Since 1992, the auditors and examiners of charities have had a statutory right, as opposed to duty, to report matters to the relevant regulator such as the Charity Commission. In a sign that the regulators would welcome a bit more dynamism from these "scrutineers", guidance has now been issued giving examples of where they "can usefully use their discretion to report relevant matters of interest to the regulators". The commission said that it is keen to encourage such reporting, and so the examples provided should be read carefully. They cover a number of scenarios: an immaterial breach of trust where the trustees have taken no remedial action; a donation from an unknown source with conditions where the trustees have not notified the regulator; and uncertainty over the renewal of a contract which is a material source of income to the charity.
Tax in Scotland is getting interesting, with the recent budget introducing a range of new rates. This may change how much "tax to cover" individuals pay, but the essentials of Gift Aid will remain unchanged with the recovery continuing to be based on the basic rate of 20 per cent. However, with five different rates, there will be fewer donors sitting in the basic rate than before. Derek Mackay, the Scottish Finance Secretary, said that the move to a five-band income tax system will mean no-one earning less than £33,000 in Scotland will pay more tax they do now. This probably that means that some people will no longer be paying enough tax to cover their gift aid payments. Charities may therefore need to review their Gift Aid documentation to ensure that it is still clear enough.
Meanwhile the same Scottish budget also introduced the removal of charity relief eligibility for independent schools from 2020/21. Although this is clearly targeted at just one part of the sector, and universities have been explicitly excluded, there will be many charities reassessing their risk profiles, just in case the precedent spreads. The relief is estimated to be worth £1.8bn to charities in England.
The Financial Reporting Council has proposed revisions to UK corporate governance code used by listed companies, partly with a view to UK business being match-fit for Brexit. The FRC says that the changes focus on the importance of long-term success and sustainability and seek to ensure that boards of companies undertake "effective engagement" with wider stakeholders as part of efforts to improve public trust in business. As the sector considers how best to apply the new charity code, trustees may want to monitor developments in the corporate code too.
Coutts have issued their 10th Million Pound Donor Report, and with the benefit of a decade's work, it identifies some interesting details. Key trends that might be most useful to charities are that major donors are becoming more visible and declaring their long-term intentions more publicly, and that there is a growth in establishing family foundations, so that giving passes down the generations. The report also says that while impact is important, there is a recognition that foundations can afford to support causes that have a higher risk of failure; that major donor fundraisers are important to accessing and unlocking these sources of funds; and major donors and family foundations are increasingly interested in making investments that work for good, whether ethical investments within a foundation, or social investments into a charitable cause.
There is also a comment on Brexit, and it is reassuring to see that even the wealthiest don’t know what is going on. This is expressed more subtly: commenting on the unknown impact of leaving the European Union, the report simply says that 'the full impact is yet to be seen'.
Don Bawtree is lead partner for charities at accountants BDO LLP