Changing Your Charity’s Financial Year

You cannot change your charity’s financial year or period if your latest annual return and accounts (if required) are overdue.

charity collecting tinRules for charities that are not companies

If your charity is a charitable incorporated organisation (CIO) or unincorporated (not a company) you can change the financial year or period to run for more or less than 12 months.

It needs to be a minimum of 6 months, and no longer than 18 months.

You can only:

  • change the dates for your current financial year
  • make a change once every 3 years

Changing your financial year or period will also change your deadline for filing the annual return and accounts.

Rules for charities that are companies

If your charity is incorporated (a company) you can shorten your financial year or period as often as you’d like.

The minimum period you can shorten it to is 1 day.

You can lengthen your company’s financial year to a maximum of 18 months, but this can only be done once every 5 financial periods.

Rules for newly registered charities

If your charity is newly registered, and you have not submitted an annual return you will need to request permission to change your financial year.

To sign in and change your financial year you will need your:

This password gives people in your charity access to detailed information about your charity and individuals connected with it.

When giving access to this password you need to have measures in place to make sure the system is only used for proper purposes, and that the information accessed through the Commission’s services will be treated carefully and sensitively and in accordance with legal requirements including the General Data Protection Regulations (GDPR).

Read the privacy notice before you use the service.

What the Charity Commission expects from trustees in its casework

CC903546-E4A0-491B-9E28-17765EEBB663Trustees or charity officers contact the Charity Commission for different reasons. These include applying to register a charity, updating the recorded details of a charity or using one of the electronic forms to apply for a service. When you contact the commission, it expects you to always:

  • prepare carefully – this includes reading relevant commission guidance, ensuring you have all the information you need before contacting the commission and being clear what it is you want or need from the commission
  • provide information which is true, complete and correct

When the Charity Commission contacts you, it needs to be confident that its regulatory concerns have been fully addressed. This means the commission expects you to:

  • fully cooperate with it
  • provide full, frank and honest answers to its questions
  • provide information or documents it has asked for by the date specified

This will help ensure the commission’s engagement with your charity is completed as soon as possible.

Sometimes the commission may decide to check some of the information you have given it with other people or organisations, or it may ask for evidence to prove what you are telling it is correct. This is standard practice.

If you cannot meet a deadline the commission has set, you must let it know immediately and before the deadline expires. You must also ensure that you answer the commission’s questions fully and honestly. This means you should not provide limited or partial responses.

If you:

  • do not cooperate with the commission
  • do not provide information the commission has requested, or
  • provide partial, inadequate or no response

the commission is likely to conclude that the regulatory concerns are not resolved or allayed. If you do not provide the information requested, or provide limited, partial or inadequate responses the commission will often consider this a regulatory concern in itself. This may result in it deciding to take stronger regulatory action.

The courts have made clear that they expect trustees to cooperate with the regulator.

The commission will consider non-cooperation as evidence of mismanagement or misconduct, which is a matter the commission takes seriously.

It is a criminal offence under section 60 of the Charities Act 2011 for anyone to knowingly or recklessly provide false or misleading information to the commission. This includes suppressing, concealing or destroying documents.

Know Your Charity’s Financial Position

Set a budget and follow it

Your charity should have a budget.  Check that it is being used.  It helps make sure you have realistic plans based on how much money your charity:

  • currently has
  • plans to raise
  • plans to spend each year

By checking how much your charity receives and spends against the budget, you can identify problems in good time and agree what to do about them.  It’s particularly important to do this where you see big differences between the budget plans and what is actually being spent.

Mr Claw Cover

 

Our publication Mr Claw in the World of Charity Accounting explains charity budgeting and planning in more detail.  We still have a few copies available, so contact us here if you would like a copy.

Get the funds you need

Your charity may get the funds it needs in different ways.

This can include:

Make sure you know what the rules are for getting funds in these ways and that your charity complies with them.

