Consultation outcome

Annual Return 2023 consultation

Updated 21 December 2022

Applies to England and Wales

1. Introduction

The wider context - the Charity Commission’s data strategy

1.1. The Charity Commission registers and regulates charities in England and Wales, to ensure that the public can support charities with confidence.

1.2. The Commission has five statutory objectives set out in the Charities Act 2011 (the Charities Act). These include:

• increasing public trust and confidence in charities
• promoting awareness and understanding of the operation of the public benefit requirement
• promoting compliance by charity trustees with their legal obligations in governing their charity
• promoting the effective use of charitable resources
• enhancing charities’ accountability to donors, beneficiaries and the public

1.3. The Commission also has general functions and duties under the Charities Act. These functions include encouraging and facilitating better administration in charities; and identifying and investigating apparent misconduct or mismanagement in charities and taking appropriate remedial action. We must engage with charities in a proportionate, accountable, consistent, transparent and targeted manner. We must use our resources in the most efficient, effective and economic way. The Commission is also tasked with maintaining an accurate register of charities in England and Wales. Obtaining and holding relevant and accurate data on charities helps us to achieve our statutory objectives and functions.

1.4. To continue fulfilling these objectives, we will need to make better use of data which will in turn help us to deliver greater impact for the sector and for the public. This is also a key priority in our Business Plan. The new questions we have proposed are intended to be consistent with our strategic aims and this has also informed the development of new questions. We invite respondents to feedback on whether they feel the new AR will achieve these. These aims are:

• being able to build regulatory decision-making processes around the right data so that we can make greater use of analytics, intelligence and information sharing to proactively deal with emerging issues and problems rather than reacting to the consequences

This supports our statutory objectives relating to public trust and confidence, and promoting charity law compliance by trustees.

• ensuring availability of reliable information about charity activities, governance and impact. If the public feel they have access to clear and appropriate information, this is likely to support increasing levels of trust

This supports our statutory objectives relating to public trust and confidence, and enhancing charities’ accountability and transparency.

1.5. We also have an important role in making information available to decision-makers in government and wider stakeholders, as well as helping the sector to learn from what we know.

This supports our statutory objective to promote the effective use of charitable resources.

Background: about the Annual Return

1.6. The AR is an important data collection tool. It is particularly significant for evaluating year-on-year trends, where a shift in aggregate responses can be an early indication of risk in the charity sector. This allows the Commission to respond appropriately and to support the sector effectively.

1.7. The Charities Act (s.169) provides the legal framework for the AR (introduced by the Charities Act 1992) and provides for the Commission to set the content of the AR in regulations.

1.8. The AR complements other sources of information, including:

• register particulars – the details that charities must enter on the register
• the charity’s Annual Report and accounts – for charitable companies and all charities with incomes over £250,000, the requirements for Annual Reports and accounts are set out in the Charities SORP (Statement of Recommended Practice)

1.9. The AR currently has four component parts. Requirements are tiered so that the smallest charities submit minimal information, while we require more from larger charities. These are:

• a survey to collect baseline details about all registered charities with income over £10,000 and all charitable incorporated organisations (CIOs) (this is known as Part A)
• a survey to collect structured financial data; all charities with an income over £500,000 are required to respond (known as Part B)
• copies of charity financial accounts – all charities with income over £25,000 must provide this
• a charities Annual Report - all charities with income over £25,000 must provide this

1.10. We last consulted on significant changes to the questions asked in Part A in 2017. These came into effect for charities’ financial years starting on or after 1 January 2018, through the Charities (Annual Return) Regulations 2017.

1.11. As part of this change, we also transferred some questions from the Annual Return into a new digital service, Update Charity Details (UCD). This allows charities to update their register entry (e.g. contact details and trustees) throughout the year so that the register remains accurate, and the Annual Return is simpler to complete.

Why are we proposing to update and improve the Annual Return questions?

1.12. Since 2018 we have refined our understanding of risks facing charities. We have also completed new research on how different types of published information influence public trust and confidence in charities, what standards are sufficient to meet accountability requirements, and how data can demonstrate effective use of charitable resources in today’s world. Our public research ^{[footnote 1]} has consistently shown that public trust and confidence in charities is dependent on well-managed charity finances.

1.13. We have used this insight to review whether we hold the right information to help the public make informed choices about charities, to identify risk and to provide our stakeholders with better visibility of the sector. We took account of other ways we collect data, to ensure that additional information is sought through the most appropriate mechanism.

