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The Charity Commission has published helpful guidance for charities on forthcoming changes to the automatic disqualification rules, which will take effect from 1 August 2018. The changes mean that there will be greater restrictions on who will be able to run a charity.
Most charities will be required to take some simple steps to update recruitment and appointment systems in order to prepare for the changes. The guidance includes an overview of the current disqualification rules, the changes that will take effect, the steps that charities should take to prepare for the changes and information about the right for a disqualified person to apply for a waiver.
We will report on the guidance in more detail in our next Charities Law Brief.
On 8 January 2018, we reported that the Commission has now published its response to the consultation on its proposed changes to the 2018 annual return, which includes a number of amendments to its content. Whilst the Commission has ultimately decided to retain a majority of its proposed questions, it says the new annual return will be easier to use, with many charities required to answer fewer questions, and only those with large or complex operations being required to provide more information.
The government has now published its response to the House of Lords Select Committee's report on Charities - 'Stronger Charities for a Stronger Society' - which was published in March 2017. The government welcomed the report, which contained 43 recommendations, and said that it broadly agrees with many of the points around improving governance and support for charities.
The Charity Commission has also published its response to the report. In its response, the Commission accepted some recommendations, including the importance of setting out its plans to start charging charities, as well as the recommendations on improving guidance around mergers and serious incident reporting. However, it rejected a recommendation for a time limit on trusteeship, arguing that charities “must develop their own policies in line with the requirements of their governing documents”.
The Information Commissioner’s Office (ICO) has published a set of 12 frequently asked questions about the GDPR for charities, which is due to come into force on 25 May 2018. Trustees will no doubt find these FAQs helpful and we will be reporting on this in more detail in our next Charities Law Brief.
Following a request by its new chief executive, the Charity Commission has recently been awarded Government funding of £5 million per year as a result of a significant increase in demand on its registration, compliance and other core regulatory functions. The Commission hopes that this funding will act as an interim solution, whilst it considers longer term, more sustainable funding models.
A noteworthy decision by the First-tier Tribunal has held that the provision of free events by a charity was not an economic activity. The charity in question had claimed credit for input tax on the expenses incurred for organising free educational events at the Yorkshire Showground for schoolchildren. HMRC issued a notice of assessment to recover this input tax claimed by the charity. The charity appealed against this notice, but this was dismissed by the tribunal as the provision of free events was not considered a business activity of the charity. Charity trustees will therefore need to carefully consider what activities they will be able to claim credit for input tax on.
According to figures from the Fundraising Regulator, around 90% of eligible charities have paid the levy for the first year 'or have committed to paying very soon', but a total of 31 charities refused to pay the levy in 2017.
Data has also shown that fewer than 5,000 members of the public have signed up to use the Fundraising Preference Service (FPS) since its launch in July 2017. The data also showed that at the end of 2017, almost 4,900 individual members of the public had made over 13,800 suppression requests relating to 1,117 charities using the FPS.
The National Council for Voluntary Organisations (NCVO), which represents more than 13,000 charities in England, has said that voluntary organisations should consider publishing gender pay gap information even if they have less than 250 employees. For all private and voluntary-sector employers with 250 or more employees, new rules introduced in April 2017 mean that they are required to publish information about the differences in pay between men and women on an annual basis. NCVO, despite only having 100 employees, has voluntarily published its own gender pay gap data in an attempt to increase transparency and encourage other charities to do the same.
As of January 2018, the FCA is now responsible for the regulation of the professional digital fundraising sector and crowdfunding platforms, after the revised Payment Services Directive (PSD2) came into effect. However, it has been reported within the sector that this will have no bearing on the Fundraising Regulator's continued efforts to bring digital fundraising platforms within its regulatory scope.
The Charity Commission has launched its annual return service for 2017. Charities are required to submit their annual return for 2016 before they can do so for 2017. The Commission has encouraged trustees to complete their charity's annual return as soon as they approve its latest accounts and trustees’ annual report. The online annual return is required for all charities with an annual income greater than £10,000 and for all charitable incorporated organisations, regardless of income.
The Charity Commission has issued a warning to charities to remain vigilant and protect themselves against phishing scams. Charity trustees have access to detailed government advice on improving cyber security and can also find out how to become accredited under the Cyber Essentials Scheme, which is a government-backed, industry supported scheme to help organisations protect themselves against common cyber-attacks.
