Charities are highly regulated, and sadly this means that sometimes, once-great ideas and projects can get weighed down by legislation and ruling.
When a charity gets to a larger size, it has more red tape that it needs to get through – so hiring an accountant becomes a necessity, especially one who knows the sector well.
So what services can an accountant provide your charity business? And what are the requirements you need to adhere to?
Accounting requirements for charities
When starting a charity for the first time, it’s important to understand your accounting and reporting obligations.
No two charities are the same size, but every registered charity must prepare:
- an annual report
- a set of accounts
- an annual return form.
You must submit your annual report and accounts to the Charity Commission if you manage a charitable incorporated organisation (CIO) or if your charity’s annual income exceeds £25,000. You’ll only need to make them available upon request in other circumstances.
Additionally, an annual return must be completed and sent to the commission by all CIOs and other registered charities with a gross income of more than £10,000. Registered charities with a lower gross income are asked to complete the annual return for certain items.
But not all charities are as simple – others require special behaviours. For example, a charity with a gross income of £25,000 to £1 million in their financial year will be required to have their accounts independently examined.
Income over a million? You’ll need an audit.
An audit will also be needed if the charity’s gross income exceeds £250,000 and its total assets before liabilities are over £3.26m.
What services will help me?
There are many things you may need an accountant for as a charity. Some are more complicated than others, but they all serve a purpose.
Accounts preparation is vital, as mentioned above. These accounts must be completed and made available on request.
Preparing accounts comes in two methods:
- Receipts and payments
As the simpler of the two methods, receipts and payments can be used by unincorporated charities with a gross income of £250,000 or less.
When accounts are prepared with this method, a summary of all the money paid and received during the financial year will need to be created, alongside a statement of its assets and liabilities come the year end.
A charitable company is different – if you have an income of more than £250,000, you’re legally required to prepare accruals accounts.
Accruals accounts have to comply with the statement of recommended practice (SORP). They will have a balance sheet included, and advisory notes.
Complying with SORP can be a minefield, so it’s best to have an accountant who knows the area well.
An audit or independent examination can be a fantastic opportunity to make sure your financial records and processes are all in order, whether it’s a legal necessity or a component of your governing document.
A dependable, knowledgeable, and objective professional should handle this.
The auditor or examiner should be able to not only meet your regulatory standards but also explain what they signify for you and what improvements you could make.
An audit or examination can be a wonderful opportunity to improve your own systems, giving you more time to concentrate on the goals of your charity.
One of the most beneficial things you can get from an accountant is their strategic advice, which goes beyond compliance alone.
To bounce ideas off of, challenge your thinking, and encourage you to do better work, having the assistance of an expert and knowledgeable person outside of your organisation may be incredibly valuable for charity leaders.
An expert charity accountant can offer personalised advice that will assist you in making crucial decisions by combining their understanding of your aims and issues with their knowledge of your charity’s structure and financial aspects.
Additionally, they’ll alert you of legislative changes, assist you in streamlining your accounting procedures, and provide governance advice.
At Langdowns DFK, we’re committed to looking after charities. Speak to us if you need support for your charitable project.