1.14. We aim to ensure that the overall impact of our regulation of charities is proportionate to the benefit to the sector and public. Information we collect should be that which we need to provide charities with the right support and guidance to enable compliance, minimising time and resource burden.

1.15. Following this review, we have proposed a new set of questions reflecting where:

• collecting additional data through the Annual Return would be the most proportionate and effective way of ensuring our data set helps us as a regulator to assist with accountability in the sector
• we could narrow down the data we currently ask for, to optimise it to the use we intend, and to reduce the burden of gathering and reporting it

1.16. We also completed research with people who complete charities’ AR. Charities emphasised that gathering the information needed to answer the questions in the AR is what takes most time. They would welcome additional clear and simple guidance on completing the Annual Return. They recommend we avoid, or explain, technical language. It should be clear why we are asking a question, what we want to find out and what charities should include when responding.

1.17. This has been accounted for in redesigning the AR to ask for information in the right way and improve how we specify the data that we want. We have proposed in this consultation questions for the revised AR that use simpler language and so are easier to understand. We aim to ensure that the AR enables charities to share information with us more easily, so we can get a fuller picture of the sector, without imposing undue regulatory burden, as additional questions are offset by improvements in question usability.

2. Overall approach to questions included in the Annual Return

2.1. The Commission must implement changes to the AR by making regulations under the Charities Act. These Regulations include the list of questions to be asked in the AR.

2.2. 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 AR Regulations, we could not use the AR to get the missing data.

2.3. We are proposing a question that can be added to the AR if required, in response to an unexpected sector-wide event (such as the pandemic). This is explained in Section 8. By doing this we can retain the specificity in the Regulations, and consult on the principle of the question, but create enough flexibility to respond to unexpected risks and events, whilst only asking for information when it is needed.

2.4. We also aim to develop a more flexible approach to the use of our proposed AR questions, that will allow us to reflect the circumstances at the point at which we run each AR that would take place during the three-year period covered by this consultation. There will be a core of fixed questions from the set included in this consultation that we will ask every year. We intend for this to be the majority. This stability is important because of the value of longitudinal data to compare trends, at an aggregate level between years. However, each year some of the questions may not be needed, or appropriate to run, and in that case we would not include them. Each year we will publish in advance details of which questions have been selected for inclusion in the AR and the rationale for including them.

2.5. We propose to base our decisions to include or exclude questions on the following factors:

• we intend to collect information once only, for a ‘snap-shot’ of the sector
• the AR is the best place to collect the information for the first time, but from then on it can be updated via a different source, for example an alternative avenue for collecting the information becomes available
• responses to this consultation suggest that it would be difficult for charities to collect a piece of information for AR23. To provide an opportunity for charities to first amend their systems/processes it is initially not included, but it is added once charities can collect the right information in a subsequent year
• a particular risk event is identified on which the Commission wants to collect sector information (see Section 8)

Question 1: Do you support the proposal to increase the flexibility of the AR, allowing us to select certain questions not to be run in a given year, using the criteria set out in paragraph 2.5?

Overview of revisions to questions

2.6. Questions proposed sit within categories based on our statutory objectives and regulatory priorities (as set out in the introduction to this consultation). They are similar to the categories used in the previous AR but updated in response to our current assessment of risk. We ask you to comment on the questions in each category, after we have explained the rationale for changes made to questions within the category.

2.7. We have conducted significant internal and external testing on the structure and wording of the AR. We found that the 2018 AR questions in several cases were not easy to navigate. They often asked for multiple data points despite being counted as a single question. (For example, a single question containing parts (a)-(e), each requiring a charity to provide a separate piece of data.) Wherever feedback suggested this was hard to navigate, we remodelled questions to make them easier to follow. In far more cases our questions now require a straightforward Yes or No, based on assessment of one piece of information.

2.8. Through a combination of this remodelling, and addressing our priority data requirements, there will be a higher number of individual questions in the new AR, shown in the tables below. We recognise these are significant changes. We are confident that our simplification of the AR will mitigate any overall increase in regulatory burden. We have evaluated these conclusions using a Regulatory Impact Assessment, based on user testing with a sample of charities during development of questions. This is described in greater detail in Section 9.

	Existing Annual Return	New Annual Return – all questions
Maximum number of questions	36	52
Annual baseline - the core questions that would be answered by all respondents	16	32
Sub-questions, responded to only by respondents with relevant operations or data	20	20

	No. of Questions
Questions retained from previous Annual Returns	24
Questions amended as per feedback from previous Annual Return processes	5
Number of new questions	23

2.9. The full set of questions, the accompanying draft guidance and the Regulatory impact assessments are in Annexes 2, 3, 4 and 5.

