What Are My Charity's Accounting and Reporting Obligations?
Charities have a number of important reporting and accounting obligations. These are designed to ensure that the Charities Register can be kept accurate and up to date, and that the public can be sure that charities operate properly and transparently.
If you are looking at these obligations for the first time, they can seem overwhelming. You should remember, though, that smaller organisations have relatively simple reporting requirements; larger organisations, on the other hand, must think harder about their paperwork.
Types of accountsThe type and range of accounts that a charity is required to prepare and file depends on the nature and turnover of your organisation. Charities that are also limited companies, or that have high turnovers, have more demanding reporting obligations.
If your charity has a gross income that does not exceed £100,000 in the year and is not registered as a limited company, you can complete abridged accounts known as ‘receipts and payments’. This requires you to just provide accounts showing money in and money out, as well as a breakdown of year-end assets and liabilities.
If your charity is registered as a limited company, or if its annual gross income exceeds £100,000, you are required to provide accounts based on the ‘accruals’ standard. In practice this means you must prepare and file a balance sheet, a statement of financial activities, and explanatory notes. Charities that are required to prepare this type of accounts often engage an accountant to provide help.
Annual ReturnsIf your charity has a total income greater than £10,000 during the year, you will be legally obliged to complete an Annual Return. You will normally receive this document a couple of weeks following the end of each financial year. It requires you to provide the Charities Commission with basic information on your organisation’s financial situation and activities, as well as the trustees’ details.
Trustees’ Annual ReportsAgain, if your charity’s total annual income exceeds £10,000 you will also have to complete a Trustees’ Annual Report (TAR). The TAR provides an overview of the charity’s activities, achievements and aims throughout the year, as well as details of the charity’s structure.
While all charities are obliged to complete the basic part of the TAR, only organisations with a turnover exceeding £500,000 are required to complete the full document.
AuditingDepending on your charity’s annual turnover, you may have to have your accounts independently audited. Charities with a turnover below £10,000 are exempt from auditing, unless their governing document specifically states otherwise.
For charities with a turnover exceeding this threshold, accounts must be inspected. If the income is greater than £10,000 but not greater than £500,000, accounts must be submitted for independent examination. If the income is greater than £500,000, or if the total gross assets exceed £2.8 million, the accounts must be audited. This is a more time consuming process, although your accountant may be able to carry it out if they are a registered auditor.
The range of accounting and reporting obligations faced by charities can seem daunting, particularly if you have not previously had to complete accounts or an annual return. If you are in any doubt, contact the Charities Commission or your accountant for more information.