Consultation outcome

Annexes 1 to 7

Updated 21 December 2022

Annex 1: Questions on financial governance

Consultation Q2 - Do the changes we are making on questions about finance ask for the right information about charities based on the information provided?

• 66% Yes
• 14% No
• 21% Unsure

Consultation Q3 - Are the questions on finances worded in a way that makes them clear and easy to understand?

• 66% Yes
• 19% No
• 15% Unsure

Consultation Q5 –If you are responding on behalf of a charity, could you answer these questions using information you already gather on your charities’ finances?

• 72% Yes
• 17% No
• 11 % Unsure

Most respondents were supportive of the need for us to collect financial data. They recognised that transparency of income data is important in the interests of effective charity governance. Most charities stated that they already gathered this financial information. Some respondents expressed concern about the format in which we had requested the data, which is addressed below.

Some respondents suggested ways in which we could reduce the burden of the questions. These included amending the wording to be consistent with accounting categories. This would also reduce duplication for charities with an income exceeding £500,000 who also provide a return to Part B, until such a point as the Commission can move to a digitised accounts process.

Concerns were also raised about asking charities to calculate percentages from values, which may lead to high levels of data inaccuracy. A number of respondents suggested that we revert to direct reporting of the value of income, as we do in the current Annual Return.

It was noted that the data collected might show two distinct facts about the charity:

• the extent of their income diversification; and
• degree of dependence on a single entity (who may be a related party).

Some respondents were concerned that the boundaries may be blurred between the risks in the analysis, or inappropriate conclusions drawn from the data collected. We agree that reliance on a single income stream may not represent a risk or may represent an appropriate approach for a charity in certain circumstances. Respondents cited examples such as membership or tuition fees, and charges associated with trading or maintenance where reliance on these sources as a single income stream is not necessarily risky. Certain conditions may also affect interpretation of the data: a large donation made in one year may be restricted and inaccessible to the charity until a future date.

We understand that a range of factors will naturally impact the level of income diversification a charity can or should pursue. For instance foundations may derive income from a single individual or family, or a new charity may have a smaller donor base which will increase over time. We are clear that we will appreciate and consider these wider contextual factors in gathering and interpreting any data on reliance of single sources of income, and will not necessarily regard limited income diversification as a risk factor in every case.

Limited feedback was received on the proposed additional question on grant-making. As with wider feedback on the income section, some noted that the percentage of total grants received from individuals and charities is a new calculation and not routinely undertaken as part of accounting, which may add to regulatory burden.

Changes to Annual Return questions on income in response to consultation feedback

The question on income, and majority income streams has been replaced. The question has been reframed to request values rather than proportions. We have applied the same financial categories recommended in SORP to aid understanding and reduce burden. We have also made minor improvements to the question regarding grant making, including also replacing the request for proportions with values. The changes are summarised below.

Proposed questions at consultation stage	Amended questions after consultation
• Was more than 70% of the charity’s income derived from one income stream in the financial period for this return? • Has the charity received a donation(s) exceeding 25% of total income from a Corporate Donor(s) in the financial period for this return? • Has the charity received a donation(s) exceeding 25% of total income from an individual(s) in the financial period for this return? • Has the charity received a donation(s) exceeding 25% of total income from a connected party in the financial period for this return?	For charities with a gross income of £500,000 or less in the financial period for the return • What was the total value of income received during the financial period of this return from: a. Donations and legacies; b. charitable activities; c. Other trading activities; d. Investments For charities with a gross income exceeding £100,000 in the financial period for the return: • What was the value of the charity’s single highest value donation received from a corporate donor during the financial period of this return? • What was the value of the charity’s single highest value donation received from an individual during the financial period of this return? • What was the value of the charity’s single highest value donation received from a related party during the financial period of this return?
• In the financial period for this return, what percentage of total grants were made to: a. Individuals b. Other charities Are any of the above connected parties to the charity?	For all charities completing the Annual Return: • In the financial period for this return, what value of grants were made to: a) Individuals b) Other charities c) Other organisations that are not charities Are any of the grant recipients above related parties to the charity?

A financial threshold has been introduced on the question about income source, so that only charities with a gross income of £500,000 or less will be asked this question. Charities with a gross income exceeding £500,000 already answer this question in Part B of the Annual Return.

In addition, we have made a clearer link between the questions on income relating to grants and government contracts to the broader section on charity income. Based on earlier answers to questions on income from government grants and contracts, the questions on income sources will only be answered by charities for which income from government grants or contracts constitutes under 70% of their gross income (as stated in the consultation 70% is the point at which our previous analysis indicates there may be risks associated with a lack of income diversification). This is to ensure that where charities have already provided data on their main source of income, they are not also required to complete this additional question on income streams. We also now calculate if grants and government contracts are a charity’s main source of income which enables us to then exclude charities who obtain most of their income from grants and contracts from questions on further income breakdowns, reducing burden for some.

With regard to the questions on income from a single source, we have decided to introduce a financial threshold so that only charities with a gross income exceeding £100,000 will be asked these questions. This is because for smaller charities, where the response to the questions would likely to relate to small amounts of income, the potential risk is correspondingly reduced.

We are now asking for the highest value of donation by type of donor for each question and will compare this to the gross income provided to determine the level of significance of the donations described, removing the need for a percentage to be calculated. We will continue to use the thresholds of significance suggested in the consultation for this internal analysis.

We considered making certain charities exempt from questions on income breakdown and donations based on charity type and or age of charity. The specificity of the current charity classifications means it is not possible to determine this accurately for the next Annual Return. We are intending to review this again once the new charity classification system has been introduced to consider whether exemptions for specific types of charities may be appropriate.

Consultation Q6: Do you have any concerns about the time it would take to answer the questions on trustee payments?

• 16% Yes
• 76% No
• 9% Unsure

Most respondents state that the trustee payment question is straightforward as they do not pay their trustees and are therefore unaffected. However, others stated it could be time consuming and there is some concern that it may stigmatise the concept of trustee payments.