3. Proposed revisions to questions on financial governance

Income

3.1. We propose retaining the first question on income from the current AR unchanged. This asks for overall income and expenditure in the financial period.

3.2. We propose replacing the subsequent questions in this section with five new questions. These look at the diversity of the charity’s income streams including any income from corporate or individual donors or connected parties. The new questions will reduce the reporting burden by using yes/no answers rather than requiring specific values. The questions are also more targeted to obtain data in relation to specific risks. Charities will be asked whether they have exceeded specified thresholds in the following risk areas:

• heavy reliance (greater than 70%) on one income stream
• reliance (greater than 25%) on corporate donations
• reliance (greater than 25%) on individual donations
• reliance (greater than 25%) on donations from a single trust
• reliance (greater than 25%) on donations from connected parties

3.3. These thresholds reflect evidence that charities who are over-reliant on a single source of income, or who receive large donations from corporate, individual or connected party donors can be more financially unstable unless the correct procedures are followed. We will not ask charities to provide details of any donors. The proposed questions focus on connected party donations because our evidence also suggests that without proper management, donations from connected parties can indicate a conflict of interest. We will use the data to identify trends and provide proactive support where we identify charities that may be at risk.

3.4. We appreciate from feedback that income can be one of the more confusing aspects of the AR. We have sought to request yes/no responses where possible, rather than detailing individual transactions and their values. In response to user feedback, we will provide clear and accurate explanatory notes and definitions of what should be reported. We have assigned values to specify thresholds for significant donations. We have also created a glossary of technical terms. We would welcome comment on the effectiveness of our draft explanations and definitions.

Trustee payments

3.5. We propose one new question on any payments to trustees for goods and/or services. We plan to retain an existing question on whether any trustees resigned to take up employment in the charity.

3.6. We currently ask charities about payments and benefits their trustees have received. We propose now to specifically ask whether trustees were paid for being a trustee, paid for a role within any of the charity’s trading subsidiaries or connected organisations, or paid for providing goods and/or services to the charity, its trading subsidiaries or any connected organisations. We also propose to simplify responses to yes/no answers.

3.7. While charities do not have a statutory power to pay trustees for providing goods at the point of this consultation, the rules under the Charities Act are expected to change to allow trustees to be paid for goods as well as services by the time charities would be answering this question in the AR. This is why the question asks about goods as well as services.

3.8. Where trustees receive payments or other benefits, they must follow our guidance, and seek consent where necessary. This question will give us accurate information on the extent of trustee payments and ensure we can monitor potential risks. It should help to provide assurance that trustees understand the rules and risks around personal benefit and trustee payments and can recognise and manage conflicts of interest.

3.9. In user testing of the revised questions, participants felt able to answer these questions where appropriate definitions and explanatory notes were provided. They were comfortable with the Commission asking them. Trustee payments are likely to be the exception rather than the rule, and we would expect charities to have the details they need to answer these questions straightforwardly. We would provide any additional explanatory notes that responses to this consultation indicates are required.

Grant making; Income from government contracts; Income from government grants

3.10. These sections include questions about charities’ grant making activities, and grants and other contracts with government and local authorities.

3.11. We have retained the questions from the existing AR, which work well, and which feedback suggests are easy to understand.

3.12. We propose adding a new question for charities which are principally grant-makers, on what percentage of grants were made to individuals and to other charities. We will also ask whether any of those grants were to connected parties. Similarly, we want to make sure that charities who make grants to individual beneficiaries are financially stable, to reduce the risk to beneficiaries of the charity running into difficulty. Understanding the extent of grants provided charity-to-charity and to individuals will help us understand the extent of this risk.

3.13. We propose to ask about grants to connected parties because it is important that charities identify and manage any potential conflicts of interest. Although charities are entitled where appropriate to make grants to individuals and other charities (including where recipients are connected parties), any conflicts of interest must be managed effectively by the charity. The Commission has identified this as a material risk for charities.

Question 2: Do the changes we are making on questions about finance ask for the right information about charities based on the information provided?

Please provide any comments that will help us understand this further.

Question 3: Are the questions on finances worded in a way that makes them clear and easy to understand?

Please provide comments on questions you do not consider to be clear and easy to understand.

Question 4: Is our draft supporting information and guidance on the finance questions sufficient to explain how to complete these questions?

Please provide any comments that will help us improve this further.

If you are responding on behalf of a charity:

Question 5: Could you answer these questions using information you already gather on your charities’ finances?

