Hot Topics – Charity Newsletter Winter 2018

This article was featured in our Winter 2018 Charity Newsletter. To read the newsletter in full, please click here.

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How much do the public trust charities?

It is fair to say that 2018 has seen a lot of scrutiny of the charity sector with some very high profile names in the spotlight. It is therefore perhaps not surprising that the CCEW research into the public’s trust of charities came up with some interesting results.

Confidence levels low

The research found that public confidence in charities is currently 5.5 out of 10. This compares to 5.7 out of 10 when the research was last carried out in 2016 and 6.7 out of 10 in 2014. It should be noted that the research was carried out immediately after the Oxfam news hit the press. This still compares favourably with groups such as MPs and journalists, who score below 4 out of 10!

It is also interesting to note that trust is highest among young people and declines as you move up the age range.

When asked why trust has declined, respondents quoted the recent media reports and that too much charity money is being spent on advertising, wages and admin as being the two main reasons.

Other issues

Other findings from the research included that 58% of respondents think that charities perform an essential or very important role in society. The main factors affecting the issue of trust are ensuring that donations reach the end cause, as well as making a positive difference.

Has your charity considered how a reduction in public confidence could affects donations and implications for any long term viability?

Guidance: goo.gl/c8fPD4

Joint registration portal shelved

The government has decided not to pursue plans to develop a joint CCEW and HMRC portal for charity registrations.

The rules at present require charities to register with the CCEW and then again with HMRC for Gift Aid and other purposes. The plan (announced back in 2013) was to streamline this process to reduce the burden on charities and improve information sharing. However, having considered this, the government has concluded that information sharing has improved in the interim and as most charities have a long gap between their CCEW and HMRC registrations (around nine years) there was unlikely to be much benefit from a joint registration portal.

Guidance: goo.gl/BEz8xu

Fraud

The CCEW has issued an alert to charities following a National Fraud Intelligence Bureau alert highlighting the insider threat from fraudsters and cyber criminals.

Research from the CCEW published earlier in the year found that in the vast majority of cases where fraud was committed in charities, the primary enabling factor was the lack of appropriate internal controls in place and being consistently applied.

The lack of controls particularly focused around excessive trust or responsibility being placed on one individual, along with a lack of challenge or oversight.

The impact of fraud on a charity can vary, but will typically include reduced service provision, a loss of funding/ income, damage to team/organisational morale, an adverse effect on the charity’s reputation and possible closure of the charity.

Guidance

Both OSCR and the CCEW have published guidance to help charities protect themselves from fraud – a must read for all trustees. If you would like any further information on applying appropriate safeguards please contact us.

Following Charity Fraud Week, the CCEW has published a number of helpsheets and e-learning videos to:

  • raise awareness of the key risks affecting the sector
  • promote and share good counter-fraud practices
  • promote honesty and openness about fraud.

Guidance:

Britain’s Secret Charity Cheats

In the summer the BBC featured five episodes of Britain’s Secret Charity Cheats in their daytime schedule.

The programmes featured examples of fraudsters either purporting to be a charity or charity insiders and how they committed their frauds. The programmes also featured some ‘good news’ stories about the sector.

The timing was again very pertinent given the environment and is an interesting view for all charity trustees.

Clips from the programmes are available on the BBC website.

Guidance: goo.gl/EPyi8Y

Automatic disqualification rules

On 1 August 2018 the law in England and Wales changed to extend the scope of who is disqualified from running a charity. As a result of this change, senior manager positions (for example chief executives and finance directors and equivalent roles) are now included. If you are in a trustee or senior manager position, ensure you have read the guidance and if needed, apply for a waiver.

Charities need to update their processes before appointing for these positions and ensure staff already in place have considered the new rules. CCEW have produced sample declarations for senior managers and trustees which could be used for existing staff and trustees.

Guidance: goo.gl/es9hdc

Charity annual return

All charities registered in England and Wales must submit an annual return every year, no later than 10 months after the end of their financial year. Worryingly a CCEW report has shown that 40% of small charities are providing inaccurate financial information in their annual returns.

Charity trustees have a legal obligation to keep the charity’s registered details up to date. On the 12 November 2018 the service used to update charity details changed and all charities are now required to check and update their details before they can access the annual return. The details of trustees such as names and contact details will need to be up to date and each trustee must not be disqualified as acting as a trustee. The service:

  • guides trustees through several screens that show the charity’s details
  • highlights missing information that needs to be provided. This will be tailored to the individual charity and will reflect how up to date the details are on the register.

The CCEW 2018 annual return service has been available since the end of August. This tailored annual return includes new and enhanced questions and charities should be prepared as it may create extra work. Certain questions are optional this year to give charities time to put in place systems to enable efficient collection of the necessary information.

Overseas risk

One of these optional questions is surrounding how charities transfer and monitor their funds sent overseas. This is a risky area and it is important that charities appropriately manage this risk. The questions about the methods of transferring money outside the regulated banking system, and about monitoring controls and risk management will be optional in the 2018 annual return but will be mandatory for 2019 annual returns onwards.

Breakdown

CCEW is seeking to gain a better understanding of income from outside the UK and has introduced questions about the breakdown of sources of income from each country a charity receives funds from. As charities may need to make changes to their financial systems to capture this data, these questions are optional for 2018 but mandatory for 2019.

Salaries

Thirdly, a breakdown of salaries across income bands, and the amount of total employee benefits for the highest paid member of staff will need to be included in the 2018 return. This additional information is being included due to the public concern over high pay in the sector. The information on benefits given to the highest paid member of staff will not be published on the public register.

Guidance:

Developing your board – trustee recruitment and diversity

Research conducted as part of the Taken on Trust report, commissioned by the Department of Digital, Culture, Media and Sport in November 2017, noted that the majority of charity trustees are male, white and retired, the so called ‘male, pale and stale’ demographic. Since then, the CCEW, the Charity Governance Code and various other commentators have been encouraging charities to step up and improve diversity on their trustee boards.

In a lot of cases, trustees are a self selecting group; who have the time and skills to take up such a post. However there has to be more positive action from current board members to seek out a wider range of people to add breadth and depth to the trustee group.

The research also found that trustees particularly those considering the role or new to it, were often unaware of the role and responsibilities that go with the title.

The CCEW has therefore published a new trustee welcome pack to explain exactly what is expected of a charity trustee. Worth reading for all board members as an introduction or refresher.

Guidance:

 

This publication has been prepared by Robinson Reed Layton LLP. It is to be treated as a general guide only and is not intended to be a comprehensive statement of the law or represent specific tax advice. No liability is accepted for the opinions it contains, or for any errors or omissions. All rights reserved.