What to include in your trustees’ report?

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Are you are a trustee or CEO of a small charity? Have you been assigned (if you volunteered, you are a rare breed!) the daunting task of preparing the Trustees’ Annual Report? It is close to the deadline and the accountant is chasing for a trustees’ report. Have you no clue of what to include in your charity’s trustees’ report? Or are you one of the charities in the 30% margin that, according to Charity Commission’s report, do not meet the basic quality benchmark for their accounts and report? Fret not, Charity Accountant have this simple easy to understand guide on what to include.

What to include really depends on the income and nature of activities of your charity. Larger charities (ie with income over £1mn or assets over £3.26mn) have a whole lot more to report on, than small charities. We have broken down information you need to add in your report into 8 headings. Below is information which you should include in your trustees’ report if your charity’s income is below £500,000.

REFERENCE AND ADMINISTRATIVE DETAILS

  • Include the name of the charity and any other name by which it is known.
  • Charity registration number and if applicable, company registration number.
  • Address of principal office and registered office.
  • Names of trustees in the period and at the report approval date. So, all appointments and resignations since the start of the accounting year to the actual date of signing the accounts will have to be included along with such dates.

 

STRUCTURE, GOVERNANCE AND MANAGEMENT

  • Add the nature of governing document ie rules, trust deed, memorandum and articles etc.
  • What is your charity’s legal structure? ie charitable company, Charitable Incorporated Organisation etc
  • Methods used to recruit and appoint new trustees, including any constitutional provisions for appointment.

 

OBJECTIVES AND ACTIVITIES

  • Purposes of the charity. Look at your governing document, rules, constitution or memorandum of association to find what your charities purpose is.
  • Main activities undertaken in relation to those purposes. Explain activities, projects or services as identified in the accounts. Where practicable numerical information on resources spent on particular activities consistent with accounts analysis.

 

PUBLIC BENEFIT

  • Explain how main activities undertaken to further the charity’s purposes for the public benefit
  • Confirm whether or not the trustees have had regard to Charity Commission’s guidance on public benefit.

 

ACHIEVEMENTS AND PERFORMANCE

  • Give a summary of your charity’s main achievements. This is where you can tell your story, and no one can stop you. Write passionately about what your charity has achieved and how it has changed the lives of so many like it was set out to do. Tell the funder, tell Charity Commission, tell the prospective service user the impact your charity has had in the community. Give that funder a reason they cannot say no to.

 

FINANCIAL REVIEW

  • Write a short review of your charity’s financial position at the end of the year. You can compare the annual income and expenditure figures against the same for last year. Then explain why you think the income and expenditure were up or down as compared to last year.
  • You can also add year end restricted and general fund balances here explaining the reason for these balances. Trustees and funders like to know this information because it gives them an idea as to how much free reserves the charity has at its disposal.
  • You must explain the circumstances due to which any fund is materially in deficit (ie overspend) and steps being taken to eliminate it. You could, for example, say that the overspend was due to a late grant installment not received before year end. Alternatively, you could say that the project expenditure was higher than budgeted due to unavoidable circumstances and that the deficit will be made good by a transfer from general fund.

 

RESERVES POLICY

  • Trustees should include a reserve policy in their report. But in order to do this, they first need to draft a reserves policy. Guidance on how to set reserves policy for your charity can be found on Charity Commission’s website.
  • The reserves policy should state the amount of reserves at the year end. It should also explain the reason for holding this amount in reserves.
  • If trustees have decided that holding reserves is unnecessary, then this fact as well as the reasons should be disclosed.

 

GOING CONCERN

  • Provide explanation of any uncertainties about the charity continuing as a going concern.

It is a relatively well-known fact that it is the trustee’s collective responsibility to review the charities going concern ability on a regular basis. But the fact that trustees have to review the charity’s ability of continuing for the next twelve months from the date of the review is not very well known. Most charities prepared budgets for the year ahead. But as you are half way through that year, how many charities extend that budget to cover the next six months? The answer is, from our experience, not many. They will wait till they are in the last three months of that budget before starting the budget for next year.

If your charity is doing this, it could be a dangerous and unnecessary financial risk. If there are issues you may not realise that you are in muddy waters until you are in month 6-12 of the budget. Which will be too late to put any corrective measures in place.

I totally understand that in the current climate it is nearly impossible to predict whether your charity will be a going concern. Nevertheless, trustees are still responsible to identify any issues and take reasonable step in reasonable time.

 

Disclaimer: The above list is not exhaustive but includes the most common information to include in the trustees’ report. For full details and requirements to comply with Charity Law you should ask your accountant or refer to Charity Commission guidance. Alternatively get in touch with Charity Accountant and we will be more than happy to help you.