Please provide any comments that will help us understand this further.

Question 6: Do you have any concerns about the time it would take to answer the questions on trustee payments?

Please provide any comments that will help us understand this further.

4. Proposed revisions to questions on income and operations outside England and Wales

Income from outside the UK

4.1. Existing questions in this section ask charities if they receive income from outside the UK, the value of this income and the source of this income (e.g. bodies such as the EU, or overseas donors). Only a small proportion of charities on our register receive money from outside the UK. Most charities will only have to answer “no” to the first question.

4.2. We plan to keep this section largely unchanged. In the main, it is larger charities with complex overseas operations who will need to answer this section and we believe it remains proportionate to the potential risks that can arise if overseas income is not managed in accordance with our guidance.

4.3. In addition, we plan to ask charities receiving overseas income to indicate how the payment was received from a drop-down list (e.g. bank transfer). It is important that we collect this information because levels of oversight and regulatory obligations differ according to how the money was received.

Operating and spending outside England and Wales

4.4. Existing questions in this section ask if charities, partners or third parties deliver charitable activities or spend funds outside England and Wales. The questions focus on where overseas spending occurs outside the regulated banking system. This applies to only a small proportion of registered charities.

4.5. We plan to retain these questions. They provide critical information that supports dealing with wrongdoing and harm and ensuring compliance with trustee responsibilities.

4.6. We plan to add one question to check whether the charity has formal written agreements with overseas partners. It is best practice for charities to have formal written agreements in place with overseas partners to support effective due diligence and risk management. We believe there is significant value in gathering this data. It will help assure the Commission that partnerships are appropriately governed and identify where we may need to intervene if good practice not being followed, including the safeguarding of vulnerable individuals overseas.

Question 7: Are the new questions about overseas income and agreements with overseas partners clear, easy to understand and answer (using the supporting information as necessary)?

Please offer any comments, in particular whether the options on how overseas income is received listed are complete and comprehensible

If you are responding on behalf of a charity:

Question 8: Do you have any concerns about the time it would take to answer the questions on the way overseas income was received by your charity?

5. Proposed revisions to questions on charity operations and structure

Service delivery - premises

5.1. This proposed new question would gather data on the premises from which charities deliver services or undertake operations within the UK. At present we hold only the address provided at registration, which may serve a different purpose at each charity and tell us little about where a charity operates in practice. Having more data about all the locations from which a charity operates will help us see if there are common sorts of risk around charities that tie to a particular geographical location. This would enable the evaluation of localised patterns of complaints and reports of concerns that we receive.

5.2. More broadly, it would enable identification of gaps in charitable service provision which could support several benefits to the sector including the effective application of charitable funds. This kind of information would have been useful in the pandemic, for example. It was extremely difficult to find data to identify gaps in provision or help Government target support for charities where it was most needed.

5.3. We are conscious that this question could create a significant data collection and administration burden for some charities because of their model of service delivery or structure. We will listen carefully to charities’ feedback through the consultation period, including on the definition of premises for the delivery of services. We will also consider whether we ask just for the first part of a postcode (e.g. N1) or allow the very largest charities to declare they are present across all postcodes. We are keen to understand whether charities consider there to be obstacles to providing this data. We will consider any alternative proposals that allow us to address the challenges we currently face from our limited data on charities’ geographical operations. In the longer term we will see if we can collect this information through other routes, potentially including UCD. Our current analysis indicates that the AR would be the best way to collect this data for the time being.

5.4. We do not intend to ask for data on separately located premises or locations used for fundraising or trading subsidiaries (e.g. charity shops).

Question 9: Do you think the Commission should gather data on the premises from which a charity operates?

If you are responding on behalf of a charity:

Question 10: Please comment on how feasible it would be for you to provide information about all the locations from which the charity operates. Please include suggestions for how to implement this if it were included, such as the easiest way in which to provide location information.

Property

5.5. We plan to add a question to identify any properties belonging to unincorporated charities (trusts and unincorporated associations) held or controlled by holding or custodian trustees, other than the Official Custodian. The Commission has identified a recurring factor in disputes leading to risk to property where there are separate holding trustees who hold property or land for an unincorporated charity. This will help us to manage risks appropriately in relevant cases.

Data protection and cyber security

5.6. We propose to include a new question asking whether a charity’s websites are hosted outside of the UK and, if so, for charities to tell us which countries their websites are hosted in. Data protection legislation highlights potential security concerns if websites are hosted outside of the UK. The answers to these questions will determine if a charity may be at increased risk of cyber harms or criminality, and allow us to provide targeted support.