The Charity Commission has warned that charities should do more to be aware of the potentially serious risk that fraud poses to valuable funds and sensitive data, as well as the damage it can cause to the good reputation of charities and public trust and confidence in the sector as a whole. According to the Annual Fraud Indicator 2017, fraud among the charity sector has risen by £400m over the year, costing charities approximately £2.3bn.
According to data released by the Charity Commission, one-third of reported fraud incidents concern actions by insiders, such as staff, trustees or volunteers. The Commission has warned that charities should be alert to the risk of insider fraud, and is asking charities to share their experiences of identifying and dealing with such incidents. The Commission has produced an online questionnaire, the results of which will inform a report sharing lessons and good practice within the sector.
The Commission also published a specific warning in respect of charities delivering humanitarian aid to help the people who have fled violence in Myanmar. It has warned that fraudsters and criminals can take advantage of public generosity during times of increased fundraising, including by using fake appeal websites, email appeals that falsely use the name of genuine charities, or appeals from fake charities.
The Charity Commission has published two reports demonstrating the risk to charities of being abused as vehicles for terrorism. The Commission has made clear that it does not consider aid convoys to be an effective means of delivering humanitarian aid and has warned charities taking part in them that they will be subject to additional regulatory scrutiny to ensure trustees comply with their legal duties and responsibilities.
The Charity Commission has welcomed the publication of the UK’s National Risk Assessment 2017 of money laundering and terrorist financing (NRA 2017), which has downgraded the terrorist financing risk of the entire non-profit organisations sector from medium-high in 2015 to low. However, the Commission has also recognised that certain parts of the sector, particularly charities working internationally in certain countries, face significantly higher risks, and has warned that the risks faced by charities will vary depending on what they do and where they operate. The Commission has encouraged charity trustees to read the NRA 2017 and to consider the risks to their charity, particularly if their charity works internationally. The Commission has published guidance for trustees on these issues, such as its Compliance Toolkit.
We have previously reported on the process for charitable companies and community interest companies to convert to charitable incorporated organisations (CIOs) from this month. The first window for conversion applications for charitable companies with an annual income of less than £12,500 has now opened.
A youth support charity worker has been prosecuted for unlawfully obtaining personal data in breach of the Data Protection Act 1998 by making his own copies of sensitive data, including that of children. The Information Commissioners Office has issued a warning to workers after an employee of a charity admitted to sending spreadsheets containing the information of vulnerable clients to his personal email address without the knowledge of his employer.
The government has announced plans for a new civil society strategy that will coordinate and improve how public sector bodies interact with the charity sector. The strategy is designed to make better use of the resources that the government already has available, which could involve changes to policy and practice. It will focus not just on registered charities but also on communities and individuals who are keen to contribute. One of the key areas of focus will be on increasing participation in local communities and on empowering individuals to take action on issues which matter to them.
In a recent report jointly published by the Charity Commission, the Scottish Charity Regulator and the Charity Commission for Northern Ireland, auditors and independent examiners are being encouraged to report any concerns they have in relation to charity finances or governance during the course of their work. This is the first time the regulators have provided examples for auditors and independent examiners on when reporting would be helpful but is not a legal requirement.
The Charity Commission has published a consultation report which looks at whether organisations that use or promote complementary and alternative medicine therapies can be classed as charities. The report considers the level of evidence that the Commission should require when making assessments about an organisation’s charitable status.
HM Treasury has issued a response to its consultation published in August 2017 seeking views on draft regulations to increase the thresholds at or below which a co-operative and community benefit society may disapply the requirement to undertake an audit in respect of a financial year. Following a majority of supportive responses, the government has decided to proceed with the proposals to increase the thresholds from £5.6 million turnover and £2.8 million in assets to £10.2 million turnover and £5.1 million in assets.
The government has named 260 employers for failing to pay 16,000 workers at least the national minimum wage, with one charity-owned company reported to have paid 9,735 of its workers less than the national minimum wage. Government investigators have fined employers a total of £1.3m for underpayment. Common reasons for errors included failing to pay workers for travelling between jobs, deducting money from pay for uniforms and not paying for overtime.
The Charity Commission has issued a regulatory alert to 187 recently registered military charities, following a review which found that many of them were adopting aggressive fundraising techniques and receiving a low percentage of income from the fundraising activity. There were also concerns regarding safeguarding procedures.
The Fundraising Regulator announced changes to the Code of Fundraising Practice which came into effect on 31 December 2017. The changes relate to which contact details (either the organisation or the volunteer) are suitable to be displayed on certificates, letters and badges of volunteers authorising their collection activities.