There are different requirements for different sizes and types of charity. To understand how it applies to your charity, you need to check:
- whether or not your charity is also a company or charitable incorporated organisation (CIO)
- its income for the current financial year
- the value of its assets
- whether or not it is required to be registered as a charity
We can then advise on:
- what type of accounts must be prepared
- what information is needed in the trustees’ annual report;
- whether the accounts need an independent examination, or audit
- what information must be sent to the commission
If you do have to send your trustees’ annual report and accounts to the commission, you must do so within 10 months of the end of your charity’s year end.
Preparation of Charity Accounts and Filing
Charities (whether registered with the charity commission or not) must prepare accounts and make them available on request.
Registered charities must prepare a trustees’ annual report and make it available on request.
The requirement to file accounts and the trustees’ annual report with the charity commission applies to all CIOs, 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 requirement to complete and file the annual return with the charity commission applies to all CIOs, and to all other registered charities whose gross yearly income exceeds £10,000. Charities whose gross income is below £10,000 have an obligation to keep their registered details up to date - they can use the annual return to do this.
Each registered charity receives an annual return form from the charity commission shortly after its year end. In all cases the annual return should be completed online.
Types of Charity Accounts
Charity accounts are prepared either on the receipts and payments basis or the accruals basis - depending on the income of the charity and whether or not it has been set up as a company:
Receipts and payments
This is the simpler of the two methods of preparation and can be used where a non-company charity has a gross income of £250,000 or less during the year.
It consists of an account summarising all money received and paid out by the charity in the year, and a statement giving details of its assets and liabilities at the end of the year.
Charitable companies are not allowed by company law to adopt this method.
Non-company charities with gross income of over £250,000 during the year, and all charitable companies must prepare their accounts on the accruals basis in accordance with the SORP (Statements Of Recognised Practice).
They contain a balance sheet, a statement of financial activities and explanatory notes. These accounts are required in accountancy terms to show a ‘true and fair view’.
Audit or independent examination?
Charities with income of more than £25,000 per year are required to have their accounts independently examined or audited - below that threshold, an external scrutiny of accounts is only needed if it is required by the charity’s governing document.
The type of scrutiny needed depends on the income and assets of the charity. An independent examination is needed if gross income is between £25,000 and £500,000 and an audit is needed where the gross income exceeds £500,000.
An audit will also be needed if total assets (before liabilities) exceed £3.26m, and the charity’s gross income is more than £250,000.