Structure and membership

5.7. This section includes new questions on membership of federated or regional structures, affiliations and membership of umbrella or professional bodies. It also retains and extends an existing question regarding trading subsidiaries.

5.8. Charities may belong to a wider organisational framework. They may (sometimes concurrently) be:

• federated (a single centralised body connects a group of organisations each retaining some internal autonomy)
• providing services on behalf of or as part of another registered charity
• affiliated to other registered charities through formal links (such as in a consortium)
• associated with, or a member, of different organisations who work on their collective behalf – these are termed umbrella bodies or other professional bodies

5.9. We are proposing new questions so that charities can declare if they fit any of these criteria. We need this information to target our resources more effectively; our evidence suggests that different charity structures can generate very specific and potentially challenging governance concerns. We anticipate that information about group structures will enable us to identify and engage more effectively with charities needing support and guidance on a particular theme or risk.

5.10. We have provided draft guidance, and a glossary, to explain each of the above terms so charities can be sure of their status and report it accurately. We are particularly keen to seek feedback confirming whether this clarifies the information we are seeking.

5.11. We are proposing new questions to identify and monitor which charities have members, and whether these members have rights set out in the charity’s Governing Document.

5.12. We anticipate that having this information will enable us to target communications to charities, advising on roles and responsibilities to assist with charity management and good governance. this should reduce the number of disputes dealt with by the Commission. We hope this will free up regulatory resource to deal with higher risk concerns.

Subsidiaries

5.13. We intend to extend the existing question on trading subsidiaries to check if any associated trading subsidiaries dissolved in the AR period. We will use this data, together with other data sources, to proactively identify and work with charities that may be at financial risk.

Question 11: Do the changes we are making on questions about charity operations and structure ask for the right information about charities based on the information provided?

Please provide any comments that will help us understand this further.

Question 12: Do you agree that the new questions about charity operations and structure are clear, easy to understand and answer?

Please provide comments on questions you do not consider to be clear and easy to understand.

Question 13: Is our draft supporting information and guidance for the questions about charity operations and structure, including the glossary, sufficient to explain how to complete these questions?

Please provide any comments that will help us understand this further. In particular we are keen to understand whether the definition of “hosted” in the glossary sufficiently clear to help you answer the question.

If you are responding on behalf of a charity:

Question 14: Could you answer these questions using information you currently gather on your operations and structure?

Please provide any comments that will help us understand this further

6. Proposed revisions to questions on employees and volunteers

Employees; Volunteers

6.1. These sections include new questions on the number of staff a charity employs (in the UK and overseas), and payroll costs. They retain an existing question on volunteering. Sustainable volunteer numbers are of vital importance to the sector being able to continue its work now and in the future. Monitoring trends here will help the Commission understand where charities may not be able to maintain service or governance standards and would help identify where localised or sector specific risks may arise.

6.2. We intend to retain an existing question on salaries. We propose to request new information on headcount and total payroll cost because:

• it is relevant information for the public or other stakeholders to consider when looking at charities’ use of resources and ability to deliver certain activities
• the number of employees, relative to other factors regarding finances and operations, is likely to be associated with the risk profile of the charity, and allows us to target guidance or proactive support based on how the charity is operating
• headcount overseas allows us to identify charities with employees overseas and support them in ensuring relevant duties are fulfilled

Question 15: Do the changes we are making on questions about employees and volunteers ask for the right information about charities based on the information provided?

Please provide any comments that will help us understand this further.

Question 16: Are the new questions about employees and volunteers clear and easy to understand and answer?

Please provide any comments on questions you do not consider to be clear and easy to understand and answer

Question 17: Is our draft supporting information and guidance around the questions on employees and volunteers sufficient to explain how to complete these questions?

Please provide any comments that will help us improve this further.

If you are responding on behalf of a charity:

Question 18: Could you answer these questions using information you currently gather on your employees and volunteers?

Please provide any comments that will help us understand this further

7. Proposed revisions to questions on governance of risk, incidents and safeguarding

Financial controls; Governance

7.1. We plan to retain an existing question on whether the charity has reviewed its financial controls and to supplement this with a new question on the charity’s policies and procedures. We will use this data to help us provide specific advice and guidance where charities appear not to be following relevant requirements. This should be straightforward for a charity to complete, as it does not require additional data monitoring.

Safeguarding; serious incidents

7.2. We are retaining questions on the reporting of serious incidents and safeguards including DBS checks. We have revised and clarified the wording in response to feedback.