It is important that charities effectively manage trustee payments, avoiding any conflicts of interest that may arise from paying trustees for services and/or goods that benefit a charity. We have decided that all trustee payments should continue to be accounted for in Annual Return reporting, irrespective of size of charity. Reporting these payments in the Annual Return is part of promoting compliance by charity trustees with their legal obligations and promoting the effective use of charity resources. Charities should continue to ensure that Commission authority is obtained when required,

We have clarified the question by making improvements to the wording of the question and the range of responses.

Proposed questions at consultation stage

Amended questions after consultation

For what were any of the trustees paid during the financial period for this return? a. paid for being a trustee b. paid for a role within any of the charity’s trading subsidiaries or connected organisations c. paid for providing goods and/or services to the charity or any of its trading subsidiaries or connected organisations

Excluding out of pocket expenses, for what were any of the trustees paid during the financial period for this return? a. paid for being a trustee; b. paid for a role within any of the charity’s trading subsidiaries or connected organisations; c. paid for providing goods and/or services to the charity or any of its trading subsidiaries or connected organisations; d. None of the above; e. Trustees have not been paid.

Consultation Q4: Is our draft supporting information and guidance on the finance questions sufficient to explain how to complete these questions?

• 64% Yes
• 14% No
• 21% Unsure

Respondents welcomed many of the definitions in the guidance, but were unsure what we meant by ‘single income stream’, ‘individuals’, ‘donor’ and ’connected party’. Those were felt to be unclear across the Annual Return questions, the guidance, and the glossary. We were specifically asked to improve definitions around government grants and contracts, particularly:

• the status of the NHS
• what to include, exclude and group, with regards to grants
• investments – for example an investment portfolio may contribute most of the income but be based on multiple investments

Changes made to the glossary and guidance in response to feedback

We reviewed the guidance and glossary for the financial questions, covering both the retained existing Annual Return questions and new questions. We have updated it to ensure clarity of definitions across the return, particularly those highlighted above. This clarifies what should be reported under the different sections, for example specifying the types of grants and the organisations that respondents should include under the term ‘government’. The guidance also now clarifies whether ‘income’ includes both ‘restricted’ and ‘unrestricted funds’.

To improve the user experience in completing the Annual Return, we have changed the order in which the questions appear. This is primarily by ensuring that expenditure questions are grouped together, and income questions are grouped together under clear headings.

Annex 2: Questions on income and operations outside the United Kingdom

We have considered feedback received about questions on income and expenditure from outside the United Kingdom. This included feedback on existing questions as well as the proposed new questions. Reviewing this section has helped to accommodate some of the feedback around the complexity of providing information, which was respondents’ main concern.

Consultation Q7: Are the new questions about overseas income and agreements with overseas partners clear, easy to understand and answer (using the supporting information as necessary)?

• 62% Yes
• 14% No
• 24% Unsure

Consultation Q8: If you are responding on behalf of a charity, 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?

• 20% Yes
• 68% No
• 13% Unsure

Some felt that the existing questions on overseas activities were complex and lacked appropriate guidance. To reduce burden, some suggested we remove the need for a value to be entered as part of the existing question relating to income by transaction type as this is difficult to collect, resulting in substandard data. Additionally, it was noted that two of the questions seemed to be duplicative in the information sought.

Some respondents felt we should create clear financial thresholds either in terms of value level (e.g., £25,000 per country or as total overseas income) or as a proportion of overall charitable income (e.g., where charitable income from overseas exceeds 10% of total income).

Respondents asked us to consider excluding certain types of charities from the question on income from outside of the UK given that some income types would not necessarily indicate risk – examples raised included fees for tuition or for membership.

The range of activities conducted by charities outside the UK is wide. Accordingly, we need to clearly define the types of income that we are interested in. A better definition of ‘operating’ overseas is required to describe the activities about which information is needed. Examples included providing online counselling for UK residents abroad, delivery of wellbeing cafes, facilitating grant arrangements on an international basis and travel expenses and costs incurred by charity staff in the furtherance of their objects. Respondents have asked for clarity on events held abroad and how these will feature, particularly if entry is by cash payment and anonymised. Reference is also made to defining the terms used in the dropdown list and removing any existing and unnecessary duplication.

Some respondents also felt that it might be difficult to determine the origin of certain income sources, depending on whether we were interested in the donor or the donation, highlighting that this difficulty applied to donations received through platforms such as Facebook or YouTube.

Respondents asked for a better definition of ‘partner’ for the question on formal agreements and information on the key elements of a formal written agreement with a partner

Changes to Annual Return questions in response to consultation feedback

To improve understanding and consistency we have changed each section to define ‘overseas’ as being all countries outside of the UK, standardising these definitions throughout.

We reviewed what is, and is not, important to understand about income and expenditure outside the UK. This has informed our ultimate decision on the necessity and feasibility of exclusions by either threshold, or charity type.

As noted previously it is not possible to exclude charities by type using the current charity classification system. We may be able to consider enabling exemptions by charity type if developments of the classification system enable this in the future. However, given the level of risk that can be associated with income and expenditure outside the UK, it is essential that the Commission collects data on the nature of financial transactions. Introducing exclusions based on charity type, or increasing income thresholds, may undermine our ability to detect compliance concerns.

The feedback also indicates that significant confusion could be generated by creating income thresholds and exemptions based on income proportions. These concerns extend to the existing threshold. We have decided to remove the previous threshold on the question for income outside of the UK, and instead introduce further mitigations to simplify and clarify reporting, described below.

To increase clarity, firstly, we have stipulated that spend and income means the total by country for the period of the Annual Return, with no type of income and spend omitted. Secondly, we have clarified that income is based on country of origin (if this is possible to determine) and spend only in the country in which the spend has occurred. The guidance specifies that this is not necessarily the same as the country of origin of the donor of the income or of the individual who spends the funds, so trustees do not have to obtain or report that information.

We have removed the requirement to provide a value for income by type of transaction method. While this data is useful for compliance and risk detection, we agree that this imposes a regulatory burden that outweighs the benefit of the data requirement.

