination of accounts

Charities will be required to give details of the person or organisation that prepared the accounts as well as details of the auditor or independent examiner. There is also a question asking if the audit report was qualified.

Purchase of capital items

The annual monitoring form includes questions on the purchase of capital expenditure. The Commission is seeking views from the sector on a suitable threshold as it is does not want to include a threshold that would create a burden for charities. For example, some larger charities may purchase quite a lot of equipment or assets during the year.

Gift Aid and Fundraising

Charities will be asked to include the amount of gift aid which they have claimed during the reporting period which will be made known on the Register. There may be concern from some charities that this may impact on them negatively, especially those which don’t receive cash donations from UK tax payers which would not be in a position to claim gift aid.

The Commission also wants to know if the charity has engaged in fundraising during the year and if so, if it is a member of the Fundraising Standards Board. While the Fundraising Standards Board does an excellent job in promoting high standards of fundraising practice in the sector it may not be appropriate for all charities to be members, for example, those that are primarily in receipt of grants to carry out their activities.

Other regulators

The Commission also wants to know if a charity is registered with another regulator, for example, Companies House. This is not only for reasons of transparency but also so that the Commission can work with the other regulators to possibly minimise the reporting requirements for charities.

Number of staff

Questions are included to ascertain the number of staff employed by a charity. It may be more straight forward however to have two questions on staffing – one on the number of full-time and one on the number of part-time staff.

Trustees

As well as having to provide information on the number of trustees and if they are resident in or outside of Northern Ireland, there are also a number of questions included on payments to trustees. The questions refer both to out of pocket expenses as well as any other payments or financial transactions to trustees or connected persons.

Respond to the consultation

The Commission is holding a series of consultation events across Northern Ireland. For further details and a full list of the consultation documents, please visit the Charity Commission's website.

The responses to the Commission’s consultation are required no later than 13 December 2013. To contribute to NICVA’s response, please send your comments to [email protected] by Friday, 29 November 2013.

by Denise Copeland

Governance and Charity Advice Manager

[email protected]