Financial Reporting to the charity commission
To understand what you need to do for your charity, first check: whether or not your charity is also a company or charitable incorporated organization. Decide depending on income for the current financial year, the value of assets, and whether required to register as a charity. You should then establish what type of accounts you must be prepared, what information is needed in your trustees’ annual report, whether your accounts need an independent examination, or what information you must send to the Charity Commission. If you have to send your charity’s annual report and accounts to the commission, you must do so within ten months of the end of your charity’s financial year.
New accounting rules for Charities
On 16 July 2014, The Charity Commission published its long-awaited new guidance for accounting by charities. The direction outlined in two Statements Of Recommended Practice (SERPs) applies to financial years beginning on or after 1 January 2015. This guidance was finalized after considering a public consultation in 2013 due to significant changes in the UK accounting framework to harmonize it with international financial reporting standards.
It is the first significant change in charity accounting since the 2005 SORP, and all charities need to work out how the changes apply to them. For many charities, the new SORPs will not have a dramatic impact, although the position is complicated because there are two new SERPs. The SORP is divided into two versions: · Financial Reporting Standard 102 (FRS102) SORP · Financial Reporting Standard for Smaller Entities (FRSSE) SORP. SOFA – Statement of Financial Activities. Accounts prepared according to standards set by the charity commission, which will include the latest changes in 2014
Trustees report
The charity has to be managed by the trustees, and the accounts prepared by the treasurer. The annual report of the trustees will include the yearly charges of the charity, which the public can have access to it. On the date of receipt, or if the costs of undertaking a valuation outweigh the benefit, charities can continue with the existing practice.
Other changes
There are various other changes, including · Clarification that internally generated databases cannot capitalize · Enhanced disclosures of trustee and staff remuneration, a related party, and other transactions. The Potential is discounting for the time value of money where income and expenditure settlement will delay by more than 12 months.
Financial Reporting to the charity commission
Action required
Charities need to consider · which SORP to use · the date the new rules apply · the impact of changes, and what information needs to obtain and at what times. Changes may be required to prior year figures · if any opportunities arise from the new rules · if additional information is needed for the trustees’ report. Charities need to plan rather than wait until the preparation of the accounts sometime after December 2015. It may also be an excellent time to consider how you communicate information to your stakeholders. The annual accounts may not be the most effective or engaging way of doing this, and an additional “glossy” report may also be helpful. Sadly, even if you choose to do this, preparing annual accounts is still required!