To reduce burden and improve data accuracy the list of transaction methods that will appear has been narrowed down and defined with reference to Commission guidance on holding, moving and receiving funds safely in the UK and internationally.

We removed reference to ‘operating’ as this appears to be unclear for many people completing the Annual Return. This has been replaced uniformly with ‘delivering charitable activities’. This has also been separated out from questions related to ‘income received from outside the UK and ‘spending outside the UK’ to aid understanding.

The overall impact of the above changes is summarised in the table below. We have also removed a duplicate question.

Proposed questions at consultation stage	Amended questions after consultation
During the financial period for this annual return, did the charity receive income from outside of the UK? No If you answer ‘Yes’, you will be presented with a table of countries. Select countries the charity received income from or select ‘Unknown’. Then answer the following questions.	No Change
What is the value of income by country? For each country specify the source and amount of income from the options: a. overseas governments or quasi government bodies; (including European Union or European Commission) b. overseas charities, non-government organisations or not for profits c. individual donors resident overseas d. overseas institutional donors (for example private company donations) e. unknown/don’t know	For each country selected, what was the value of income in the financial period for this return received from: a. governments or quasi government bodies outside of the United Kingdom (including the European Union); b. charities, non-government organisations or Not-for-profits outside of the United Kingdom; c. private companies outside of the United Kingdom; d. individual donors resident outside of the United Kingdom; e. unknown?
How was overseas income received by the charity in the financial period for this return? (Tick all that apply) a. bank transfer b. cash courier c. crypto-currency d. informal money transfer systems e. money service bureau f. money transfer without money movement (for example Hawala) g. online payment methods (for example Paypal) h. third party transfer / cash courier i. a banking service other than the UK banking system j. other	How was income from outside of the United Kingdom received by the charity in the financial period for this return? (Tick all that apply) a. Informal Value Transfer Systems (IVTS); b. Money Service Businesses (MSBs); c. businesses authorised to provide ‘payment services’; d. cash couriers; e. crypto currency f. other?
During the financial period for this annual return, did your charity operate outside England and Wales? If you answer ‘Yes’, you will see a table of countries. Select the countries the charity delivered its charitable activities in (including via partners or third parties). Then answer the following questions	During the financial period for this return, did your charity deliver charitable activities outside of the United Kingdom? If you answer ‘Yes’, you will see a table of countries. Select the countries the charity delivered charitable activities in (including via partners or third parties).
Record the total expenditure by Country How much money did your charity send outside the UK regulated banking system in total (enter amount to nearest £)? When sending money outside England and Wales, did your charity transfer money other than via bank to bank transfer?	During the financial period for this return, did your charity spend funds outside of the United Kingdom? Please record total spend in each country or select ‘unknown’. How much money did your charity send in total outside of the United Kingdom using a method other than the regulated banking system in the financial period for this return? Please round all figures to the nearest £100 (do not enter decimal points or commas)
If you answer ‘Yes’, you will be asked: What methods to transfer money did the charity use and what was the value? (Tick all that apply) a. cash courier b. crypto-currency c. informal money transfer systems d. money service bureau e. money transfer without money movement (for example Hawala) f. online payment methods (for example Paypal) g. third party transfer / cash courier h. a banking service other than the UK banking system i. other	How was money transferred outside of the United Kingdom by the charity in the financial period for this return? (Tick all that apply) a. Informal Value Transfer Systems (IVTS); b. Money Service Businesses (MSBs); c. businesses authorised to provide ‘payment services’; d. cash couriers; e. crypto currency; f. other?
Does the charity have formal written agreements in place with its overseas partners?	Does the charity have formal written agreements in place with any partners delivering charitable services on its behalf outside the United Kingdom?

All existing guidance has been reviewed and refreshed to ensure clarity and simplicity and to reflect the updated questions. Other definitions have been reviewed against existing legal and accounting definitions and updated to address consultation feedback.

Annex 3: Questions on charity operations and structure - premises

Consultation Q9: Do you think the Commission should gather data on the premises from which a charity operates?

• 36% Yes
• 31% No
• 34% Unsure

We acknowledged in the consultation that it could be difficult in practice to collect data on geographic locations. We anticipated that the questions published for consultation would need to be amended. In Consultation Q10 we asked those responding on behalf of a charity how feasible it would be to provide information about all the locations from which the charity operates, including how best to allow charities to answer the question if it were included.

Respondents welcomed the opportunity to engage on this issue, with a high volume of specific suggestions. Many agreed that additional data collection in this area would be valuable if we could target it sufficiently to indicate:

• individual charities’ reach and impact; and
• at an aggregate level, regional variations in service provision by charities, particularly where (if this were available externally) this could support decisions by funders

However it was not universally agreed that the proposals in the consultation would elicit the correct data to support this, in a sufficiently targeted way. Charities felt that, without further clarification, there could be a risk of different understandings of the data to be provided. This could reduce data accuracy and create uncertainty. There were also some concerns regarding regulatory burden for charities. This is reflected in the response to Q9.

Some of the main complexities raised in response to the consultation included:

• the diversity of charity ‘presence’ in a location including owned property, rented property, properties used for hosting events (which can vary widely in an area and be changeable), properties where services are delivered directly to beneficiaries, administrative offices, public addresses or properties where most staff work from
• grant making charities, membership charities and other charities whose purpose is largely transactional transfer funds based on need, and data on location may be hard to capture and may not be meaningful
• the changing nature of how charities operate, with many using virtual means (online) and a significant number conducting charity business from private residences
• the potential time burden of data entry (as opposed to collection, given trustees should have appropriate oversight of their operations) for medium-sized and larger charities, particularly those with federated memberships
• whilst those with 3 or fewer premises generally felt they could service this request easily, they were generally operating in a contained geographical area, so questioned the value of data we would obtain over and above what is provided at registration
• respondents who deliver services internationally cite the difficulty in providing this data, particularly if third parties are utilised. These charities suggested that activities outside the UK should be excluded as they could be ascertained from other responses to Annual Return questions

Based on these consultation responses, we recognise the need to better define and classify what we require, including by charity type. This is critical to ensuring proportionate collection and use of data about where charitable activities are delivered.

