Response on The Charity Commission for Northern Ireland’s Interim Reporting Requirements Consultation

10 Dec 2013 Denise Copeland    Last updated: 15 Aug 2014

This is NICVA's response to the Charity Commission's Interim Reporting Requirements consultation. 

Introduction 

NICVA (the Northern Ireland Council for Voluntary Action) welcomes the opportunity to respond to the Charity Commission for Northern Ireland’s (the Commission) consultation on Interim Reporting Requirements. 

NICVA is the umbrella representative organisation for the voluntary and community sector in Northern Ireland with a membership of over 1,000 organisations. 

NICVA’s response is based on its role as the representative body for the voluntary and community sector in Northern Ireland. Comments are based on the Interim reporting requirements consultation seminar held in NICVA, previous charity law consultations and ongoing work in governance and charity advice as well as contributions from the Association of Independent Examiners (ACIE).  

Rationale

The Department for Social Development (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 December, 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. 

The Commission is using this consultation to seek views on the objectives of its monitoring programme, interim reporting arrangements and the content of the annual monitoring return.

General comments

The proposals in this consultation do not require charities to change the format of how they prepare their accounts, that will be for the Department to decide. NICVA welcomes the interim reporting requirements and agrees with the Commission that it should press ahead with requiring information from registered charities in order to fulfil its powers.   

Interim refers to the period until the Department introduces the full audit and accounting requirements.  NICVA notes that the interim reporting arrangements will not affect too many charities however the annual monitoring return will affect all charities as it will remain as a permanent requirement for all charities registered with the Commission. 

NICVA would also note that there is perhaps a lack of understanding about the registration process as many participants at the consultation seminar did not understand what is involved in the registration process which needed to be explained at the roundtable table discussion, in order for people to understand the questions on the monitoring return. 

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. 

Objectives of the monitoring programme

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

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

The consultation document 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 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’.

NICVA welcomes the Commission’s approach to be “constructive and proportionate in promoting compliance, particularly in the first few years.”  At the roundtable discussion at the consultation seminar, some questioned the ‘encourage good practice’ objective from a point of view of what is the Commission’s interpretation of it going to be and not that it shouldn’t be an objective.   For example, is everything that the Commission would like to see a charity do, but cannot legally require it to do,  going to fall under the heading of good practice?  Participants were keen to highlight that the Commission should recognise that the charity sector is very diverse and that one interpretation of good practice may be very different from another. 

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.

At the consultation seminar, some people raised concerns that the Commission was asking more questions than it needed to however NICVA believes that it will be extremely useful to have up to date statistics on registered charities in Northern Ireland.   Where specific areas of concern were raised, these have been detailed further under the relevant topic heading. 

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. Once the Department introduces the full accounting and reporting requirements, it will prescribe the content for the trustee annual report and set the audit and independent examination requirements for accounts depending on income threshold.

NICVA notes that the ‘interim reporting period’ may cause a bit of confusion for some, as it only applies to the small number of charities that will be on the Register.  NICVA looks forward to the Department’s full accounting and reporting regulations which will be consulted upon next year. 

Reporting periods

It is intended that the annual monitoring programme will apply to registered charities with accounting periods on or after 1 April 2014.  so the interim reporting requirements should not affect too many charities – essentially, those on the Register. 

So, a charity with a financial year end of 31 March that registers with the Commission 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.   

At the consultation seminar, some questioned the necessity of having ‘interim’ reporting requirements given that the Department plans to bring the full accounting and reporting regulations into force in January 2015.   NICVA agrees that the Commission should implement the interim measures as it needs to be able to monitor those charities on the Register.  There is always the potential for a delay in the implementation of legislation, and if there is, it should not hinder the Commission’s work on implementing charity compliance.

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. 

NICVA believes that charities will see the benefit of online registration when it comes to completing the monitoring form as much of the information on the latter will be prepopulated with information included at the time of registration. 

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.  This information will be useful for any stakeholder seeking information on a particular charity.

Public benefit requirement

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 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. 