If your charity does not spend all its income

Check that your charity has a reserves policy.  This explains whether your charity is aiming to keep a reserve of unspent income, what it will be used for and why this is reasonable.  Check that your charity sticks to the policy or can explain why if it does not.

Make sure that your charity’s annual report explains the policy and says how much money (if any) it has kept in reserve, what it is for and when the charity will use it.

If you want more information on Reserves, see the Charity Commission’s guidance here

Charity Trustee – Declaration of Eligibility and Responsibility

Protect Your Charity’s Money – Internal Financial Controls

Fraud Top TipsAs a trustee you must take steps to make sure that your charity’s money is safe, properly used and accounted for. Every trustee has to do this. Even if your charity has an expert to manage its finances, you are still responsible for overseeing your charity’s money.

Protect your charity’s money

Make sure that money is only spent on what is allowed by the charity’s governing document and policies. If it is not, you and the other trustees need to put it right.

Use the Internal financial controls checklist (MS Word Document, 31.6KB) to help you know you are doing this properly. This will help you make sure that money coming into the charity is:

  • secure and recorded
  • only spent on your charitable purposes
  • at less risk of theft, fraud or cyber crime

Appointing An Independent Examiner

AccountingHaving opted for an Independent Examination of their charity’s accounts, the  trustees may find it helpful to draw up a set of questions to ask their proposed examiner to help them check that the person has the skills and experience needed. You should ask:

  • all examiners  to confirm that they have read and understood the Charity Commission’s Directions and guidance
  • professional examiners to provide proof of membership of one of the professional bodies listed here and that they meet that body’s requirements for acting as an independent examiner.  In particular, the examiner is likely to need a practising certificate or licence, although if he or she is not charging a fee to carry out the independent examination this may not be necessary.  This check can be done using each body’s on-line member search tool, or directly if the body does not have this facility
  • non-professional examiners to explain their skills and experience and why this makes them competent to carry out the work.  For example, the examiner may work in a role that involves financial management, such as setting and managing budgets and reviewing financial reports, or that requires knowledge of accounting systems, such as maintaining financial records and internal controls

The trustees’ decision to appoint a person to act as the charity’s examiner should be in writing and recorded in the charity’s minutes.  The examiner should confirm their appointment and this can be done by an exchange of emails.  Professional examiners may issue a letter of engagement, setting out the terms of their appointment including their fee.

The process of finding and appointing an examiner can take time and so should not be left until the trustees’ annual report and accounts are due for filing.

Holding Charity Meetings During Lockdown

Charity Commission LogoFrom the Charity Commission

Coronavirus continues to have a major impact on charity events and trustees need to consider how and if they can hold meetings.

Charitable companies and Charitable Incorporated Organisations (CIOs) can hold AGMs and other members’ meetings online.  This temporary amendment is in the Corporate Insolvency and Governance Act 2020 and also applies to exempt charities that are community benefit or friendly societies.  It was extended from 30 September to 30 December 2020 but may be extended again if the government thinks this is needed. We will update with any changes if they happen.

For other types of meetings, or for any other type of charity, trustees need to check if their charity’s governing document allows them to hold meetings online or by telephone. Where it does not, an alternative may be to amend it to allow meetings to be held in this way.

Holding meetings online or by telephone

In the current situation, it may be difficult to hold face-to-face meetings. Some charities have clauses in their governing documents that allow them to meet virtually or to use telephone facilities, so we advise trustees to check their governing document and see if they can make amendments themselves to facilitate changes as to how or when meetings are held.

Generally, if there is no such clause in the governing document and you decide to hold meetings over the phone or using digital solutions, we will understand but you should record this decision and that you have done this to demonstrate good governance of your charity.

In the specific cases of members’ meetings (not trustee / director meetings) of Charitable Incorporated Organisations or charitable companies, held between 26 March 2020 and 30 December 2020:

  • they may be held by phone / video or other electronic means, even if the governing document requires them to be held physically face-to-face
  • members still have the right to vote, but the charity can require this to be done electronically, or by other means (such as by post)
  • members will not have the right to attend a meeting in person or participate in meetings other than to vote

If you rely on these provisions, you must ensure that this decision is recorded in the minutes and that all other meeting requirements are met. You should ensure that you have a robust system to ensure only those eligible to vote can do so and that you record who has voted and the percentages of votes cast.