7.3. We propose a new question asking charities to identify where they work with children and/or adults at risk. We intend to compare answers to this question against information we hold on types of charities and the occurrence of serious incidents to identify particular areas of risk.

Question 19: Are the changes we are making to questions about governance of risk, incidents and safeguarding clear and proportionate, and do they ask for the right information?

Please provide any comments that will help us understand this further.

Question 20: Is our draft supporting information and guidance on governance of risk, incidents and safeguarding sufficient to explain how to complete these questions?

Please provide any comments that will help us improve this further.

If you are responding on behalf of a charity:

Question 21: Could you answer these questions using relevant information you currently collect?

Please provide any comments that will help us understand this further.

8. Additional question in response to major external change

8.1. We envisage that this new question will only be used in the event of an external change that is likely to impact most charities, either positively or negatively. Recent examples of such events might be the COVID-19 pandemic, or the crisis in Ukraine. It will help the Commission to move towards more proactive and risk-led regulation as we can better:

• identify risk themes and trends
• tailor subsequent activity, for example provide targeted advice and guidance to trustees to support them to respond to the risk where required

8.2. We would use it to understand the impact of the relevant events upon different elements of charity operations. To ensure consistency of data, make the question easy to complete, and allow it to be captured in the Regulations, responses would be captured through a dropdown list. We propose to include impact on:

• donations
• fundraising activities
• other income i.e. grants
• expenditure
• number of volunteers
• number of employees
• number of trustees
• total service demand

8.3. It will not be automatically included in the AR cycle. Rather its inclusion would be triggered by risk assessment. Accompanying guidance will explain to which event it relates.

Question 22: Do you support an additional question being available for use in response to major external change?

Please provide any comments that will help us understand this further.

9. Summary assessment of Regulatory Impact

9.1. Our initial Regulatory Impact Assessment (RIA) of the impact on charities of introducing the new proposals for the AR has been informed by:

• user testing of the new draft questions
• an assessment of the complexity of each question
• an assessment of the different requirements (e.g. number of questions required to answer) that would apply to charities in different income bands, and how many charities would be affected in each case

9.2. There are approximately 169,000 registered charities in England and Wales. The very smallest unincorporated charities, which amount to over 70,000 of these, are not affected by any of the changes proposed in this consultation as they are not required to complete the full question set.

9.3. We estimate that the total increase in regulatory cost to all charities is £4.95m. This has been calculated by assigning a monetary value (£14 per hour) to the estimated time taken to complete the revised AR, in comparison to the existing number of hours. We have differentiated between smaller, medium and large charities in this calculation because we believe our evidence base is robust enough for us to allow this. Full details are in the Regulatory Impact Assessment Annex.

9.4. We are satisfied in principle that the benefits of enhanced transparency and better data, enabling more targeted regulatory interventions will be of greater benefit to charities. Greater transparency and accountability, and more effective regulation, should also help to increase public trust and confidence in charities.

9.5. We will review and update our RIA calculation to take account of new information we gain through this consultation.

Question 23: Do you think the approach to the new Annual Return is proportionate?

Please provide us with further evidence that informs your response, highlighting any that you believe should be incorporated into our final Regulatory Impact Assessment.

10. Summary assessment of compliance with equalities duties

10.1 We have considered potential impacts of these proposals on charities, trustees and the public under the Public Sector Equality Duty. We have carried out an Equality Impact Assessment (EIA) covering this consultation, the proposed new approach to the AR, and the proposed new questions in the AR. We have assessed that the proposals would not constitute unlawful discrimination, harassment, victimisation or any other conduct prohibited by the Equality Act 2010 and have had due regard to the need to advance equality of opportunity and foster good relations between people who share a protected characteristic and those who do not. Where we consider the proposals may have an indirect impact on certain groups we have carefully considered mitigating actions. We will ensure that the digital system adheres to the ‘AA’ accessibility standard and that sufficient guidance is provided to ensure that those unfamiliar with using digital systems will be able to use the AR system.

10.2. Our equality analysis has been informed by evidence from different sources including interviews and focus groups conducted on behalf of the Commission by IFF Research with around 70 charities across a broad spectrum of income levels.

10.3. We will review and update the EIA regularly to incorporate new information, including responses to this consultation and a survey of up to 8,000 charities regarding the proposed new question set.

Question 24: Do you have any comments on our assessment of the equalities impact?

