Development of the SORP

We have had the current SORP for a few years now and the next version is currently in development.  Many of the Trustees we speak to are still not satisfied that charity accounts reflect the activity within their charity and are providing the correct information to readers and stakeholders.  The committee responsible for developing the SORP are looking for engagement partners to develop stakeholder groups to gather feedback and ideas for changing the SORP.  The partners can be individuals or organisations, giving charities and Trustees the opportunity to be involved.  The Groups will be asked to consider:-

  • the information needs of users of charity annual reports and accounts
  • how far the SORP needs to change to meet those needs
  • what information users of the SORP need to prepare for good annual report and accounts
  • opportunities to simplify and remove unnecessary reporting and ensuring technical compliance with the UK-Irish Generally Accepted Accounting Practice (GAAP).

The closing date for applications is 31 January 2020.

If you have any questions on the development of the SORP, please do not hesitate to contact one of the charity specialist team at MHA Moore and Smalley.

Election Fever: Charities responsibilities surrounding politics

It can’t have passed many people by that we are due to have an election on December 12th which dominates national media. The Charity Commission has taken the opportunity to remind charities of their particular responsibilities in the weeks and days leading up to the election.

It is legitimate and healthy for charities to speak up for the causes they serve, but appearing to take a political position on either side could risk undermining public confidence in a charity and therefore caution must be taken. The Charity Commission provides useful guidance which can serve as a reminder to charities, their trustees and staff.

The guidance stresses that a charity may give its support to specific policies advocated by political parties if it would help achieve its charitable purposes. However, trustees must not allow the charity to be used as a vehicle for the expression of the political views of any individual trustee or staff member.

While campaigning and political activity can be legitimate and valuable activities for charities to undertake, it is a legal requirement that a charity cannot exist for a political purpose, which is any purpose directed at furthering the interests of any political party, or securing or opposing a change in the law.

In this political climate a charity must stress its independence and ensure that any involvement it has with political parties are balanced. A charity must not give support or funding to a political party, nor to a candidate or politician.

The run up to the election and discussion around policies is undoubtably going to be interesting and we will be watching to see how these might impact businesses and charities over the next term of parliament.

For more information on campaigning and political activity please click here.

Forensic Accounting – Not for Profit

Although charities are particularly vulnerable targets for fraudsters, many of the threats faced by charities can be significantly mitigated by a well-functioning board of Trustees that proactively defends their organisation against the threat of fraud.

At MHA, we regularly offer our clients tailor made advice to minimise the chance of a fraud occurring. Download the flyer to find out more.

Charity Commission’s new incident reporting form

The Charity Commission has produced a new online form for Trustees to report serious incidents.

Serious incidents are both actual or alleged risks such as:

  • Harm to beneficiaries, staff, volunteers
  • Loss of money or assets
  • Damage to property
  • Harm to the charity’s work or reputation (such as above – reputational damage of accepting donations from dubious sources or questionable sources).

Exempt charities are not expected to report such incidents to the Charity Commission but to their principal regulator, and it is up to the principal regulator to refer the incident to the Charity Commission as appropriate.

It should be noted that charities with an annual income of less than £25,000 are expected to report any serious incident via this new online form even though they are not required to submit the declaration on serious incidents in the annual return.

Off Payroll Working

The off payroll working rules were introduced to try and prevent the avoidance of tax and national insurance contributions where services are provided through the use of intermediaries, such as personal service companies (PSC) rather than through direct employment of an individual.  The rules require that where the characteristics of the service provided are those of employment, the amount paid to the PSC should be treated as employment income and should be subject to PAYE and National Insurance.  There were concerns that the rules were not being implemented properly.  From April 2017 the off payroll rules were introduced to the public sector and companies funded principally by government funds.  As a result they may already be familiar to some charities.  From April 2020, these rules are being extended to the private sector.  They will not apply to small companies being those that satisfy two or more of the following conditions:-

  • Annual Turnover of not more than £10.2 million
  • Balance sheet total of not more than £5.1 million
  • Number of employees of not more than 50.

Where a charity does not satisfy these conditions, the new rules will require the charity rather than the worker to determine their employment status and where appropriate deduct PAYE and NIC when making payments.  For any individuals providing services through a personal service company, e,g consultants, the charity should complete the HMRC employment checklist to establish if the service provided has more characteristics of employment.  This includes consideration of who determines when the individual works, whether a substitute can be provided and who guides and controls the work completed. 

For more information on this subject please contact Nicola Mason or call 01772 821021

Related Party Transaction Reporting in Charity Accounts

Trustees must always act in the interests of their charity and not for their own personal benefit, but it is not uncommon for conflicts of interest to arise. It is important the charity is open and transparent in such situations, and it is good governance to handle these conflicts appropriately.

In charity accounts, the reporting of related party transactions is integral to complying with the SORP and providing details about their transactions with persons and entities closely connected to the charity or its trustees.

The Charity Commission has recently undertaken a review of a sample of Charity accounts and although reporting was found to be significantly better in larger charity accounts, less than two thirds of the charities in lower income samples fully complied with the SORP’s transparency requirement.

Charities preparing accruals (SORP) accounts must disclose:

  • trustees’ remuneration and benefits
  • trustees’ expenses
  • transactions with those persons and entities that are closely connected to the charity or its trustees, referred to as related parties

Trustees may delegate accounts preparation to charity staff or their accountant but remain responsible for approving the trustees’ annual report and accounts. The independent examiner or the auditor cannot be expected to know all of the related parties involved with the charity and so trustees need to co-operate with them to ensure that the disclosures provided in their accounts are complete.

If you have any questions on charity reporting, please do not hesitate to contact one of the charity specialist team at MHA Moore and Smalley.

Nicola Mason

Professional: Nicola is a senior manager in the audit department with particular responsibility for a large number of charitable and not-for-profit organisations, including a number of academy schools. She has advised on systems and procedures and financial reporting, as well as managing year end audits.