The Charity Commission has opened a formal consultation on proposed modifications to the Annual Return, with the goal of ensuring that the regulator collects the correct data in the future.
The Annual Return is an online form that must be completed within 10 months of the end of the financial reporting period by all charities with annual incomes of £10,000 or more.
The return hasn’t changed much since 2018, but after a thorough examination, the Commission is proposing to alter the question set that charities will be required to fill out starting in 2023.
A significant step forward in the regulator’s data strategy
The Annual Return updates are an important step toward the Commission’s goal of becoming a more data-driven regulator. The overall strategy aims to ensure that the type and volume of data collected on charities serves three purposes: allowing the Commission to better identify risks and problems in the sector, assisting the public in making informed and confident decisions about charities, and allowing policymakers, researchers, the sector, and the public to gain a richer understanding of the sector in England and Wales.
Changes proposed
The proposed changes will require charities to respond to a greater number of questions, but the questions have been simplified and clarified in many cases. Overall, the Commission aimed to keep the time burden on charities in filling out the return reasonable and proportionate.
An interactive vocabulary will be included in the final questionnaire to assist charities in filling out the form. This is still in the works and will be influenced by the replies to the consultation.
Questions such as these are among the anticipated additions:
Improve your understanding of how reliant charities are on specific types of income and single funding sources. For example, charities will be asked if one income stream accounts for 70% or more of their financing, and if specific categories of income sources, such as corporate donations, account for 25% or more of their income.
Learn more about roles and duties, governance, controls, and diverse organizational structures in charities, since the regulator’s case studies show that this information can be linked to risk in some cases.
By requesting information on the premises from which charities operate, you may help to create a more accurate image of the geographical areas in which charities operate in England and Wales. This data will, among other things, assist policymakers and grantmakers in identifying geographic locations that are comparatively underserved by philanthropic efforts. This will enable funders to make judgments that will aid in the ‘leveling-up’ of such ‘charity deserts.’
Allow the public and others to examine charities’ use of resources and their potential to deliver particular sorts of activity by better capturing employee numbers and payroll costs in the sector.
As part of the consultation, the Commission wants to hear from a wide spectrum of charities so that it can make any required revisions before the new return is published in 2023. In addition to the formal consultation, the Commission has been user-testing the question set with charities to ensure that the questions are clear and easy to comprehend in their current form. A second round of user testing is scheduled for July. 4,000 charities will be chosen at random and requested to provide input on the language of the question set as it is currently written.
The Charity Commission’s chief executive, Helen Stephenson, said:
The annual return is an important instrument for charities to account for their activities to us as regulators, as well as to the general public and funders. It’s critical that we get the questions correct, but we also need to make sure that the burden on organizations to complete the return is reasonable. As a result, I encourage charities to review the proposed amendments and provide feedback as part of our public consultation.
Looking ahead, the new data we hope to collect through the annual report will benefit both the sector and the Commission as a regulator by allowing us to publish more detailed, richer information about the sector, which will help the public and funders make better decisions about which charities to support.
With a three-year set of questions, a new, adaptable strategy has been developed.
The Commission is creating a more flexible approach to the use of suggested AR questions as part of the proposed amendments, allowing it to alter each AR throughout the time in question based on current conditions.
The majority of the questions from the consultation will be published each year, according to the idea. This stability will allow longitudinal data to be collected, which will allow the Commission and others to compare trends from year to year. A small number of questions may not be suitable to include in a given year, for example, if the risk in question is time-limited or if the Commission can obtain the information in another way.
The Commission will announce ahead of time which questions have been chosen for inclusion in the AR and why they were chosen.