Preparing Your Charity Accounts
Charity accounts are a matter of public record. The financial affairs of your charity will be noted on the Register of Charities, ready for perusal by the government and the public.
In order to assist this process, and to ensure that your financial affairs are being conducted properly, you must complete and file accounts in a specific manner. The relevant accounting requirements differ depending on the size and structure of your organisation, but some requirements apply to every registered charity.
Record keepingAll charities, like regular businesses, are required to keep full and accurate records of income and expenditure throughout the year. You must retain these records for at least six years unless yours is a charitable company, in which case you must keep them for three years.
In practice, your record-keeping obligation requires you to keep hold of all invoices and receipts relating to the charity. You should also keep bank statements and cash books, along with any other relevant documents.
Remember, too, that charities registered for Gift Aid have additional record-keeping obligations. If you are registered for Gift Aid you must ensure that you keep copies of Gift Aid declarations, as well as details of the donations themselves.
Receipts and paymentsIf your charity has a gross income of £100,000 or less, you can submit abridged accounts known as ‘receipts and payments’. Unsurprisingly, accounts of this kind simply summarise the money the charity has received over the course of the year, and the money it has spent. As long as you have kept accurate records during the year you should be able to complete this relatively quickly.
In addition to this, you will also need to provide details of the charity’s assets and liabilities at the end of the financial year in question. This can be a more complex task, and you may need to seek help from your accountant to complete it properly.
AccrualsIf your charity has an income of £100,000 or less, or it is a charitable company regardless of income, you must complete your accounts in accordance with the Statement of Recommended Practice (SORP), which is issued by the Charities Commission. You must present your accounts on the ‘accruals’ basis which, in practice, means that you must provide a wider range of information than that required by the receipts and payments standards.
Charities in this situation must provide a balance sheet, as well as a full statement of all financial activities. In addition, a trustee (or director in the case of a charitable company) must prepare and sign explanatory notes.
Public availabilityIn order to maintain transparency, charities are also obliged to make their accounts publicly available. There is a range of ways in which charities choose to do this; most now keep their most recent accounts online, with a link from their main website. You should also be willing to provide paper accounts by post to members of the public who request them.
It is worth noting that trustees are permitted to make a “reasonable charge” for this service. In practice this means that you can charge a few pounds for postage and photocopying in the event that paper copies are requested.
Preparing and maintaining charity accounts can be a complicated process, particularly if you have not done it before. But, by keeping legible and accurate records, you can make the task as simple as possible.