There were areas where many respondents felt we could collect useful data. One example is confirming whether the public address held by the Commission is correct. Whilst it is a legal requirement for charities to keep their details on the Register up to date, and to contact the Commission proactively if they do change, respondents highlight that where a public address differs from a charity’s headquarters, an exercise gathering both a headquarters and public address could be a useful function for the Annual Return. It would highlight major differences in geographical presence as well as any details that are out of date.

Data protection was also a common topic of feedback, for instance whether charity staff working from their home address were intended to be in scope. We do wish to emphasise that the Commission will only publish data in line with its legal duties relating to personal data. A small number of respondents were conscious of the risk to vulnerable beneficiaries if certain addresses are disclosed. For charities concerned about the risk of harm to trustees who are identifiable because of their connection to a charity (e.g. charities supporting victims of domestic abuse), we will continue to authorise trustees at risk of personal harm not to have their name included in the published accounts or shown on the Register.

We also obtained useful feedback around how we could simplify any future data collection on geographical activity (whether through the Annual Return or other routes). These included using thresholds to move from individual location address data to area-based data, e.g. using the first part of the post code. The ability to utilise maps, area boundaries, upload files or have postcode look-ups were all suggested as ways to make information provision less burdensome.

Respondents encouraged the Commission to clarify how any data collected would relate to geographical data already published on the Register. They stressed that our focus should be on how this can be used to create a more comprehensive view of provision across England and Wales. Charities accepted that data associated with service delivery can change over time. They may express the intention to deliver services in certain regions at registration, but this may not accurately represent what happens in practice over time. However we generally noted feedback that it could be disproportionate to examine this on an annual basis, and we should consider the use of our other data collection systems as the primary method to look at these activities.

Changes to Annual Return questions in response to consultation feedback

We have determined that we should not collect the originally proposed range of information on the geographic distribution of charitable activity through the Annual Return. We still consider this data important, but further work is needed to balance the relative merit of different approaches to data collection. The main areas on which we now propose to do further work outside of the review of the Annual Return are:

• whether gathering information should be done through more tightly defined categories - for example public addresses, headquarters, owned premises and property assets, as well as what location types can be excluded
• whether we are primarily interested in where charities deliver services, or the location of those who benefit. These may differ, making data capture complex
• whether certain charities could be excluded to reduce burden, for example those that deliver services virtually, or where a location cannot be easily determined
• how often this data needs to be gathered, and whether the Annual Return is the right mechanism
• for larger charities, how we balance gaining valuable insight with reducing data entry burden, for instance grouping individual locations into larger areas

Instead, in the next Annual Return, feedback indicates we can usefully ask two much simpler new questions of charities. These will be a foundation for addressing two high priority data gaps that we have identified. We will do this as a snapshot; the questions will be removed for AR24 onwards.

Proposed questions at consultation stage

Amended questions after consultation

Does the charity use more than one address to deliver services or manage its operations? If you answer ‘Yes’, you will be asked: Please enter the addresses

The charity will be provided with their public address drawn from the Register of Charities and be asked: Are these public address details correct? If the charity enters no: Please enter your charity’s public address. Is this the same address that the charity uses as the charity’s administrative headquarters? If the charity enters no: Please enter the address of your charity’s administrative headquarters.

Firstly we will ask charities to confirm that the public address details we currently hold are still correct. If not, charities will be able to provide updated public address details. This is to ensure that we can contact any charity in the most efficient way possible. Holding valid details is also an essential component of maintaining an accurate and up-to-date Register.

Then we will ask charities to confirm if the public address is the same as the charity’s administrative headquarters. If not, charities will be able to provide the address of their administrative headquarters. Each will use a post code look up function. This data will enable the Commission to understand links between charities, individuals, and other entities. This will help us to regulate more effectively and determine and gauge potential risks, connections, and conflicts.

Where data we are collecting is, or could be, personal data, we have ensured that processing this data meets our obligations under data protection legislation.

We have decided only to collect data for locations within the UK. We are satisfied that the data collected through the Annual Return about activity outside of the UK provides sufficient information.

Following on from this Annual Return process, we will continue work to understand how different data sets related to geographical location can be used and bought together over the next few years. We will explore how the use of charity classifications could reduce the burden on charities.

Annex 4: Questions on charity operations and structure

A large amount of feedback was received on this section of the Annual Return. Feedback indicated that the data about structures is complex, varied, and changeable. Definitions need to be clear and easy to understand, and the consensus was that the consultation proposals had not achieved this. Some respondents were not clear on how the Commission would use this type of data.

Consultation Q11: 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?

• 55% Yes
• 15% No
• 30% Unsure

Consultation Q12: Do you agree that the new questions about charity operations and structure are clear, easy to understand and answer?

• 63% Yes
• 17% no
• 20% Unsure

Consultation Q14: If you are responding on behalf of a charity, could you answer these questions using information you currently gather on your operations and structure?

• 67% Yes
• 13% no
• 19% Unsure

Many respondents with concerns highlighted that charities may constitute a number of structures simultaneously. Respondents stated that it may not be possible to formulate a clear and proportionate question given the range of potential structures a charity might adopt, without attempting to shoehorn charities into structures that are incorrectly defined. This could cause uncertainty for those responding. Feedback highlighted uncertainties such as where partnerships should be considered, why structures such as confederations were not specified and where relationships with organisations and charities outside the UK would sit. Several comments specifically ask why knowing about umbrella bodies is important to the Commission.

Many charities have multiple informal affiliations. There is a risk that capturing these would obscure more formal structures, as most charities would have something to report. It was suggested that we should clarify whether, and why, informal affiliations would be of interest to the Commission. Some charities stated reporting of informal affiliations would require new data collection mechanisms and would be disproportionate.

