Here are answers to some most common questions that I have been asked by charities. Like, does our charity need an audit? What should we include in our annual report? And also, when are our accounts due? I have attempted to answer these is plain English and make it as simple as possible to understand. A simple guide to charity accounting jargon can be found in our blog Jargon Busters.
There is lot of basic information on Charity Commission website. So it is the first go to place for most small charities. We too, use it now and again. Charity Commission have issued guidance to help trustees and staff. As a result small charities with limited resources have access to information on how best operate. Their ‘How to’ guides and detailed guidance are also very useful.
But these may not always be easy to understand. Also, if you have a complex question you may not be able to find your answer easily. And even if you found what you were looking for, you may want that comfort of talking it though your accountant to just make sure you have got it right.
1. Does your charity need an audit?
Answer these simple questions and decide if you require an audit or independent examination.
When does your charity need an audit?
a. Does your Gross Income for the year exceed £1,000,000?
b. Does your Gross Income exceed £250,000 and Gross Assets exceed £3,260,000?
c. Do the trustees wish to have the financial statements audited?
d. Does the charity’s governing document require an audit?
e. Have Charity Commission asked you for an audit ?
f. Does your funder need audited accounts?
If your answers to any of the above questions is YES then you need an audit.
When does your charity need an independent examination?
Your answer to all of the above questions should be NO. Additionally, answer the following questions.
a. Is your Gross Income for the year between £25,001 and £1mn?
b. Do the trustees wish to have the financial statements independently examined?
c. Does the charity’s governing document require an independent examination?
d. Does your funder need audited accounts?
If your answers to any of the above questions is YES then you need an independent examination. For further information on independent examination click here.
2. What is the difference between annual accounts and annual return? What is the difference between trustees annual report and annual return?
No, each one is different.
Annual accounts as you may know, in simple terms, is the income and expenditure account and balance sheet (including notes) for a given year. These are normally accompanied in the front by trustees’ annual report which, among other things, gives a summary of the aim, objects, activities and plans of the charity.
Annual accounts and trustees’ annual report are most commonly produced as one document.
On the other hand, annual return is a form that most charities must complete annually with information about changes in trustees, objects etc during the past 12 months.
3. What are the filing requirements for my charity’s accounts, trustees’ annual report and annual return?
CIOs – All Charitable Incorporated Organisations (CIO) irrespective of level of income, need to file annual accounts, trustees’ annual report and annual return with Charity Commission within 10 months from the end of the accounting year.
Charitable Companies – All charities that are also registered with Companies House irrespective of level of income, in addition to the above, need to also file annual accounts which include trustees’ annual report with Companies House within 9 months from the end of the accounting year. An annual return needs to be filed with Companies House at the anniversary of the date the company was incorporated.
Other – Charities that are neither CIOs nor charitable companies (i.e. only registered with Charity Commission), if the charity’s gross annual income exceed £25,000, need to file annual accounts, trustees’ annual report and annual return with Charity Commission within 10 months from the end of the accounting year.
If the charity’s gross annual income is below £25,000 but exceeds £10,000, the charity has obligation to file annual return with Charity Commission but not annual accounts.
If the charity’s gross annual income is below £10,000, the charity has no obligation to file annual return or annual accounts with Charity Commission.
Charity’s that are not legally required to file accounts or trustees’ report are advised by Charity Commission to prepare accounts and trustees’ report and make these available on request.
4. What are the filing deadlines for Charity Commission?
10 months from the accounting year end charities must file annual accounts, trustees’ annual report and annual return.
4. What are the filing deadlines for Companies House?
9 months from the accounting year end charitable companies must file annual accounts with trustees’ annual report.
You must file your annual report on the anniversary of the date of incorporation.
5. What should a trustees’ report include?
Charity Commission requires most charities to prepare a trustees’ annual report. It is often viewed as a marketing document by some small charities without a large marketing budget. More often than not, charities include the trustees’ report as part of their accounts. As most funders ask you for your annual accounts when submitting funding bids, you can use it to show off what you charity stands for and its achievements.
If you are a small charity, you should include information under the following headings in your annual report. Read our blog on ‘What to include in your trustees report?’ for further information. Kindly note that there are additional disclosure requirements for charities with audited accounts.
- Reference and administrative details of the charity, its trustees and advisers
- Structure, governance and management
- Objectives and activities
- Achievements and performance
- A financial review including a policy on reserves
- Funds held as custodian trustee on behalf of others
- Public benefit statement
- Plans for future (optional)