11. Proposals regarding the publication of information

11.1. We propose to publish information provided by charities in response to the AR where we consider that this will promote transparency, increase public trust and confidence in charities or enhance accountability of charities to donors, beneficiaries and the public. We are mindful of our legal duties about personal data and will only publish personal data or data that could allow individuals to be identified if it is compliant with personal data legislation to do so.

11.2. We have set out our proposed approach to data publication as a column alongside each question in Annex 2 and we will continue to consider this in the context of consultation feedback.

11.3. In accordance with existing protocols and statutory data sharing arrangements we may share information gathered through the AR questions with other public authorities where appropriate and consistent with our information handling duties.

Question 25: Please provide us with further evidence or information that we can consider in, particularly any concerns you have around data privacy.

12. Next Steps

12.1. We will use feedback from this consultation to inform the development of the proposed AR questions, and to ensure that charities of all types and sizes should be able to complete the parts that are relevant to them. In the past, we have decided to cut or revise certain questions in response to consultation feedback.

12.2. We will publish a response to the findings of this consultation in the Autumn. The finalised questions will be included in the new Annual Return Regulations which will come into force on 1 January 2023. The new AR will apply to charities’ financial years commencing on or after that date.

12.3. Once the new AR is in force, each year we will publish in advance details of which questions have been selected for inclusion in the AR and the rationale for including them.

13. Privacy statement

13.1. This privacy notice explains how the Charity Commission for England and Wales (‘the Commission’ / ‘we’) processes your personal data when you respond to our consultation on the Annual Return Process.

13.2. This notice is supplemented by our main privacy notice which provides further information on how the Commission processes personal data, and sets out your rights in respect of that personal data.

13.3. The Commission consults the public as part of its open policy making process. We do this by publishing our consultations on gov.uk. We invite individual responses to be made either by online survey or by email. It is also possible that we will also use meetings to collect responses. For the information you submit, the Commission is the data controller.

Personal information we collect when you reply to this consultation

13.4. When you reply to this consultation, we ask you for:

• your name
• email address
• details of your connection to the organisation you represent (if applicable)
• the type of charity that you are connected with.

13.5. Your name and email address will not be a mandatory requirement and should only be provided if you are content to do so.

Why we ask for this information and what happens if it’s not provided

13.6. We collect this personal information because:

• it provides us with some assurance that you’re a real person
• it allows us to respond to your comments e.g., seek any clarification from you
• we may contact you to invite you to discuss further the topic under consultation

13.7. We also collect this personal information in order to:

• gather information about the types of individuals and groups participating

13.8. If you do not provide this information, we can still take account of your comments although we may consider them to be less persuasive in some circumstances.

How we will process your personal data

13.9. We log the data we receive in the consultation responses in our electronic records system. We may acknowledge your response where that is practical and necessary.

Sharing information

13.10. We will share your data if we are required to do so by law, for example, by court order or under the Freedom of Information Act (FOIA), or where necessary in order to further our statutory functions and objectives

13.11. We may share your data with other organisations which have a direct interest in this consultation: for example, Crown bodies or government departments.

13.12. Under FOIA every effort will be made to remove personal data from disclosure where a request is received. We would encourage respondents not to include personal data in the body of a response.

How long we keep your data

13.13. We will only retain your personal data for as long as:

• it is needed for the purposes of the consultation
• the law requires us to

13.14. In general, this means that we will only hold your personal data for a minimum of 1 year and a maximum of 7 years.

The legal basis for processing your personal data

13.15. The table below sets out the primary legal bases we rely on for processing data we obtain through the forms. However, we may process your data further for a compatible purpose and/or on other legal bases - further information about this is available in our main privacy notice.

Personal Data (Article 6(1) GDPR)
(c) processing is necessary for compliance with a legal obligation to which the controller is subject •(e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller
Special Category data/Criminal Conviction data
Article 9(2) GDPR (g) Processing is necessary for reasons of substantial public interest, on the basis of Union or Member State law which shall be proportionate to the aim pursued, respect the essence of the right to data protection and provide for suitable and specific measures to safeguard the fundamental rights and the interests of the data subject Conditions under Part 2 of Schedule 1 of the Data Protection Act 2018: • statutory etc and government purposes • preventing or detecting unlawful acts • protecting the public against dishonesty etc • regulatory requirements relating to unlawful acts and dishonesty etc

Your rights

13.16. You have several rights under the General Data Protection Regulation (GDPR), including the right to access your data and the right to restrict or object to further processing and the right to complain to the Information Commissioner’s Office (ICO).

13.17. You can find out more about your rights as a data subject, and details of how to contact our Data Protection Officer and the ICO, in our main privacy notice.

