Finance matters! Your quick guide to financial reporting requirements
20th November 2018
Did you know there are a variety of financial reporting requirements for charities, depending on your governing document and size of organisation?
Getting it right means you meet your legal requirements, and could also save you money!
Here’s a speedy guide to reporting requirements and external scrutiny
- Accounts preparation: all charities (whether registered with the commission or not) must prepare accounts and make them available on request.
- Trustees’ annual reports preparation: registered charities must prepare a trustees’ annual report and make it available on request.
- Filing accounts and trustees’ annual reports: the duty to file accounts and the trustees’ annual report with the charity commission applies to Charitable Incorporated Organisations (CIO) irrespective of income and to all other registered charities whose gross yearly income exceeds £25,000.
- The trustees’ annual report and accounts should be filed online. The Charity Commission annual return does not automatically ask a CIO for the filed accounts – you will have to make sure to attach them to your annual return.
- A charitable company must also file accounts with Companies House, no matter what the size.
- It is a common misconception that if the income of your unincorporated charity is under £25,000 then you do not need to prepare any accounts, but this is not true! You are still required to prepare accounts but you are not required to file the accounts unless the Charity Commission ask for them.
- All charities with an income over £25,000 require external scrutiny from someone with sufficient financial expertise – this is called an “independent examination”.
- For charities with income between £250,000 and £1m, this person must belong to a registered accounting organisation.
- Many charities can use this “independent examination” rather than an audit. It is simpler and cheaper than a full audit, and since 2017 is more robust than it was previously.
- If your organisation’s income is £500,000 to £1m, you may wish to consider an independent examination. It is more straightforward, and usually cheaper, and enables you to comply with funding and governance requirements.
- An audit must be undertaken by registered statutory auditors, and follow strict rules under the “International Standards on Auditing”.
- An independent examination is a less formal process but still reviews the accounting records, and should be undertaken in line with the Charity Commission guidelines.