Respondents felt that trying to capture data on the variety and volume of different types of memberships may lead to confusion in the interpretation between different charities. For instance, a respondent highlighted that in a charity with trustees who are members, but members who are not trustees, some members would have rights under the governing document, and some would not. They would be unable to answer to the question as proposed.

The feedback also asked whether we could obtain this data in another way, for example, at registration, as charity structures tend to be consistent year on year. Conversely a minority might change their structures, associations or affiliations based on projects over short periods of time, and there is a risk snapshotting this annually may produce unreliable data.

Feedback was also received on the question related to where websites were ‘hosted’. Respondents were concerned that the question would not collect data relevant to data protection, given that it is where personal data is ‘stored’ that is of primary concern. Providing data on web hosting may require further data collection mechanisms for some charities.

Changes to Annual Return questions in response to consultation feedback

In response, we have reviewed what elements of charity structures we need to collect data about, why we are collecting it and how to reduce concerns about the quality of the data that would be collected. We have taken on board the feedback that suggests that the data collected in the manner we suggested in the consultation may be inaccurate.

We have therefore made significant changes to the questions on structure and memberships to simplify them. We have removed questions relating to affiliations and umbrella bodies. We have refined the question on membership to ask a single question, rather than two. Additionally, we have removed the questions related to website hosting.

We have also taken on board feedback that much data under this section will not change on an annual basis. The reframed questions will only be asked once, after which we will explore alternative ways to keep data up to date.

In response to feedback, we have removed reference to any informal affiliations from the Annual Return as this is unlikely to produce useful data. We are switching to the terms parent and subsidiary to describe structure as these are widely understood and will provide the key information.

We have clarified which forms of membership we are interested in. We have clarified that trustees are excluded from the question on membership. This focuses the question on our interest in determining the potential for disputes arising between trustees and voting members who are not trustees. The second new question will only be asked of incorporated charities and unincorporated associations, all other charities will be excluded

The first new question will determine if a charity is part of a group structure, as either a parent charity or subsidiary charity in the group. Where the charity self declares as a subsidiary charity within a wider group structure, they will automatically be exempt from a later question on policy and procedures. We recognise that parent charities are generally responsible for updating and reviewing core policies and procedures on behalf of the subsidiary charities in their group. We have amended the question as follows:

Proposed questions at consultation stage	Amended questions after consultation
Is the charity a federated or regional member of another registered charity? Is the charity affiliated to another registered charity (such as in a consortium)? Is the charity a member of any professional or umbrella bodies? Does your charity have people or organisations which act as members? If you answer ‘Yes’, you will be asked: Do the charity’s members have rights under the charity’s Governing Document?	Is the charity part of a wider group structure with a parent body and subsidiary bodies? a) Yes, we are a parent body; b) Yes, we are a subsidiary body; c) No, the charity is not part of a wider group structure; d) Unknown. This question has been removed. This question has been removed. If the charity is an incorporated charity or unincorporated association: Other than trustees, does the charity have members who are entitled to vote under the charity’s governing document?
Are any of the charity’s websites hosted outside of the UK at the date of this return? If you answer ‘Yes’, you will be asked: In what country are your websites hosted?	This question has been removed

Consultation Q13: 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?

• 58% Yes
• 17% No
• 25% Unsure

Many of those who commented stated they felt that the consultation version of the glossary was unhelpful. They felt that explanations introduced terms that needed expanding, and so it failed to clarify meaning. We have not included feedback in this response on terms that have now been removed as a result of the updated question set.

Annex 5: Questions on employees and volunteers

We have considered existing questions on employees and volunteers, and where required, have updated them to ensure they remain consistent with the wider Annual Return question set.

Consultation Q15: Do the changes we are making on questions about employees and volunteers ask for the right information about charities based on the information provided?

• 63% Yes
• 15% No
• 21% Unsure

Consultation Q16: Are the new questions about employees and volunteers clear and easy to understand and answer?

• 69% Yes
• 11% No
• 20% Unsure

Consultation Q18: If you are responding on behalf of a charity, could you answer these questions using information you currently gather on your employees and volunteers?

• 78% Yes
• 9% No
• 13% Unsure

We proposed requesting employee information using headcount rather than FTE, to simplify reporting. However, many were concerned it would make analysis and any publication of employee number difficult. Some charities would appear to have a high headcount due to numbers of part-time staff. Many preferred FTE as a more reliable measure. Some suggested clearer definition of inclusions and exclusions to clarify short term appointments, which might be particularly common outside of the UK.

Some also suggested that using FTE would increase consistency with SORP accounting categories, reducing data collection burden. However, charities beneath the income threshold for SORP may produce Receipts and Payments accounts. Use of FTE could create new collection requirements for those charities. Feedback on consistency with SORP definitions was also raised in relation to salary reporting.

A common query was whether the Commission intended to capture salaried or non-salaried individuals. Respondents flagged the complexity concerning the variety of arrangements for compensating staff who work for a charity e.g., where a corporate trustee employs the staff and charges the charity. There was also clearly some confusion as to whether to include self-employed individuals or not.

Smaller charities are most concerned about additional burden from these questions, with some suggesting a threshold based on employee number e.g. 5 or more FTE.

On the existing question regarding volunteering, many queried how volunteers are defined and counted. Suggestions were made that the question ought to be reframed to capture only ‘active’ volunteers excluding, for example, an individual who sometimes unlocks premises used to deliver charitable services. Some suggested we could implement an average, or scale, to account for levels of variation over time in a volunteer’s ‘active’ status. However conversely this might encourage inconsistent reporting.

Finally, caution is advised on what we publish, ensuring our thresholds prevent data being shared for smaller charities that makes information personally identifiable. This has always been considered by the Commission in setting our publication policy, and was considered in the consultation document. Our position on this is set out in Annex 6.

Consultation Q17: Is our draft supporting information and guidance around the questions on employees and volunteers sufficient to explain how to complete these questions?

