The Charity Commission has launched a 12-week consultation into potential changes to the annual return, which could require charities to answer 16 additional questions each year.
As part of the proposals, the Commission is looking to update the questions charities will need to answer from next year onwards as well as adding new ones.
If the proposed changes went ahead, it would be the first major update to the annual return since 2018.
Proposed changes
The Commission is proposing to implement a maximum of 16 new questions, albeit simplified, around themes including financial governance, charity operations and structure and employees and volunteers.
Its questions aim to collect additional data in relation to specific risks to ensure greater accountability and transparency across the sector.
For instance, charities will be asked whether 70% or more of their total income depends on one income stream and whether a quarter or more comes from donations to determine whether they have exceeded certain thresholds.
The regulator also hopes that the new information it will collect will help identify areas where charities are most needed and encourage funders to make decisions that level up “charity deserts”.
Greater flexibility
The Commission is also calling for more flexibility to be able to include or omit certain questions in any given year depending on external circumstances.
For example, charities could be asked a specific question in response to an “unexpected sector-wide event” such as the Covid-19 pandemic. This would “create enough flexibility to respond to unexpected risks and events, whilst only asking for information when it is needed,” the Commission said in the consultation.
It said: “As the questions are set by the regulations, this makes it difficult to respond quickly to unforeseen risks and changing data needs. For example, during the pandemic it became evident that there were important gaps in data on how charities were responding and coping with the effects. As the issues were not covered in the annual return regulations, we could not use the annual return to get the missing data.”
‘Key step’
The Commission said updating the annual return is key in its plans to become more data-driven.
Helen Stephenson, chief executive of the Charity Commission, said: “The annual return is a crucial tool that helps charities account for their work to us as regulator, and to the public and funders. It’s important we get the questions right, but also that we keep the burden on charities completing the return proportionate. So I encourage charities to look at the proposed changes and have their say as part of our consultation.
“Looking ahead, the new information we hope to gather through the annual return will benefit the sector, as well as the Commission as regulator, by allowing us to make more detailed, richer information about the sector available, which in turn can inform the public and funders in making better informed decisions about which charities to support.”
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