Written evidence submitted by the Charity
Commission for England and Wales
1.1 The abolition of cheques should not
weaken a charity's system of internal financial controls, provided
the trustees opt to use the alternative method of payment and
put in place sufficient safeguards over its use.
1.2 The alternative payment method developed
to replace cheques would need to be thoroughly tested by charities
and those groups who represent individuals who donate to charity.
1.3 In order to encourage the take up the
alternative payment method it should retain as many as possible
of the advantages of chequesit should be safe, straightforward
and cheap for the user.
1.4 When a decision has been made on what
will replace the cheque the Payments Council should run a national
campaign, funded by the banks, setting out details of the replacement,
how to use it and what users need to do to minimise the risk of
1.5 There is still some way to go before
the sector's digital inclusion is comprehensive. Some charities
already run their banking arrangements online, using software
developed by their banking provider. However many charities, particularly
smaller charities, are still very reliant on paper systems. For
example, to date, only 70% of registered charities use the Charity
Commission's online services to file their annual return or to
receive our regular newsletters.
2.1 The Charity Commission for England and
Wales is established by law as the regulator and registrar of
charities in England and Wales. Our aim is to provide the best
possible regulation of these charities in order to increase charities'
efficiency and effectiveness and public confidence and trust in
3. THE CHARITY
3.1 There are approximately 160,000 registered
charities in England and Wales. The size of charities is very
diverse. Figures collated from the register of charities show
that the aggregate annual income of the sector is some £52.6 billion,
although within this the annual income of individual charities
ranges from the few pounds to more than £500 million.
Some charities rely on individual donations from members of the
public for the bulk of their income; others receive the majority
of their income from charitable activities or investments.
3.2 The Commission collects figures on the
annual gross income reported by charities in their annual returns
and publishes a summary in the Facts and Figures area on
our website. The most recent numbers, as at 31 December 2009,
show that three-quarters of registered charities have an annual
income of less than £100,000. At the other end of the scale
the largest 6% of charities account for almost 90% of the sector's
31 December 2009
Annual income Bracket
|£0 to 10,000||72,958
|£10,001 to £100,000||50,430
|£100,001 to £500,000||16,527
|£500,001 to £5,000,000||7,658
|Not yet known||11,232
|Source: Charity Commission website
4. THE POTENTIAL
4.1 We publish guidance for charities in a number of
areas. Our guidance on internal financial controls looks at various
areas of financial activity and provides examples of internal
financial controls that are commonly used to reduce the risk of
loss. We know, from inquiries to our contact centre, that charities
want details of the internal financial controls we recommend trustees
of charities to have in place when they are making payments online
using debit and credit cards, or via BACS direct credit. We are
currently revising our guidance on internal financial controls
for charities to provide trustees with advice of the sort of controls
they need to put in place to protect these transactions.
4.2 Our overall advice is that using these payment methods
should not weaken the charity's internal financial controls, provided
the trustees put in place sufficient safeguards over their use.
These will include procedures stemming from the charity's banking
4.3 Banking institutions have developed software for
online transactions that allows users, including charities, to
provide for more than one person to authorise payments. The software
provides control similar to that of more than one signature on
a cheque, and ensures that the charity has a proper internal financial
control over online payments. This software is available at a
cost, which we recommend is worth paying for the internal control
it provides. In the run up to the abolition of cheques we would
like to see banking institutions further develop, and disseminate
information on, this software, making it more cost effective to
charities to use.
4.4 Trustees also need to maintain the security of the
charity's online bank accounts via a number of basic precautions
over the charity's computers. These include using up to date anti-virus
spyware and firewall software on all computers, and controls over
passwords and PINs. These measures have cost implications for
4.5 However a notable number of smaller charities are
likely to be paper based. These smaller charities see cheque payments
as the cheapest, easiest and safest payment method. The alternative
method that the Payments Council and banks develop should not
ignore these important features of cheques.
4.6 This is important because when cheques are abolished
charities should not, as an alternative, move to making payments
by cash. Our guidance on internal financial controls makes it
clear that charities should keep cash transactions to a minimum,
as they are inherently more risky, and they also increase the
charity's cash handling costs. It would be a backward step in
the internal financial control framework for charities if the
abolition of cheques saw a corresponding increase in the number,
and value, of cash payments made by charities, rather than a move
to online or other electronic payment methods.
5. THE POTENTIAL
5.1 While many charities encourage donors to give via
bank payments or to pay online, they continue to accept money
in whichever way a donor prefers to give, including cheques. Those
charities that opt to accept donations online will need to ensure
that their website is secure enough to protect the data of those
making donations. This should generally be part of the system
of controls that charities use to protect their website, but will
have cost implications for those charities that do not already
have a website or do not use it to receive donations.
5.2 Many potential individual donors may be more comfortable
with cheques and may be wary of using a debit/credit card or online
method of making a donation. This may make them less inclined
to make a donation when cheques are abolished. We would not want
those charities that rely on such donations for a notable proportion
of their income to suffer a loss of income.
5.3 To mitigate the risk of a loss of income charities
should be prepared to advise donors to use whatever method replaces
cheques in order to make donations. We would like to see in the
run up to 2018 a national campaign setting out the change
and what will replace cheques. This should include specific coverage
of the options for individuals who wish to make donations to charity.
To minimise the costs to charities the national publicity campaign
should be led by the Payments Council and funded by the banks.
This campaign should set out the alternative payment methods and
also educate individuals and organisations about the risk of fraud
and identity theft, and what they should do to minimise the risk.
6. THE ONLINE
6.1 There is still some way to go before the sector's
digital inclusion is comprehensive. The Commission uses email
in preference to postal addresses for 114,353 registered
charities to send out our biannual newsletter. The range of our
online services includes the facility for charities to complete
their annual return and update form. In 2009 we received
112,076 forms online.
6.2 There are 160,000 registered charities. This
means that approximately 70% of registered charities have opted
to receive or send information online. But this does not imply
that these charities would be able to bank online; and conversely
the figures show that 30% of registered charities do not use the
internet for the basic function of communicating with us.
7. THE IMPLICATIONS
7.1 Charities will need to ensure that trustees and staff
have sufficient training on how to use the alternative payment
method that replaces cheques. Bank transfers and other means of
electronic payment require the sharing of bank information between
the parties involved. This will require additional training and
measures to be taken to safeguard this data and also to train
staff to ensure that the charity's bank details are only shared
to bona fide counter parties. Charities will have to meet the
costs of this training.