• 63% Yes
• 13% No

We received some feedback on definitions in guidance around the existing payroll question. We were asked to clarify definitions around inclusions or exclusions related to benefits. Respondents highlighted that some benefits or salary sacrifices are not easy to quantify, such as wellbeing packages. Clarity is needed on whether to include pensions, ex gratia or termination payments.

Some respondents requested guidance on what constitutes a volunteer, what to include and what to count.

Changes to Annual Return questions in response to consultation feedback

We have made a number of improvements to the questions in response to feedback:

Proposed questions at consultation stage	Amended questions after consultation
Enter the number of staff employed in total by your charity as at the end of the financial return period: a. 1. Overseas (international) b. 1. In the UK (national) This should not include staff that were contracted by the charity to deliver services on behalf of the charity	At the end of the financial period of this return, how many: a. People were permanently employed by your charity; b. People were on fixed-term contracts with your charity; c. Self-employed people were working for your charity? How many of the people above work on behalf of your charity outside of the United Kingdom?
How many UK volunteers, excluding trustees, did your charity have during the financial period relating to this return?	Excluding trustees, please provide an estimate of the number of volunteers who carried out charitable activities on behalf of your charity in the United Kingdom during the financial period of this return?

We attempted to align to the SORP more closely where it was possible without compromising the data requirement. For instance, guidance now clearly stipulates what to exclude and include in the reporting of benefits. However we believe it is still right to ask for employee counts at year end, rather than the financial year average. This makes it easier to calculate for respondents, and therefore the likelihood that we have reliable ‘point in time’ snapshots for year-on-year comparison purposes.

We have not converted the count of employees to FTE due to our concerns about smaller charities’ ability to monitor and report this. We instead revised our original approach to make clear we are interested in the categories of permanently employed, fixed-term contracted and self-employed people, taking on board the feedback that collecting data on the different employment types will provide a richer data set. Guidance has been reviewed to ensure these terms are clearly described.

Charities that do not employ staff will only need to respond to the volunteers question. However we have decided that even charities with a relatively small number of employees should continue to report on employee data. Workforce trends, including for small charities, give a valuable indicator of the ongoing health of charities.

In relation to the existing questions, guidance has now been added to define ‘volunteer’. This includes who to exclude, confirming that a volunteer must have carried out some activity for the charity during the period being reported on, as opposed to being in a general pool but not having carried out any activity for the charity in the financial period.

We reviewed the salary bands used in the existing question. Having considered the proportion of salaries that fall into the bands eligible for reporting, we do not believe it is necessary to increase the bands at this time. These will remain the same, as will our approach to publication of salary band data as part of AR23.

Annex 6: Questions on governance of risk, incidents and safeguarding

Most of the narrative comments on these questions were focused on the new question regarding the policies and procedures charities have in place. We have interpreted the numerical responses below in light of this information. For clarity, we have therefore separated out our responses on the financial controls Annual Return question, the Annual Return question about DBS checks undertaken by a charity, the Annual Return question relating to serious incidents, and the policies and procedures Annual Return question.

Consultation Q19: 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?

• 62% Yes
• 18% No
• 20% Unsure

Consultation Q20: Is our draft supporting information and guidance on governance of risk, incidents and safeguarding sufficient to explain how to complete these questions?

• 63% Yes
• 13% no
• 24% Unsure

Consultation Q21: If you are responding on behalf of a charity, could you answer these questions using relevant information you currently collect?

• 72% Yes
• 11% No
• 16% Unsure

Financial controls

No significant issues were raised in the feedback, but some clarity is needed on how this relates to the financial controls policy that was referenced in the proposed Annual Return question on the policies and procedures that the charity has in place and how these differ, to avoid duplicating effort.

Policies and Procedures

Feedback indicated that smaller charities were concerned the question implied that charities were required to have all these policies regardless of whether they would be relevant and appropriate to them. Some suggest that a ‘where relevant’ note should be added to responses, and a ‘not applicable’ option provided, as charities legitimately prioritise certain policies dependent on their activities. Some felt that otherwise the Commission risks unintentionally driving an approach to policy formulation that will impact on quality, as charities may feel incentivised to adopt a full suite of policies, regardless of whether they are relevant to their charities.

Conversely some felt that areas such as health and safety, risk management, fundraising, trustee recruitment and sustainability were missing, if the intention was to provide a complete list of policies and procedures. The ‘Political Activities Policy’ received particular comment, with respondents feeling expectations were unclear from our existing guidance. Some felt the question implied an annual review of policies is a requirement, when this may not be the case. Others took this as a useful reminder to update policies routinely.

Other feedback suggested that charities often cluster related policies together for governance purposes, rather than each being listed distinctly, making it difficult for some charities to respond. An additional complication would be that federated charities follow central policies and guidance informed by their parent charity, which could impact on the data received and assessment made.

More generally respondents asked whether this could be better collected through the Trustee Annual Report to reduce the burden on charities.

RSIs and DBS

On the question about children and adults at risk, respondents asked us to clarify what we mean by ‘provide services’ and ‘adults at risk’ and that the term ‘child’ is accurately described as being under the age of 18.

Some respondents expressed uncertainty about the existing question on reporting serious incidents. They requested clarification of what is or is not a serious incident in the guide, with links to the RSI process. Some charities stated that levels of seriousness depend on the status and scale of the charity (which is correct, as per the Commission’s guidance). There was concern that by requiring a binary yes or no answer regarding whether all RSIs had been reported, charities with no serious incidents in the report faced ambiguity regarding the appropriate answer to report.

As we had identified during user testing prior to consultation, not all in the sector are clear on the meaning of ‘eligible’ in relation to DBS checks. There is concern that given Basic Checks are good practice (and so some charities might interpret all individuals as eligible) the data may be of limited use in assessing compliance risks. It was suggested we differentiate between Basic, Standard, Enhanced and Enhanced with Barred List Checks. DBS checks are also not necessarily reviewed annually, and it was requested we clarify that to reduce confusion.

Changes to Annual Return questions in response to consultation feedback

Financial Controls

On reflection we agree that the question on financial controls will lead to duplication when cross referred to the question on financial policies and procedures. We have removed this question from the Annual Return.

