Changes to Charity Annual Returns 2018 – Overseas Funding

27th June, 2018

The Charity Commission is making changes to the Charity Annual Return 2018 to improve transparency about overseas funding sources and revenue from non-UK donors.

This follows a consultation with the charity sector to make improvements to the annual return and improve transparency for users of charity accounts. Based on the outcome of the consultation the Charity Commission is introducing a tailored annual return later this summer. It will include some new questions that charities can start preparing for now.

The new annual return format will be available from 31 August this year, but fully mandatory reporting on international funding will be optional for charities for the first year.

Although the return is changing, the questions will only be optional for the first year of operation, becoming mandatory for 2019 returns. According to the Commission this is in recognition of the fact that the new questions will create additional work. They go on to say that certain questions will be optional this year to give charities time to put systems in place to collect the information more easily which means less effort will be required in the future.

Overseas expenditure

One of the key areas of change will be the level of reporting about charitable expenditure overseas, to establish how charities transfer and monitor funds sent abroad.

This is part of the Commission’s efforts to ensure that charities meet tough money laundering rules and improve their general oversight of risky money transfer processes. The new requirements will mean that some charities will need to make changes to their record keeping to answer parts of this question.

For this reason, the questions about methods of transferring money outside the regulated banking system, and about monitoring controls and risk management, will be optional to answer for the 2018 annual return.

In terms of the money transfers, charities will have to state the amounts moved around and the methods used to transfer the money, whether it is cash courier, other charities or non-governmental organisations and non-profit organisations, money service business, informal money transfer systems and online payment systems like PayPal.

The new rules also require that charities puts in place sufficient risk management policies and procedures to adequately address the risks to charities in countries where it is operating.

Trustees will also have to be satisfied that the charity’s risk management policy and procedures adequately address the risks to the charity arising from its activities and/or where it operates.

Income from outside the UK

At the same time, the Charity Commission has also tightened up rules to require more disclosure about money received from overseas donors and organisations. In future, there will have to be full disclosure from the following financial sources:

  • Overseas governments or quasi government bodies;
  • Overseas charities, non-governmental organisations or non-profit organisations (NGOs/NPOs);
  • Other overseas institutions (for example private company donations); and
  • Individual donor resident overseas.

For the first time, in the annual return for 2018, charities will have to provide a breakdown of salaries across income bands, and the amount of total employee benefits for the highest paid member of staff. However, in response to concerns raised during the consultation by charities who were against disclosure of the individual benefits, the Charity Commission has decided not to publish on the public register details of benefits given to the paid members of staff.

More information is available on the Charity Commission website

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