Cookies on Knowhow Nonprofit

We use cookies in order for parts of Knowhow Nonprofit to work properly, and also to collect information about how you use the site. We use this information to improve the site and tailor our services to you. For more, see our page on privacy and data protection.

OK

Skip to content. | Skip to navigation

Community-made content which you can improve Case study from our community

External reporting

This page is free to all

Statutory Reporting – your legal obligations as a charity

What to prepare

All charities registered with the Charity Commission must prepare annual accounts and a Trustees’ Annual Report and make them available on request.

There are specific rules about:

  • what type of accounts you must prepare
  • what information to include in the trustees’ annual report
  • whether the accounts need an independent examination or audit
  • what information you must send to the Charity Commission.

and this depends on

  • whether or not your charity is also a company or charitable incorporated organisation
  • its income for the current financial year and/or the value of its assets.

The details about this are in Charity reporting and accounting: the essentials November 2016 (CC15d)A summary is available.

The Charity Commission provides excel templates and guidance notes for both formats, and templates for the Trustees Annual Report

When to submit

If you do have to send your annual report and accounts to the Charity Commission, this must be within 10 months of your charity’s financial year end.

Types of charity accounts

There are two formats for charity accounts – receipts and payments accounts or accruals accounts, (sometimes called SORP accounts). The format you use depends on the income of your charity, whether it is a charitable company and whether there is any requirement written into your governing document. The Charity Commission’s view is that anything asking for a balance sheet or for a ‘true and fair view’ requires accruals accounts, and this might be buried in an old trust deed.

Receipts and payments accounts

This is the simpler method of accounts preparation where you produce:

  • Receipts and Payments Account - a summary of the money received and paid out by the organisation during the financial period
  • Statement of assets  and liabilities at the end of the period. 

There is a template (CC16a), that shows the minimum expectations for information, but there is no legally required format for receipts and payments accounts, you just have to be consistent year to year.

Charitable Incorporated Organisations (CIOs) have to give some specific information about their assets and liabilities (if they have given a guarantee, or if there is a mortgage or similar charge on any of their assets). Apart from that there is no obligation to add notes to the accounts, though you can provide any information that you think will help people to understand your organisation’s finances.

CC16b Receipts and Payments Accounts Introductory Notes is clear, helpful step by step guidance for completing the receipts and payments accounts.

Receipts and payments formats may only be used by non-company charities with a gross income of less than £250,000. 

Charitable companies must comply with company law which means they cannot adopt this method.

Charity accounting templates from GOV.UK

Accruals accounts/SORP Accounts

Non-company charities with a gross income of more than £250,000 and all charitable companies must prepare accruals accounts (for their statutory accounts) which comply with the Statement of Recommended Practice (Charities SORP) and consist of:

  • Statement of Financial Activities (SOFA)
  • Balance Sheet
  • Statement of Cash Flows (for organisations with gross income over £500,000)
  • Notes to the accounts

Accruals accounts look at the income and expenditure due for the year, not just what money has gone in and out of the bank account. The aim is to try to get a clearer picture of the state of the finances (accountants talk about a 'true and fair view'). The big differences come when there are transactions that don’t fit neatly into a financial year for example:

  • fixed assets (things that last a number of years like buildings and equipment) – under cash accounting you would report all the money going out when you paid for the thing, but in accruals accounts you depreciate them (spread the cost over the life of the asset)
  • grants that straddle a year end – under cash accounting you would report when the money arrived, under accruals accounting you would report the income in the financial years as per the agreement.

SORP accounts are more complicated to produce because you also have to comply with international accounting standards and there are strict rules about what and how you have to report. 

There are templates (CC17a) for charities with a turnover of less than £500,000 (different for companies and non-companies) and the completion notes on each give general guidance and a clear step by step guide on what should go into each section and note to the accounts. Often, though, it will make most sense to ask your Independent Examiner/Auditor to prepare the accounts for you if they have the experience (and software) to make the process efficient.

Accounts packs

Other useful references for accruals accounts

Reading charity accounts

The Annual Report and Accounts are an important window into any organisation you are interested in, particularly because they are likely to have been independently scrutinised.

When you are reading the document, look to see that the numbers are consistent with the narrative - when the Trustees report identifies a priority, you should be able to see easily in the accounts what resources are channelled towards that work.

One approach to reading the accounts:

  • Start with the narrative, get a feel for the organisation, its current situation and how it presents itself.   
  • Just check quickly in the “opinion” section of the auditors’/independent examiner’s report for any adverse comments. 
  • Look at the Statement of Financial Activities (and check through to the notes if you need to)
    • Have they made a surplus on unrestricted funds (if not – is that explained somewhere in the narrative?)
    • Where does their money come from?  A range of sources indicates more stability
    • What are they spending it on?  Does that mesh with what they say?
    • What level of unrestricted reserves do they hold? You are looking for changes in the level and transfers between funds here – make comparisons with similar organisations.
    • How do all the numbers look in comparison to the previous year?
    • Does all of that stack up with the trustees report?
    • Look at the balance sheet
      • Check for changes from the previous year

Like anything, the best way to understand charity accounts is to practice – have a go at reading a few and see what sense you can make of them or find someone who does like accounts and get them to talk you through an annual report so you can see their thought processes. After a while you will start seeing patterns and getting more confident.  

Further reading

Sayer Vincent Made Simple – Reading Charity Accounts 

Page last edited Oct 02, 2018

Help us to improve this page – give us feedback.

1 star 2 stars 3 stars 4 stars 5 stars 2.6/5 from 30 ratings

Find out how-to…

How-tos are written by our users to share practical knowledge.

And if there isn't one already you can write it yourself, or request someone else write it.

See all how-tos