RSI, DBS and Safeguarding

All guidance and glossary entries have been reviewed and updated to better define terms such as ‘provide services’, ‘adults at risk’, ‘children’ and ‘procedures’.

We have reviewed the existing Annual Return guidance on serious incidents. We generally feel this is clear in specifying terms. However, we have changed the way that this question can be answered to ensure there is a distinct category for charities that did not experience or did not become aware of a serious incident in the relevant period for the return.

Proposed questions at consultation stage	Amended questions after consultation
If gross income is more than £25,000 has the charity reported all Serious Incidents (including any historical incidents) that the charity became aware of during the financial period relating to this return?	If the charity has a gross income exceeding £25,000 in the financial period for the return: Has the charity reported all Serious Incidents (including any historical incidents) that the charity became aware of during the financial period relating to this return? a. Yes; b. No; c. No serious incidents to report.

The term ‘eligible’ which we use for the question on DBS checks is based on the legal framework and guidance issued by the DBS. For consistency the term has been retained in the question and our guidance provides links to the relevant DBS guidance. We have altered the question to prevent skewing of data from not excluding Basic Checks.

Proposed questions at consultation stage

Amended questions after consultation

Has the charity obtained DBS checks for those that are eligible in the financial period for this return?

Excluding Basic DBS Checks, has your charity obtained the required level of DBS checks for all roles which are eligible for them in the financial period of this return? (Tick all that apply) a. Yes, all required Standard DBS Checks have been obtained; b. Yes, all required Enhanced DBS Checks have been obtained; c. Yes, all required Enhanced with Barred List(s) DBS Checks have been obtained; d. DBS checks are not required other than Basic DBS Checks

Policies and Procedures

We have updated the list of policies and procedures. The updated set of policies are not intended to be comprehensive but contain policies that address specific regulatory and sector risks. We have made it clear in accompanying guidance that it may not be relevant or proportionate for all charities to have each of the policies listed in the question, depending on the size and nature of the charity. For instance, we do not require every charity to have a policy on Political Activity and Campaigning, if they do not engage in such activity.

If a charity has identified itself as a subsidiary charity in the earlier question on group structure, they will not be required to answer this question on the basis that the parent charity is likely to set policies and procedures centrally.

To limit the likelihood of collecting inaccurate data we have removed the request to provide the date of last review.

Proposed questions at consultation stage

Amended questions after consultation

Which of the following policies and associated procedures does the charity currently have in place? You will also be asked to provide the date of last review for each. a. bullying and harassment policy and procedures b. conflict of interest policy and procedures c. financial controls policy and procedures d. safeguarding policy and procedures e. complaints policy and procedures f. whistleblowing policy and procedures g. reserves policy and procedures h. political activities policy and procedures i. volunteers policy and procedures

Which of the following policies and procedures did your charity have in place at end of the financial period of this return? (Tick all that apply) a. Internal charity financial controls policy and procedures; b. Safeguarding policy and procedures; c. Financial reserves policy and procedures; d. Complaints policy and procedures e. Serious incident reporting policy and procedures f. Charity financial reserves policy and procedures g. Internal risk management policy and procedures h. Trustee expenses policy and procedures i. Trustee conflicts of interest policy and procedures j. Investing charity funds policy and procedures k. Campaigns and political activity policy and procedures l. Bullying and harassment policy and procedures m. Social media policy and procedures n. Engaging external speakers at charity events policy and procedures.

Clear links to relevant Commission Guidance on the topics covered by the policy will be provided, so that charities can understand the scope of the policy referred to in the list. The previously labelled ‘Political Activity Policy’ has been renamed to reflect Commission guidance as ‘Campaigns and Political Activity Policy’.

Question in response to major external change

Consultation Q22: Do you support an additional question being available for use in response to major external change?

• 65% Yes
• 17% No
• 18% Unsure

Many respondents felt introducing this question would help to proactively gather data on the sector-wide impact of major external changes and help identify trends. It could open up targeted opportunities for support for the sector, and many respondents reflected on this question in light of the impact of Covid 19. Respondents support the Commission’s aims in introducing this question.

However there was some challenge on whether the Annual Return is the right route to collect this data. One concern was timeliness of collecting the data. Any data is retrospective and therefore may be of limited value in this context. Some major events may lead to delayed impacts or impacts that occur over a period of many years which will be difficult to gauge. Some respondents suggested it may be more useful for the Commission to conduct one-off research, which we will continue to consider.

Some respondents queried how this related to their obligations to file RSIs where a negative event occurred. This question would not replace a charity’s existing RSI reporting obligations.

We note that not all respondents understood the consultation proposal. Any ‘major event’ that charities are asked to report on will be specified by the Commission during each cycle of the Annual Return process. The relevant event would be identified through a strategic assessment of risks, ensuing it is genuinely likely to be a sector wide risk, and agreed by the Commission Board. If any event were identified and merited use of the question, we would communicate this to charities in advance of, and during, the Annual Return.

Several respondents asked for a clear way to measure impact, to ensure assessments are comparable between charities. Some stated they would appreciate direct suggestions to make a mathematical calculation to ensure data accuracy and consistency. Otherwise they were concerned that the request to provide an estimate would be inconsistent with the declaration of accuracy that we ask charities to make at the end of the Annual Return.

Changes to Annual Return questions in response to consultation feedback

We have reviewed the guidance and framing of this question to clarify the difference between ‘major event’ and serious incident reporting and concluded that there may be some overlap. However, the purpose of RSI reporting is to allow the Commission to respond promptly to serious incidents within a charity, to comply with its regulatory duties. This question is designed to collect data on the wider sector impact of one particular event. In addition, while localised events such as flooding which impair a charity’s ability to operate should be reported as a serious incident, such events would not be captured by this Annual Return question unless they related to the specified event. This question covers wider and larger scale events and crises that are likely to impact all charities in some way.

