Sanctions for the late filing of charity accounts with the Charity Commission should include the withdrawal of Gift Aid, and consideration should also be given to fines, according to the Hodgson review of the Charites Act 2006.
"Government should also work with the commission to develop a fair and proportionate system of charging for filing annual returns and for the registration of new charities," it says.
It says that charging of this kind is highly controversial in the sector, and emphasises that the funds raised should not be deducted by the Treasury from the commission’s budget.
All information required to be submitted by charities should be combined in a single document, the review says. The first page should be a list of key risk indicators that would help the commission select samples for investigation and be published on the charity’s register entry, the review says.
The list should say whether the charity has paid staff, receives public funding, raises money from the public, works overseas, has trustees who have served more than nine years, has paid trustees or has been fined or submitted a serious incident report to the regulator.
In general, the Charity Commission should concentrate on its core functions of registering charities, identifying and tackling misconduct and providing the public and charities with information, the review says.
In particular, it should focus on regulation, including checking random risk-weighted samples of charity accounts. "The commission should be more proactive in deterring, identifying, disrupting and tackling abuse of charitable status," the review says.
The threshold for compulsory registration of charities with the commission should be raised from £5,000 to £25,000, it says, which matches the threshold for filing accounts. The threshold for excepted charities, currently being registered under a requirement of the 2006 act, should drop to the same level in three years.
The requirement for charities to submit accounts and reporting information should be aligned with the proposed registration threshold of £25,000, and all charities below that income level that register voluntarily should be identified on the register as ‘small’ in order to alert the public that they are subject to little proactive oversight.
Voluntary registration of charities with an income below £25,000 should be permitted once registration of excepted charities is completed and existing charities wanting to convert to being charitable incorporated organisations have done so, the review says.
Meanwhile the processes of applying for registration with the commission and for tax relief from HM Revenue & Customs should be combined, and work should continue urgently to create a single reporting system for incorporated charities to use when filing information with the commission and Companies House.
The commission should remain the main regulator of charities in England and Wales, but should continue developing partnerships with umbrella bodies to promote compliance and best practice. It should begin discussions about making the Homes and Communities Agency the principal regulator for charitable social housing providers, the review says.
The income level at which charities are required to have their accounts audited should increase from £500,000 to £1m, the review says, and the audit threshold for charities with assets valued at £3.26m should be removed completely.