14. Annexes

Annex 1 – List of consultation questions

Proposal to introduce flexibility into the AR process

Question 1: Do you support the proposal to increase the flexibility of the AR, allowing us to select certain questions not to be run in a given year, using the criteria set out in paragraph 2.5?

Questions on financial governance

Question 2: Do the changes we are making on questions about finance ask for the right information about charities based on the information provided?

Please provide any comments that will help us understand this further.

Question 3: Are the questions on finances worded in a way that makes them clear and easy to understand?

Please provide comments on questions you do not consider to be clear and easy to understand.

Question 4: Is our draft supporting information and guidance on the finance questions sufficient to explain how to complete these questions?

Please provide any comments that will help us improve this further.

If you are responding on behalf of a charity:

Question 5: Could you answer these questions using information you already gather on your charities’ finances?

Please provide any comments that will help us understand this further.

Question 6: Do you have any concerns about the time it would take to answer the questions on trustee payments?

Please provide any comments that will help us understand this further.

Questions on income and operations outside England and Wales

Question 7: Are the new questions about overseas income and agreements with overseas partners clear, easy to understand and answer (using the supporting information as necessary)?

Please offer any comments, in particular whether the options on how overseas income is received listed are complete and comprehensible

If you are responding on behalf of a charity:

Question 8: Do you have any concerns about the time it would take to answer the questions on the way overseas income was received by your charity?

Questions on charity operations and structure - premises

Question 9: Do you think the Commission should gather data on the premises from which a charity operates?

If you are responding on behalf of a charity:

Question 10: Please comment on how feasible it would be for you to provide information about all the locations from which the charity operates. Please include suggestions for how to implement this if it were included, such as the easiest way in which to provide location information.

Questions on charity operations and structure

Question 11: Do the changes we are making on questions about charity operations and structure ask for the right information about charities based on the information provided?

Please provide any comments that will help us understand this further.

Question 12: Do you agree that the new questions about charity operations and structure are clear, easy to understand and answer?

Please provide comments on questions you do not consider to be clear and easy to understand.

Question 13: Is our draft supporting information and guidance for the questions about charity operations and structure, including the glossary, sufficient to explain how to complete these questions?

Please provide any comments that will help us understand this further. In particular we are keen to understand whether the definition of “hosted” in the glossary sufficiently clear to help you answer the question.

If you are responding on behalf of a charity:

Question 14: Could you answer these questions using information you currently gather on your operations and structure?

Please provide any comments that will help us understand this further

Questions on employees and volunteers

Question 15: Do the changes we are making on questions about employees and volunteers ask for the right information about charities based on the information provided?

Please provide any comments that will help us understand this further.

Question 16: Are the new questions about employees and volunteers clear and easy to understand and answer?

Please provide any comments on questions you do not consider to be clear and easy to understand and answer

Question 17: Is our draft supporting information and guidance around the questions on employees and volunteers sufficient to explain how to complete these questions?

Please provide any comments that will help us improve this further.

If you are responding on behalf of a charity:

Question 18: Could you answer these questions using information you currently gather on your employees and volunteers?

Please provide any comments that will help us understand this further

Questions on governance of risk, incidents and safeguarding

Question 19: Are the changes we are making to questions about governance of risk, incidents and safeguarding clear and proportionate, and do they ask for the right information?

Please provide any comments that will help us understand this further.

Question 20: Is our draft supporting information and guidance on governance of risk, incidents and safeguarding sufficient to explain how to complete these questions?

Please provide any comments that will help us improve this further.

If you are responding on behalf of a charity:

Question 21: Could you answer these questions using relevant information you currently collect?

Please provide any comments that will help us understand this further.

Question in response to major external change

Question 22: Do you support an additional question being available for use in response to major external change?

Please provide any comments that will help us understand this further.

Regulatory impact

Question 23: Do you think the approach to the new Annual Return is proportionate?

Please provide us with further evidence that informs your response, highlighting any that you believe should be incorporated into our final Regulatory Impact Assessment.

Equalities impact

Question 24: Do you have any comments on our assessment of the equalities impact?

Information and privacy

Question 25: Please provide us with further evidence or information that we can consider in, particularly any concerns you have around data privacy.

Annex 2

Full list of proposed AR questions

Annex 3

AR Glossary

Annex 4

AR Guide and explanatory notes

Annex 5

Regulatory Impact Assessment

1. See, for example, Trust in Charities 2018; Public Trust in Charities 2020; Public Trust in Charities 2021; previous years’ research also supports these findings ↩