As noted, any ‘major event’ on which we will collect data would be decided annually through the Commission’s strategic risk assessment process. Our aim will be to understand the impacts of certain risk events on different sector cohorts, and provide a good indicator of ongoing sector health, resilience, and sustainability. It is important to understand that this data would not be used in isolation. Analysts will compare this data with information from other Annual Return questions and a range of different sources to assess risk and issues. Blending data from a range of sources will allow the Commission to undertake the best possible assessment of the state of the sector. These include external research (both our own and external data), reported serious incidents, Annual Reports and Accounts and casework data.

We do not believe it is feasible to provide a precise and universally applicable toolkit for quantitively measuring event impact, and this could be burdensome to use. The Annual Return question clearly states that the Commission is interested in a charity’s estimate of the impact of the event, and as a result charities should not be concerned that the declaration of accuracy at the end of the Annual Return would impact on their ability to answer this question.

In the question, we have amended ‘charity’s ability to operate effectively’ as this denotes negative impact only, rather than our intention to also capture positive improvements. The drop-down list of impacts has also been updated.

In respect of the event specified by the Charity Commission:

Has the event had an impact on your charity during the financial period of this return?

Tick all the options that apply.

Estimated positive impact on:	Estimated negative impact on:
a. Donations b. Other income – grants c. Other income – contracts d. Other income - investment e. Expenditure on charitable activities f. Expenditure on overheads g. Number of volunteers h. Number of employees i. Number of trustees j. Fundraising activities k. Capacity to deliver services l. Total service demand	a. Donations b. Other income – grants c. Other income – contracts d. Other income - investment e. Expenditure on charitable activities f. Expenditure on overheads g. Number of volunteers h. Number of employees i. Number of trustees j. Fundraising activities k. Capacity to deliver services l. Total service demand

Annex 7: Impact Assessments

Regulatory Impact Assessment

Few respondents commented directly on the methodology of our initial Regulatory Impact Assessment. Whilst those who did found it comprehensive, some charities queried our assessment of time cost at £14 per hour. This hourly rate is a standard cost based on average wage figures.

Response

Whilst larger charities may pay higher hourly rates to the person completing their Annual Return, this is not typical of the majority of charities (many of whose Annual Return will be completed by volunteers). Using the standard cost allows us to place a notional value on volunteers’ as well as paid staff time. The higher costs for larger charities are reflected in our assessment of additional sign-off costs.

We have further developed our assessment to take account of the mitigations and simplifications to the Annual Return that we plan to introduce which will mainly benefit smaller charities. We have also factored in the benefits to the charity sector through our use of the Annual Return data to inform our proactive identification of risks, allowing us to intervene with advice and guidance before issues become more serious. The new Annual Return questions would allow us to proactively identify a wider range of risks than the previous question set, including risks arising from dependency on particular income streams. We will also continue to be able to identify charities that have become dormant, and work to release dormant assets for the benefit of similar charitable purposes.

Based on the revised Regulatory Impact Assessment, we are satisfied that the regulatory impact of the new Annual Return questions (direct cost or benefit to the sector) will be below the Government’s de-minimis threshold of a total cost or benefit of £5m. This gives us reassurance that the Annual Return proposals are a proportionate means of achieving our intended regulatory outcomes of enhanced transparency and accountability, and better data enabling more effective regulation, as well as supporting the Commission’s general statutory functions and objectives.

Equality Impact Assessment

We sought feedback on our Equality Impact Assessment, which is undertaken routinely when carrying out work on policies and services, including to meet our obligations regarding the Public Sector Equality Duty. The aim of the analysis is to ensure that policies and services are not discriminatory and do not perpetuate or worsen inequality. We will monitor the equality impact to understand how the Annual Return service is working once implemented. Respondents stated that:

• They are pleased that equality duties are being considered and are supportive of the impact assessment;
• Accessibility of the system is critical, as the current system is described as unhelpful for some. Consideration of the impact of age in the use of technology should feature in the development of the digital service; and
• Consistent translation into Welsh across Commission systems is desired, including all material necessary to complete the Annual Return.

Response

The assessment conducted for the Annual Return identified minor concerns focused primarily on the accessibility of the digital service, and this has been reflected in the consultation feedback.

A new digital service is being developed to house the revised Annual Return from 2023. Our aim is to ensure the service will be more accessible and we are exploring improved functionality that will make the Annual Return easier to navigate, save and resume. We can confirm that the Annual Return, and all associated materials, will be available in Welsh.

Data Protection and data privacy (including sensitive information)

Consultation Q20 invited participants to provide information that we can consider regarding publication of the Annual Return data, particularly any concerns around data which is or could be personal data. We are satisfied that we are acting in compliance with data protection legislation when publishing data which is or may be personal data. The main areas of concern for respondents were:

• Potential identification of individual salaries from salary pay band data for small charities
• Potential sharing of sensitive information such as:

1. private residences, if these were a charity public address
2. location data that could impact on the safety of beneficiaries or the safety of volunteers and staff overseas;
3. data that is inadvertently commercially sensitive, particularly financial or contractual information, if this could impact on competitive tender process.

Respondents requested that the Commission provides clear guidance on what information may be published.

Response

The Commission will continue to ensure that we only collect and publish personal data where it is compatible with data protection legislation to do so.

For further information see our personal information charter.

We have considered carefully for each item of data whether there is a rationale, connected to our statutory objectives, to publish that information on the Register. Where we have considered there is a rationale, we have ensured that there are appropriate mitigations in place to ensure that individuals will not be identified. For instance, salary data for charities with 2 or fewer employees will not have this information made public, and we will not publish data confirming how many of those employees or contractors are working outside of the UK. This is set out in the following table, and mirrors the approach we set out at consultation stage.

In relation to commercial and contractual sensitivity, data is prevented at a sufficiently aggregated level, and retrospectively, such that it is not likely to impact any tendering processes. It also mirrors data that would be available through accounts already.

In response to concerns about private addresses, we significantly reduced the level of detail obtained through the question regarding charity premises. There is no requirement for the public address (which is the information we are not collecting) to be a private residence and trustees can choose to use a different type of address.