Companies House, HMRC, the FSA – all impose fines for the late submission of returns and documents. The Charity Commission do not. But are they about to? And should they?

Whilst attending the recent annual public meeting of the Charity Commission, I was intrigued to hear Sam Younger, chief executive of the Commission, revealing that 35% of charities that filed their accounts late with the Commission had actually completed and signed the accounts within the filing deadlines.

Furthermore, of the late filers who are incorporated charities, 39% had submitted their accounts to Companies House on time. In fact, only 5% of the charities examined had filed their accounts with the Commission before filing with Companies House. It is worth remembering at this point that charities have a longer filing deadline with the Charity Commission – 10 months, as opposed to 9 months with Companies House.

These statistics indicate that charities are more aware of their requirements with Companies House, and perhaps feel under more pressure to ensure these deadlines are met. The Charity Commission research further revealed that 23% of charities examined (with incomes over £250,000) had filed late for all off the previous 5 years.

The obvious conclusion for this is that the late filing penalty regime imposed by Companies House acts as the driving force behind prompt filing.

So is it time to start fining charities for late submission? Trustees have a legal responsibility to meet the requirements to file their charity’s accounts with the Commission and the threat of late filing penalties may be the prompt needed to ensure charities approach governance and their legal responsibilities with more urgency.

The Charity Commission now seem keen to explore the idea of introducing some form of late filing penalty, and in his recent review of the Charities Act 2006, Lord Hodgson suggested that small penalties should be introduced to encourage charities to take their statutory and regulatory requirements more seriously. Lord Hodgson further suggested that such charities be barred from claiming gift aid.

But to me this seems unfair on charities that are reliant upon donations from individuals, and would not provide any discouragement for those charities reliant on other forms of income, on which gift aid cannot be reclaimed. Therefore, a fines’ system similar to that imposed by Companies House would seem fairer – with consideration to smaller fines for smaller charities (such as those with incomes below £250,000), so as to be slightly more proportional to their income levels.

Whilst the issue of fines is being discussed, there do seem to be other options that could be introduced to try to encourage prompt filing.

Aligning the filing deadlines at Companies House and the Charity Commission would be a good starting place, and would help to get trustees and advisors in the mindset of filing within 9 months.

Highlighting the filing options available to charities may also help. The Charity Commission actively encourages online filing. The vast majority of accounts filed at Companies House are still submitted through the post – and usually by an organisation’s accountants and advisors. Perhaps encouraging advisors to be more aware of the filing options (such as the option to file accounts separately, rather than together with the Annual Return which is the common method of submitting accounts to the Charity Commission) and making it easy for them to submit on behalf of the charity, would also help.

But is it wrong to fine charities that file late? With funding scarcer now, or at least more highly sought after, reducing the resources a charity to fund its charitable activities would seem unfair. However, incorporated charities are already subject to the penalties imposed by Companies House and so some charities are already paying fines. So perhaps the unfairness of fines isn’t an issue to consider.

Furthermore, a recent Ipsos Mori poll revealed that 96% of the public believe charities should provide the public with information on how they spend their money. Charities have a duty to demonstrate their public benefit. In addition, maintaining trust is vital in attracting donations. Therefore, it could be argued that charities not fulfilling their reporting requirements and providing the public with the information they want, are not deserving of support.

The negative connotations surrounding fining charities seem to be diminishing. Charities should be aware of their governance requirements – and should want to ensure they are compliant. Public trust and reputation is vital – without it, charities would lack the funding to carry out their important work.