Disagreements and Disputes in Charities

conflict resolutionWhy internal disputes are a problem

Charity trustees, staff and members can sometimes disagree with each other over decisions about the charity.

A serious disagreement within a charity may cause the charity problems and damage its reputation.

It is your responsibility as trustees to try to resolve a disagreement or dispute. The Charity Commission can only get involved in exceptional circumstances.

How to resolve a dispute yourself

Your charity’s governing document may include a ‘disputes clause’ with procedures for dealing with a dispute. Even if it doesn’t, you should do everything you can to reach an agreement yourselves.

When to get external help

Charity trustees and members need to work together to settle any differences they have. If your trustees can’t reach an agreement and follow the directions in your governing document, you may need to look for some independent external help.

An independent third party will look at both sides and come up with some fresh ways to resolve the dispute.

If the dispute is about the way your charity is run, you could:

  • approach the charity’s national or umbrella body, if it has one
  • contact an organisation like the Advisory, Conciliation and Arbitration Service “ACAS”
  • ask a local church leader or community elder for help, if it is a religious dispute

Mediation

Mediation is a more formal way to settle disputes. It is a private and confidential process in which an independent person meets with both sides, helping them to reach a solution that everyone finds acceptable.

Mediation can be quick and cost-effective. Through mediation, both sides must agree to any solution, so it is more likely to be a lasting agreement.

If your dispute is taken to court, you will be expected to have tried mediation first.

WHEN to involve the COMMISSION

The commission can only get involved in internal disputes when:

  • there are no trustees (or correctly appointed trustees) in place, and
  • you can show that all attempts to resolve the dispute have failed

When the commission won’t get involved

The commission will not get involved if your dispute is about trustees’ decisions or policies. Trustees are free to make decisions for their charity, so long as they are acting within the law and within the rules of the charity’s governing document.

More detailed information can be found here

Annual Return Deadline Coming Up!

cartoon-alarm-clock-ringingWhen to submit your annual return

You must submit your annual return within 10 months of the end of your financial year

For example, if your financial year end was 31 March 2019, your deadline is 31 January 2020

INcome under £10,000

You only need to report your income and spending

Income between £10,000 and £25,000

You must answer questions about your charity in an annual return.

You do not need to include any other documents

Income over £25,000

You must answer questions about your charity in an annual return.

You will need to get your accounts checked and provide PDF copies of your:

  • trustee annual report
  • accounts
  • independent examiner’s report

You also need a full audit if you have:

  • income over £1 million
  • gross assets over £3.26 million and income over £250,000

Prepare your annual report and accounts first. You can then upload them when you complete your annual return.

Making A Complaint About A Charity

You can complain to the Charity directly, unless you suspect illegal activity, like terrorism or abuse.

!Contact the police on 101 if you suspect illegal activity!

If you are not happy with how the charity deals with your complaint, contact the relevant regulator:

Fundraising complaints

Contact the Fundraising Regulator to complain about:

  • the way you’ve been asked for donations
  • how fundraisers have behaved

You can also complain on behalf of someone else.

Advertising complaints

Contact the Advertising Standards Authority to complain about:

  • an advertising campaign you think is offensive, deceptive or inaccurate
  • the amount of emails or mail you get from a charity

You can change how often you get emails, phone calls, texts or post from a charity using the Fundraising Preference Service.

Other serious complaints

Complain to the Charity Commission if a charity is, for example:

  • not doing what it claims to do
  • losing lots of money
  • harming people
  • being used for personal profit or gain
  • involved in illegal activity

Make a serious complaint about a charity.

If you’re a Trustee or Auditor

You can:

If You’re A Charity Employee Or Volunteer

Read how to report serious wrongdoing at a charity you work for