West Yorkshire Community Accounting Service

Voluntary Sector Accounting Information

The Quick Guide to Annual Accounts

Introduction

This guide is aimed at management committee members of charitable organisations, and provides a brief description of their responsibilities for annual accounts. It is not intended to be a definitive guide; a number of resources are indicated at the end for further information.

Who is responsible for the annual accounts?

It is the legal responsibility of the whole management committee to make sure that correct annual accounts are produced every year in the legally required time; not the accountant's, not the treasurer's, not the paid member of staff. The management committee can delegate the work to someone else but the legal responsibility remains with them.

Is the timing right?

  • Appointment of Auditor/ Independent Examiner is agreed.
  • Organisation contacts Auditor/ Examiner to book a date for sending in records (NB Do not fix your AGM date until you have agreed a date with the Auditor/ Examiner).
  • Engagement letter for signing, sent out by Auditor/Examiner; it must be signed and returned.
  • Books and Documents passed to Auditor/Examiner at agreed date.
  • Accounts prepared/examined/audited by accountant (someone at the organisation needs to be available to answer queries over this period).
  • Finished accounts are sent out to the management committee for approval and signing at a management committee meeting.
  • Approved accounts are returned to the Auditor/Examiner for them to sign their report.
  • Accounts are returned to the management committee (usually with a management letter with recommendations) .
  • The accounts are presented and adopted at the AGM.
  • The accounts are sent to the Charity Commission/Companies House within 10 months of the end of the financial year. (Companies House will fine you if they are late).

Is the format right?

  • Charities with a turnover of less than £100,000 can produce annual accounts on a 'cash' basis; in which case a Receipts and Payments Account, a Statement of Assets and Liabilities and Notes to the accounts will be required.
  • Charities with a turnover of more than £100,000 must produce accounts on an 'accruals' basis, in which case a Statement of Financial Activities (SOFA), a Balance Sheet and Notes to the accounts will be required.
  • Charitable Companies of whatever size must produce accruals accounts. (see above)

Are the restricted funds right?

Restricted funds are funds that have been given to your organisation for a particular purpose; it is required that these funds are shown separately in your annual accounts. It is also important to funders that they can see their grant shown separately in the accounts. A number of restricted funds can be grouped together into one column on the SOFA or Receipts and Payments account, but a note should provide the detail on each restricted fund as follows:
  • Name of funder
  • Opening balance, incoming funds, outgoing funds, balance carried forward
  • Purpose of restricted fund

Is the level of external checking right?

The chart below indicates what level of external checking your annual accounts need. Audit is the highest level of external scrutiny possible; independent examination is also very thorough, but the Independent Examiner does not have to do as many checks as an Auditor. A Reporting Accountant's report (for companies) is less onerous than an independent examination.
However if one of your funders, or your governing document, requires a more stringent level of checking than is required by law (as set out below), that will override the legal requirement. Equally the management committee may choose to have an independent examination done even if one is not required by law. If you are not registered as either a charity or a company you need to check your governing document, and with your funders to see what is required.
Non-company Charity
Size Type of check
Income +Expenditure under £10,000 No external scrutiny required
Income £10,000 to £100,000 Independent Examination required
Income + Expenditure £100,000 to £250,000 Independent Examination required. See below
Income or Expenditure over £250,000 Audit by Registered Auditor required
Charitable Company
SizeType of check
Income up to £90,000No external scrutiny required
Income £90,000 to £250,000Accountants report required
Income over £250,000Audit by a registered Auditor required

Is the choice of Auditor/Independent Examiner right?

Audit:-make sure that you choose a firm of accountants who are registered Auditors. Ensure that they do charity audits and ask for references from charity clients
Independent Examination:-If you have a turnover of over £100,000 it is recommended to use a qualified accountant. If your turnover is less than £100,000 you do not have to have a qualified accountant but the Independent Examiner must have the requisite ability and practical experience to carry out a competent examination of the accounts. The Independent Examiner should have no connection with the charity trustees which might prevent him/her being impartial. It is a good idea to ask for references.

Is the cost right?

Accountant's fees vary tremendously; ring at least 2 or 3 and obtain quotes. Ask other voluntary organisations who they use and what they are charged.

Is the approval process right?

It is the responsibility of the committee to approve the accounts at a committee meeting; one of their number should sign the accounts on behalf of the committee. The accounts, which have already been approved by the committee, are then adopted by the members at the AGM.

Further Resources

If you require further information please contact WYCAS
Free Charity Commission booklets, especially CC51 to CC62. Tel 01823 345427

The West Yorkshire Community Accounting Service (WYCAS) has been funded by the Lloyds TSB Foundation to produce this guide. Correct at September 2003