On 12 January 2023, Crowe UK and Charity Finance Group ran an annual round-up event, highlighting key legal and regulatory changes and updates. This ever-popular event covered a wide range of topics and issues. If you missed it or need a refresher you can now watch the video and read the key points...
With so much change and uncertainty around us, it is crucial to remain abreast of all the latest developments impacting the sector. In our annual meeting we covered a vast range of issues including economic environment, VAT and tax. This write up focuses on the technical areas you need to be aware of, such as updates from the Charity Commission, Fundraising Regulator and other auditing updates.
Charity Commission and other laws and regulations
We have seen a recent shift in emphasis from the Charity Commission that may hopefully enable a more positive engagement with the sector. This appears to be the stated intention of the Chair of the Charity Commission who has publicly stated that he wants to lead an expert Commission that is fair, balanced and independent with the goal of improving public trust in charities as lingering doubts about where donors’ money goes continue.
The Commission has updated a lot of its guidance recently, mostly as a result of changes in law implemented within the Charities Act 2022
The most important updates are:
- Annual return
Annex 8 contains the full list of the revised Annual Return questions that will be set out in the Charities (Annual Return) Regulations 2022 that will come into force on 1 January 2023. We recommend that charities do look at these changes as soon as possible as it will, in some cases, require information collection systems to be put in place.
- Charities and terrorism (November 2022)
Advice and information on key aspects of the UK’s counter-terrorism legislation and how it may affect charities and their work.
- Cryptocurrencies blog (July 2022)
As things stand, trustees should think very carefully before investing in cryptocurrency, evaluating the benefits and risks as they would do with any important decision about their charity. This includes taking appropriate professional advice.
- Responsible investing
The High Court ruling last year that allows trustees of charitable trusts to prioritise the climate change outcomes of their investments even if it risks reducing financial returns. The Commission had signalled that it would publish its updated CC14 guidance but in November 2022 they published an ‘Update on investment guidance following Butler-Sloss case’ and have stated they will issue final guidance by Summer 2023.
The Charity Commission guidance released in November 2022 relates to changes being introduced by the Charities Act 2022, amending the Charities Act 2011. The changes are expected to come into force in autumn 2022, spring 2023 and autumn 2023. The changes which are effective now:
- Paying trustees for providing goods to the charity
- Fundraising appeals that do not raise enough or raise too much
- Power to amend Royal Charters
- Other provisions
The Fundraising Regulator has released recent guidance on: Safe & responsible fundraising: Fundraising for the future and on failed appeals. The latter guidance is really helpful and explains areas such as including a secondary purpose in appeals.
Of other note is the new requirements from the Fundraising Regulator on self-reporting fundraising incidents, where the Regulator has been encouraging charities to self-report breaches of the Code of Fundraising Practice.
The Regulator notes that so far, reporting volumes are low, but this is in line with their expectations while awareness of this reporting regime builds with charities and, by their nature, these reports will be for rare circumstances.
Financial reporting and auditing
Charities must take note of two key changes to the International Standards of Auditing (ISAs):
ISA (UK) 240 (revised May 2021) The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements, requiring more questions from auditors over the last couple of years and greater depth of consideration required by them.
But the important one for this year is ISA (UK) 315 (revised July 2020): Identifying and Assessing the Risks of Material Misstatement and the potential impact on the audit in future.
Charities face a more robust risk identification and assessment process, with a separate assessment required of inherent risk and control risk.
Additional requests for information to enhance understanding of the systems, processes and controls, and more information regarding the entity’s risk assessment process and monitoring of internal controls.
There will be enhanced procedures relating to exercising professional scepticism, and additional documentation requirements. This includes additional requests for information to clarify areas where evidence obtained appears to contradict information already considered in the audit.
We face an increased focus on information technology and additional requests for information to enhance understanding of the IT environment.
Watch the full Annual Round-up delivered by Crowe UK and CFG:
If you have any questions or require advice, please email the team at Crowe UK.