Advice on Whistleblowing from the Charity Commission

Whistleblowing and defamationAdvice on Whistleblowing from the Charity Commission

The Charity Commission is a ‘prescribed person’ under the Public Interest Disclosure Act 1998 (PIDA), which provides the statutory framework for employment protections for charity workers who make a qualifying disclosure (or ‘blow the whistle’) to them about suspected wrongdoing, including crimes and regulatory breaches by their employer.

“Our aim is to make it straightforward for charity workers to bring concerns covered in PIDA to our attention. It is important that they feel able to speak up about a serious wrongdoing they have identified.

We understand how difficult it may have been for them to bring a matter to our attention, and its importance to them. We recognise the value of this information, as workers will have a unique insight into how a charity is operating on a day to day basis.

These disclosures provide us with information that will help us fulfil our regulatory duties.

When opening a case we record the nature of the issue that is raised with us. The most reported issue categories were governance issues, safeguarding, fraud and money laundering.

Whistleblowing disclosures help us detect and prevent concerns within the sector and take steps to put these right. They help create more effective and efficient charities and more generally assist in raising the public’s trust and confidence in charities and the charitable sector.”

You can also report issues to your employer – check your charity’s whistleblowing policy (a Whistleblowing Policy Template can be found here: Whistleblowing-Policy__fraud_site_)

What to report to the Charity Commission

You can report things that have happened, are happening or are likely to happen. Only report issues to them that could seriously harm:

  • the people a charity helps
  • the charity’s staff or volunteers
  • services the charity provides
  • the charity’s assets
  • the charity’s reputation

Independent Examiner – Eligibility and Skills

Independent Examination of Accounts CC32Charity law requires those charities with a gross income threshold of more than £25,000 to have some form of external scrutiny of their accounts. The trustees may opt for an independent examination if their charity’s income is not more than £1m, or where gross income exceeds £250,000

The appointment of an independent examiner is made by the trustees who must reasonably believe that the person selected has the requisite ability and practical experience to carry out a competent examination of the accounts.

The skills required of an examiner will depend on whether accounts are prepared on a receipts and payments basis or an accruals basis, and the size and nature of the charity’s transactions.

All examiners need some familiarity with certain basic principles of fund accounting, the responsibilities of trustees, and the charity’s governing document.

A person with financial awareness and numeracy skills should have the requisite ability to act as an independent examiner for receipts and payments accounts.

For accruals accounts the examiner should have a good understanding of accountancy principles, accounting standards and knowledge of the applicable SORP.

Depending on the complexity of the charity to be examined, prospective examiners may also need to have practical experience relevant to the charity in question which might include:

  • an involvement in the financial administration of a charity of a similar nature
  • having acted successfully as an independent examiner on previous occasions for similar charities
  • relevant practical experience in accountancy or commerce
  • a working knowledge of charity accounting

Independent examination of accruals accounts

Having the requisite ability is important to ensure that the examiner undertakes a competent examination. A competent examination is one conducted with reasonable skill and care in accordance with the Directions for independent examination. Trustees who have had the charity’s accounts prepared on an accruals basis should select a person who is a member of one of the accountancy bodies listed in the 2011 Act as amended by the 2015 Order.

The examiner should be satisfied that they have the requisite ability with the necessary skills before undertaking the examination of accounts prepared on the accruals basis. When examining accounts prepared on an accruals basis the examiner should be a member of one of the accountancy bodies listed and the examiner must be a member of a listed body if the charity’s gross income exceeds £250,000.

The listed bodies are:

  • Institute of Chartered Accountants in England and Wales
  • Institute of Chartered Accountants of Scotland
  • Institute of Chartered Accountants in Ireland
  • Association of Chartered Certified Accountants
  • Association of Authorised Public Accountants
  • Association of Accounting Technicians
  • Association of International Accountants
  • Chartered Institute of Management Accountants
  • Institute of Chartered Secretaries and Administrators
  • Chartered Institute of Public Finance and Accountancy
  • Fellow of the Association of Charity Independent Examiners
  • Institute of Financial Accountants
  • Certified Public Accountants Association

Starting a New Employee

HMRC Starter ChecklistYou usually have to pay your employees through PAYE if they earn £118 or more a week (£512 a month or £6,136 a year).You must tell HMRC about your new employee on or before their first pay day.
  1. Tell HMRC about a new employee.
  2. Get their personal details and P45 to work out their tax code.
  3. If you don’t have their P45, use HMRC’s ‘starter checklist’
  4. Check what to do when you start paying your employee.

You only need a starter checklist from your employee to work out their tax code if they do not have a P45, or if they left their last job before 6 April 2018.

You do not need to operate PAYE on volunteers if they only get expenses that are not subject to tax or National Insurance

Operate PAYE on students in the same way as you do for other employees.

Student loan repayments

You should make student loan deductions if any of the following apply:

  • your new employee’s P45 shows that deductions should continue
  • your new employee tells you they’re repaying a student loan, for example on a starter checklist
  • HM Revenue and Customs (HMRC) sends you form SL1 or form PGL1 and your employee earns over the income threshold for their loan

More details can be found here

Legal Requirements for Accounting Records

All charities (whether registered with the Charity Commission or not) must prepare accounts and make them available on request.  All charities must keep accounting records, and prepare annual accounts which must be made available to the public on request

Charities with a gross income of more than £25,000 in their financial year are required to have their accounts independently examined or audited

Keeping accounting records

These records – for example cash books, invoices, receipts, Gift Aid records etc must be retained for at least 6 years (or at least 3 years in the case of charitable companies); where Gift Aid payments are received records will need to be maintained for 6 years with details of any substantial donors and to identify ‘tainted charity donations’ in accordance with HMRC guidance

An independent examination is an external review of a charity’s accounts and is carried out by an independent person with the requisite ability and practical experience to carry out a competent examination

An examination involves a review of the accounting records kept by the charity, and a comparison of the accounts presented with those records.  This means that all cash books, bank statements, invoices and receipts must also be made available for checking by the independent examiner

Closing Down A Charitable Company

Related imageThe company must first of all be removed from the Companies Register but only if it:

  • hasn’t traded or sold off any stock in the last 3 months
  • hasn’t changed names in the last 3 months
  • isn’t threatened with liquidation
  • has no agreements with creditors, eg a Company Voluntary Arrangement (CVA)

A company can apply to the registrar to be struck off the register and dissolved if it’s no longer needed, for example if:

  • the directors wish to retire and there is no one to take over the running of the company
  • the company is a subsidiary whose name is no longer needed
  • the company was originally set up to exploit an idea that turned out not to be feasible

More details can be found here:

Once the company has been removed from the Companies House Register, it can be removed from the Register of Charities.

A charitable company has an automatic right to expend all of its assets on its purposes.

You can tell the Charity Commission that you have wound it up by completing the closure form. This can be done online – more details  can be found here: