File Early - A challenge to the sector

Charities have to file key documents with us within 10 months of the end of their financial year. It’s a legal requirement, yet a quarter of all charities continue to miss this deadline and file late. These charities have a combined annual income of £6 billion – a massive chunk of charity money not accounted for on time. Many who do comply only file in the last month possible.

With a significant public interest in charity accountability, charities simply have to do better. Our online register is changing, making it easier for visitors to see which charities have filed promptly and which are overdue. Please visit our website at www.charitycommission.gov.uk. Charities have a responsibility to be transparent and tell the public about what they are achieving and the impact they are making. Those who continue to file late do themselves no favours – with the donating public, with funders or with us.

Annual reports and accounts filed with us are the authoritative source of information about individual charities and the wider charitable sector. This information is used by funders, donors, researchers and the public. It forms the basis of leading sector analysis - including the NCVO Almanac, GuideStar’s database and CAF's donor site.

This guidance contains some practical tips and signposting information. Please read it and pass it on to those who are directly responsible for preparing your accounts and trustees’ reports.

Our challenge to you is to raise your game and file in good time.

Andrew Hind
Chief Executive, Charity Commission.

What you must do

The law requires registered charities whose annual income or expenditure exceeds £10,000 to file their accounts and trustees’ annual report with the Charity Commission.

The law also requires charities whose annual income exceeds £10,000 to complete and return an Annual Return to the Charity Commission.

All documents must be submitted no later than 10 months from the date of their last financial year end.

Why file early?

• it says a lot about the way your charity is run – annual accounts and trustees’ reports are the window through which charities are viewed by those who fund them and by the wider public. Quality accounts and reports, filed promptly, are eloquent testimony to robust administration and effective trusteeship.

“It’s simple: for information to be valuable it needs to be relevant, accurate and timely. Filing your accounts with a well reasoned report demonstrates that your charity is run effectively. Bad news is often seen as a reason to delay filing, but bad news from a well-managed charity should strengthen the case for support if well communicated.

All charities should aim to file accounts within six months. The Children's Society has been working to reduce its timescale and will file within six months in 2006 and aims to beat that in 2007.” Charles Nall, Corporate Services Director, The Children’s Society.

• it may help you access funding – public bodies and charitable foundations provide a significant proportion of the sector’s income and both the content and timeliness of accounts and reports can be a key element in their funding decisions. As information about charities becomes ever easier for the public and the media to access, the transparency of financial reporting will increasingly influence donor behaviour. The time within which accounts and reports are filed is one of the simplest ways in which the public accountability of charities can be compared.

“Donors want to understand what a charity is doing so they can take an informed decision about giving. CAF’s website relies on Charity Commission data to inform donors and timely submission can be a key factor in a donor’s decision to give.” Stephen Ainger, Chief Executive, Charities Aid Foundation.

• it tells your story and that of the sector you are part of – to be accountable to their funders, beneficiaries and the wider public, charities should seek to make information available as close as possible to the events to which it relates. A well-framed report and clear accounts, promptly filed, are persuasive evidence of a well-run charity that deserves support. The information in accounts and reports is increasingly being used by charities and other organisations to analyse, add value and better understand the environment in which charities are operating. Our understanding of the sector is only as good and as up to date as the information that underpins it. Timely submission helps to ensure that the sector barometers are up to date and accurate.

“Effective honorary treasurers, from charities both large and small, view prompt filing of their charity’s accounts as a clear sign of the general financial health of their charity.” Leslie Jones, Director, Charity Treasurers’ Forum.

• you can gain credit and avoid criticism – many charities consistently file accounts and reports well in advance of the 10 month deadline. This deserves recognition and the Commission will be giving greater prominence to compliance history in its development of the online register of charities. It will become ever easier to identify good and bad performers. Charities which file late will inevitably be exposed to an increasing risk of negative publicity.

“It is important that a charity plans its accounting timetable to spread the workload over the year in order to speed up the production of the annual report and accounts at the year end. The annual report and accounts should be seen as an opportunity to market the charity and inform stakeholders of recent progress; the key word being recent.” Keith Hickey, Chief Executive, Charity Finance Directors’ Group.

What you must file with the Commission

Income Thresholds	Annual Information Update Form Based on Income Only	Annual Return Based on Income Only			Trustees' Annual Report & Accounts Based on the higher of either income or expenditure
		Part A	Part B	Part C (SIR)
£10,000 or below		X	X	X	X
Over £10,000 and up to £250,000	X		X	X
Over £250,000 and up to £1,000,000	X			X
Over £1,000,000	X

 

Small charities with an annual income of £10,000 and under just need to complete an Information Update form which states their income, expenditure and changes in trustees.

Small charities with an annual income and expenditure of £10,000 or below do not normally have to submit their accounts to the Charity Commission but they must be sent if the Commission or a member of the public asks for them.

Other charities need to send:

• an Annual Return. For charities with income of over £1m this includes a summary information return (SIR) at Part C of the form.
• a trustees’ annual report (TAR) and accounts.

The trustees’ annual report explains what the charity sets out to do, how it goes about it and what was achieved during the year. The accounts provide the financial detail. The trustees’ annual report should be attached to the accounts and read in conjunction, as it gives meaning to the numbers.

What you can do to improve filing time

Careful planning is the key to producing a timely, good quality trustees’ report and set of accounts. Successful charities prepare a timetable well before the year end and make key decisions before the process of preparing the accounts starts.

Charities also need to be clear about who is taking responsibility for filing. The responsibility for filing rests with the trustees. If you expect your staff, auditors or independent examiners to file on your behalf then make sure this responsibility is communicated, recorded and clearly understood.

A suggested timetable and checklist for smaller charities completing accounts and filing early:

Start of year	Ensure the opening balances in your accounting records agree with the signed accounts for the previous year Review your accounting records and see if analysis can be improved to better suit reporting and management information needs Ensure any management letter recommendations from your auditor or examiner are considered and actioned as appropriate
Throughout the year	Ensure you understand the nature of any restrictions placed on the income you receive and that restricted funds can be identified in your accounting records Keep your accounting records up to date and ensure key reconciliations are prepared Record key activities, events and achievements in your trustees’ minutes - this will help you to prepare a quality annual report at the end of the year
2 months before year end	Ensure independent examiner/auditor/reporting accountant appointed, fee (if any) agreed, timetable for external scrutiny agreed. Earlier planning may be necessary if competition for audit resources has caused delays in previous years If your accounts are audited, ensure your auditor has details of new bank accounts or loan agreements that may require audit certification Review accounting records to ensure they are up to date and that bank and other key reconciliations are up to date
1 month to year end	Decide who is coordinating the collection of information for the preparation of the trustees’ annual report Tell any internal branches/sections of the need for summaries of their work and give a deadline Ensure any known queries are dealt with (eg unknown receipts or payments) If any of your accounting policies are likely to be changed then let your auditor or examiner know Ensure a trustee meeting to approve the report and accounts (or AGM if members’ approval is needed) is arranged in good time to meet filing requirements
In the month following year end	Reconcile bank accounts Ensure all bank statements, paying-in-books and cheque stubs are available Get deposit accounts updated for interest received Close off cash books ensuring they add up and are fully analysed (and ledgers if used) Reconcile any control accounts, for example, salaries, PAYE & NI, and VAT Reconcile ledgers (if any) and prepare trial balance Review analysis for consistency (eg all similar payments and receipts in same place) Check all purchase invoices are present and try to obtain missing ones if material Ensure all receipts issued or invoices raised for services are available Ensure terms and conditions for all material restricted funds are available Prepare summaries from computer accounting packages
1 month after year end	Complete narrative for draft trustees’ annual report List any invoices paid after the year end relating to the previous financial year (needed if preparing accruals accounts) Prepare draft accounts Ensure all accounting records are available to your independent examiner or auditor Arrange sign off dates with independent examiner or auditor
2 months after year end	Meet with independent examiner or auditor to deal with any questions Arrange for final accounts and report to be presented to trustees for approval Trustees and independent examiner or auditors to sign accounts Trustees confirm who is taking responsibility for filing File trustees’ annual report and accounts Complete and file Annual Return Arrange for final accounts to be printed (and sent to members where there is requirement to do so or to present at an AGM)

Role of the AGM

Delays in filing documents often occur because of the timing of an Annual General Meeting (AGM). Incorporated charities do not have to lay accounts before a general meeting or have them agreed by the Inland Revenue before sending them to Companies House. Similarly, there is no need to wait for the AGM before filing with the Commission.

For unincorporated charities, unless their governing document specifically requires adoption or approval of reports and accounts at the AGM, and in our experience very few governing documents require this, there is no need to wait for the AGM before filing documents with us.

How the Charity Commission can help you

Many charities do not have the resources to employ dedicated finance staff and the Commission offers a range of practical advice and guidance to help charities file their documents early.

We will send you your charity’s Annual Return form as close to your year end as possible. Or, better still, you can complete your return online and submit accounts electronically. We’ll happily accept a PDF version of the trustees’ annual report and accounts. This is a quick and easy process. Go to click online for advice.

As part of our commitment to improving transparency, we will ensure information held about charities on our Register is up to date and easily accessible. We aim to record receipt of your documents within a few days of your submission. If you file online, your Register entry is updated even quicker, usually within 24 hours. A few days after filing your returns we recommend you check your charity’s entry on the web Register is accurate. If you have not filed your documents early you will receive a reminder from us that your deadline is approaching.

You can call us for advice on completing your returns on 0845 300 0218. Advisers are available to take your call between 8:30am and 6:00pm, Monday to Friday.

Our website has specific guidance on preparing accounts and meeting reporting requirements. Small charities may find our packs (CC16 for Receipts and Payments Accounts and CC17 for Accruals Accounts) helpful when preparing their trustees’ annual report and accounts. These packs provide trustees with a simple layout for both the annual report and accounts.
Follow these links to the Charities Accounts and Report and Annual Return homepages.

We also have example accounts and reports available on our website and you may find these useful when planning and designing your own. We also produce a wide range of publications relating to charity law, regulation and best practice. Additional information and details of other organisations that can help and sources of information can be found in useful links.