Accounts Monitoring Review

The Charity Commission for England and Wales (CCEW) have recently published three accounts monitoring reviews:

• Telling your story well: Public benefit reporting by charities;
• Do small charity annual reports and accounts meet the reader’s needs? and
• Do charity annual reports and accounts meet the reader’s needs?

As a reminder, all charities with income over £25,000 must produce a Trustees’ report and accounts and arrange for them to be audited or independently examined and those documents must be filed with the CCEW. The purpose of the Trustees’ report and accounts is to tell the reader what the charity is set up to do, what it achieved and how it spent its money.

As part of the CCEWs ongoing monitoring work, a random sample of 106 charity accounts were scrutinised. Similar to previous years reviews, 26% of charities failed to provide Trustees’ reports and accounts of an acceptable quality and fell short of the standard the public has the  right to expect. The most common reason why a set of accounts failed to meet an acceptable standard was that the trustees’ annual report did not explain the activities that the charity had carried out to help its beneficiaries. For small charities, a separate investigation of 110 accounts found that the percentage of Trustees’ reports and accounts not meeting an acceptable quality was even higher at 36%. This was generally due to the charity either not providing the trustee report and / or the accounts.

As part of their duties, trustees have a responsibility to comply with the CCEWs guidance on public benefit and an element of this includes setting out the charity’s activities for the public benefit within the Trustees’ report., 51% of charities show a clear understanding of the public benefit reporting (up from 46% last year.) Whilst an improvement, this is still not an acceptable figure as it means 49% of trustee reports did not consider what difference they had made to their beneficiaries and / or did not include the required statements that the trustees had considered our guidance on public benefit reporting. It is noted that the majority of Trustees’ reports included key aspects of public benefit reporting with 71% of charities explaining who benefitted from their activities.

Head of accountancy services of the CCEW, Nigel Davies highlights that

“Producing a Trustees’ annual report and accounts is not an administrative box-ticking exercise. It is a chance to show how your charity is making an impact and how you are delivering on your core purpose.”

“Our research into trust and confidence in charities shows that the public no longer give charities the benefit of the doubt; they want evidence that charities make a difference when using their money. Public reporting is an opportunity for charities to tell their story and explain to the public what they do and how they use charitable funds.”

Clearly there is more work to do in the sector and as a financial advisor to a charity, you should consider talking to your clients on the following points:

• When preparing a Trustees’ report, it should be seen as an opportunity to ‘take stock’ of how well they are meeting their objectives and the difference that they have made to their intended beneficiaries.
• Ensure that all disclosure requirements for a Trustees’ report and annual accounts are covered.
• As a reminder, all registered charities must prepare a trustees report and accounts (albeit, only those with income above £25,000 need file them with CCEW). These documents need to be made publicly available if requested.

Mercia provide the following products and services which can assist with ensuring you and your charity clients are fully compliant with relevant rules:

• Charities Specialist Assignment Manual which includes a disclosure checklist for the trustees report and annual accounts;
• Charity News (twice yearly publication for your charity clients to ensure they stay up to date with relevant accounting, taxation and governance issues); and
• Training including Charities: Approaching the charity audit and Charities update and current issues.