Charity Compliance Update – December 2017

Reporting matters of interest – regulator guidance published

On 22 November 2017 the UK’s charity regulators – being Charity Commission of Northern Ireland, Charity Commission for England and Wales and the Office of the Scottish Charity Regulator – published joint guidance for auditors and independent examiners around the reporting of matters of interest.

Examples of relevant matters which may be reported include:

  • Insecure funding putting beneficiaries at risk – i.e. a charity established to care for vulnerable adults and children is reliant on a single contract for 90% of its income in the reporting period and the trustees are uncertain whether they will be able to secure future funding at the current level when the contract is renewed the following year.
  • Donation that may indicate vulnerability to abuse – i.e. a large donation is made via an intermediary organisation, restricted to teaching the strict beliefs of a particular religion and requires educational materials to be purchased from a specified overseas source.
  • Lack of financial oversight by the whole trustee body – i.e. minutes show that the finances of a large charity are only considered annually during a presentation from the CEO.

The full guidance document, urging a more proactive approach to reporting, can be viewed here.

Practice Note 11 revisions

On 16 November 2017 the Financial Reporting Council (FRC) issued a revised Practice Note 11: The audit of charities in the United Kingdom (PN11), following a consultation earlier this year.

The revisions to Practice Note 11 reflect:

  • Revisions to International Standards on Auditing (UK) (ISAs (UK));
  • Changes to UK accounting standards (FRS 102) and the revision of the Charities SORP;
  • Continuing developments in regulation and guidance issued by the UK Charity Regulators; and
  • Changes in relevant legislation.

For the full, revised document see here.

For an overview of feedback and the FRC’s impact assessment, see here.

Charitable company conversion to CIO status

A long time coming, legislative changes in Parliament on 23 November 2017 have finally allowed charitable companies to convert to charitable incorporated organisations (CIOs). All charitable incorporated organisations (CIOs) will be listed on the Business names index, held by Companies House.

Conversion will be available to charitable companies with effect from 1 January 2018, however there is a proposed timetable for phased implementation (depending upon the total annual incoming resources of the charity in question) as follows:

All charitable incorporated organisations (CIOs) will be listed on the Business names index, held by Companies House.

The Commission will liaise with Companies House on the charity’s behalf as part of the process, ensuring that any register conversion dates match up to removal dates etc. It is also important to note that new CIO applications affected by this legislation (that are submitted to the Commission on or after 1 December 2017) will need to submit a letter of non-objection from Companies House as part of their application for registration. Failure to do so will cause delays.

New Charity Commission safeguarding strategy

On 6 December 2017, the Charity Commission for England and Wales published an updated safeguarding strategy, stating that “safeguarding goes beyond protecting at risk groups”.

Michelle Russell, Director of Investigations, Monitoring and Enforcement at the Commission, says what trustees need to do in practice will depend on their charity’s circumstances:

“The public rightly expect all charities to be safe environments. So all trustees should make safeguarding a governance priority. Of course, what trustees do in practice will depend on the context of their charity’s work, and trustees should take a proportionate approach. Charities working with vulnerable groups such as children and adults at risk for example, will need to ensure their safeguarding policies and practices comply with relevant safeguarding legislation and regulations.

But all trustees should think about the people that come into contact with their charity and consider the steps they can take to prevent them from coming to harm.

Recent accusations of harassment in the work place, including against some charities, demonstrate how vital it is that trustees are alive to the need to protect and safeguard all those involved in or affected by their work.”

To get up to speed click here.

Social Investment news

In 2016 the government commissioned a review of the UK Social Investment Market. On 14 November 2017 the outcome was published.

Recommendations are grouped under the following five action areas:

  • Improve deal flow and the ability to invest at scale
  • Strengthen competence and confidence within the financial services industry
  • Develop better reporting of non-financial outcomes
  • Make it easier for people to invest
  • Maintain momentum and build cohesion across initiatives

Two days later, the Finance No.2 Act 2017, which received Royal Assent on 16 November 2017, raised the Social Investment Tax Relief scheme (SITR) threshold to £1.5million with retrospective effect from 6th April 2017.

Consultations round-up

Here’s our monthly round-up of (and links to) key consultation opportunities and those closed, pending feedback.

The following consultations are currently open and inviting a response:

  • DCLG and DWP – Funding for supported housing – two consultations were launched on 31 October 2017 – one on housing costs for sheltered and extra care accommodation, and one on housing costs for short-term supported accommodation. For policy statement, consultation documents and how to respond click here. Closes 23 January 2018. Both consultations seek the views on the design of the government’s new supported housing funding models which relate to England only.
  • Charity Tax Group – Review of HMRC’s Guidance on Gift Aid Donor Benefits – opened 30 November 2017, deadline for feedback is 5 January 2018. To read more and have your say click here.

The following consultations are closed with feedback analysis pending – watch this space for an update in future briefings:

  • Charity Commission for England and Wales:

The use and promotion of complementary and alternative medicine (CAM): making decisions about charitable status – closed on 19 May 2017. This consultation is about the Commission’s approach to deciding whether an organisation which uses or promotes CAM therapies is a charity. The Commission have released a statement, following receipt of over 600 responses:

“The Commission had planned to publish an analysis of the consultation in early August. However, the high volume of submissions means it has not been possible to prepare the analysis in that timeframe. We will continue our work on the review and plan to publish our analysis later in 2017.”

Closed 1 December 2017. Draft legislation and supporting consultation documents can be viewed here.

  • Charity Commission for Northern IrelandAnnual monitoring return 2018 – closed on 21 November 2017. Changes to apply to charities’ financial years starting on or after 1 January 2018. A full consultation report, providing an overview of the public consultation process and outlining how the Commission considered the responses they received will be available in Spring 2018.
  • Charity Commission for England and Wales Annual return 2018 – closed on 24 November 2017. Changes to apply to charities’ financial years starting on or after 1 January 2018.
  • Office of Tax Simplification (OTS) – review of depreciation and capital allowances and whether the use of accounts depreciation to provide relief for capital expenditure instead of capital allowances would simplify the preparation of tax returns for incorporated and unincorporated business. Deadline for responses was 30 November 2017. For more information about the OTS’s call for evidence see here.
  • OSCR – Fundraising draft guidance consultation – was extended to, and closed on, 8 December 2017. The response was split into parts:

OSCR will publish the final version of the guidance and an evaluation report of the consultation in early 2018.

As previously published by Accounting Web December 2017