Lucy Hammond FCA DChA
- Partner in Audit & Assurance
- +44 (0)330 124 1399
- Email Lucy[email protected]
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Good governance of a charity includes compliance with all reporting duties. Along with the submission of annual financial statements, this also includes reporting changes to the Charity Commission and submitting the annual return.
Changes to the structure, officials, trustees and governance of a charity may take place as the charity evolves over time. The Charity Commission requires notification of these changes and in some instances, authorisation needs to be given by the Charity Commission before the change takes place.
The governing document of a charity sets out its purpose and is created when a charity is formed. It’s important that the governing document is reviewed regularly to ensure it remains up to date and relevant to your charity’s purposes. As your charity grows and adapts, there are likely to be a number of changes to operations of varying proportions. But how do you know when to notify the Commission of changes in what your charity does?
You only need to change your governing document if it’s in the charity’s best interest, for example:
If your charity is a company or charitable incorporated organisation (CIO), you’ll need the Commission to approve ‘regulated alterations’ to its articles of association or constitution. These are changes to:
You must obtain written consent from the Commission before you agree a special resolution to make any of these changes at a general meeting. If you are changing a charitable company’s purpose, you must register the change with Companies House before you start running the charity with its new purpose. For a charitable company changing its purpose, the timeline would be to gain the written consent from the Commission and then register the change with Companies House before the new purpose can be implemented.
Reporting changes to the Charity Commission can be done online. You’ll need your charity registration number to sign in.
Annual returns must be submitted to the Charity Commission within 10 months of your financial year end.
For charitable companies and unincorporated organisations with:
You will also need a full audit if your charity has either:
You can submit your Trustees’ report and accounts when you file your annual return.
If however, your charity is a CIO, you need to answer questions in an annual return and submit your Trustees’ report and accounts, even if your income is under £25,000 (in fact even if your income is nil). If the income is over £25,000, you need to ensure your accounts are independently checked and submit a copy of this independent examiners report. You’ll need a full audit if you breach either threshold as noted above for charitable companies and unincorporated organisations.
The questions included in the annual return depend on your income, the type of charity that you are and what the charity does. If your income is over £25,000 you will need to declare that there are no serious incidents that you have not yet reported.
Questions in the annual return also cover the activities of the charity, so we advise leaving sufficient time to collate the information required ahead of the filing deadline. The questions are available on the Charity Commission’s website to help you prepare in advance of submission.
Recent investigations highlight the Commission’s continued oversight and regulatory powers in relation to charity governance.
In September 2021 the Commission opened an investigation into a London church due to significant financial concerns, after identifying that the trustees had given an individual over £900,000 via unsecured loans. The regulator also identified concerns over the charity’s awarding of payments and other financial benefits to trustees and others connected with the charity. The charity was originally investigated in March 2021 after failing to file its accounts.
The same month the regulator wound up an animal welfare charity and disqualified two trustees over serious failures over the charity’s governance and financial mismanagement.
If a charity defaults on their statutory filing obligations on more than two occasions over a five year period, they are placed into the “Double Defaulter Class Inquiry”. In August 2021, the Commission reported on an inquiry that arose when a charity became a double defaulter in 2018. The Inquiry resulted in a number of findings, in addition to the failure to file financial information. These included unauthorised trustee remuneration, an insufficient number of trustees for a period of time and failures in managing conflicts of interest.
The inquiry was able to conclude that the former trustee board were responsible for the findings and therefore the charity has been allowed to continue in operation under its new trustee board. The inquiry also ensured that the new board is more aware of its duties, the filing requirements and the provisions of the charity’s governing document.
If you have any questions about your filing requirements, get in touch with our team today.
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