NICVA appreciates that this is quite new for charities in Northern Ireland, in that, while charities may be fulfilling the public benefit requirement, they have never had to report on it before.  It will therefore be very important for trustees to read the public benefit guidance and NICVA agrees with the inclusion of the question asking trustees to declare that have had regard to the guidance as it may prompt some to read it that may not otherwise have done.   

SORP

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 are 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 of them. 

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. 

At the consultation seminar, a religious charity was concerned about having to be prescriptive about the countries in which it operates overseas.   The concern is around the personal safety of its missionary workers who are working in countries where it would not be safe for them to declare publicly what they do.   NICVA would ask that a special allowance be made for such charities and that they would be eligible to name the continent or sub-continent within which they are operating.

NICVA would also seek clarification that 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.  

Income and Expenditure

Question A17 asks for the Income and Expenditure figures for the financial period and then asks at A18 if the figures entered at A17 are from consolidated accounts. 

NICVA would suggest that it would be much clearer to ask for consolidated figures and charity figures separately and also to provide guidance on what is meant by consolidated accounts as a charity that doesn’t have them may not understand what the question means. 

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. 

The Association of Charity Independent Examiners (ACIE) have pointed out that the text ‘or organisation name’ in question A19c should be removed as by definition an independent examiner is always an individual and cannot be a firm.   At question A20, ACIE has also suggested that the Commission should seek details of qualified reports for independent examinations in addition to the proposed requirement for qualified audit reports. 

NICVA would recommend inclusion of an ‘i’ button for ‘qualified’ as there may be a lack of understanding what this means. 

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. 

At the consultation seminar, some suggested that a minimum threshold could be introduced for different categories, so for example, a car costing more than £x or a building costing more than £x.  Another suggestion was to introduce a figure that was a percentage of income. 

Gift Aid

Charities will also be asked if they have claimed gift aid during the reporting period. 

Concern was raised at the consultation seminar that some charities which don’t receive cash donations from UK tax payers would not be in a position to claim this.  NICVA would highlight that if this information was included on the public register, as it stands, it may reflect negatively on a charity.  Also, charities may not have claimed gift aid in the last financial year but may have done so in previous years and could be working on a claim for the next year as a claim does not have to be submitted every year.   

NICVA would suggest that if the Commission includes this question that it does not make the results publicly available.

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.  It lists various regulators on the form. 

ACIE has questioned the inclusion of ‘Higher Education Funding Council for England (HEFCE) as it has no jurisdiction in Northern Ireland. 

Number of staff

Questions are included to ascertain the number of staff employed by a charity. 

NICVA would suggest that it may be more straight forward 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. 

ACIE has pointed out that there is no section to disclose payments to trustees for service as a trustee as is permitted in England and Wales. NICVA would ask the Commission if it is going to permit a trustee to receive payment as a trustee and in what circumstances a trustee would be eligible to receive a salary as is suggested by Q25?   NICVA would also suggest the inclusion of the definition of connected persons for those not familiar with the conflict of interest regulations.

Fundraising standards board

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 NICVA recognises the important role of the Fundraising Standards Board 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.  Also, small charities may not see the value in paying the membership subscription to FRSB when they can choose to adhere to the Institute of Fundraising’s Codes of Practice at no cost.  At the consultation seminar, strong opposition was voiced against the inclusion of this question and NICVA would also query the inclusion of this question especially given that there is a small number of FRSB members in Northern Ireland. 

Vulnerable Beneficiaries

There is a question asking to certify that the trustees have confirmed that they have an appropriate policy in place for safeguarding vulnerable beneficiaries. 

NICVA would suggest that there should be a N/A box in addition to the Yes and No boxes as by answering No it may imply that the charity is doing something wrong when it may not need to have such a policy.   

Finally, part A and part B of the monitoring return is colour coded but the declarations section on page 48 is the same colour as part B which may not get completed by those completing part A only. 

Consultation

The deadline for responses was 13 December 2013. Copies of the consultation document can be accessed from Charity Commission's website.

If you have any comments or queries about the content in this response, please contact [email protected].

by Denise Copeland

Governance and Charity Advice Manager

[email protected]