Any pointers for charity accounts?

[Vikas]

Good morning,

I have in the past prepared a few sets of charity accounts and done may 5-6 audits (all school related). I was updating my knowledge (for upcoming interview) and have been through the SORP and come up with the following differences between a set of charity accounts and small company accounts:

-The trustee's statement is much more detailed than the directors reports. The charity will need to include details on how funds are raised, performance, training provided to new trustees etc.

-The p&l and balance sheet have different headings. The income and expenditure must be classified into different funds.

-The accounting policies will reflect the above differences in P&L and balance sheet

Are these the main differences?

Any further pointers ould be much appreciated.

 

[yorkshirejames]

Obviously there is the issue of VAT and charities to be aware of.

 

[Zeno]

You do not say where you are - the rules are different in Scotland but you seem to have covered the basic differences.

You will likely find some bolier plate rubbish that will cover the drivel entered into the trustee's report. Strictly speaking, you shouldn't be writing this (as you should not write the director's report) but in the real world, who the bloody hell else will? Sorry, I digress... (I seem to spend my life at courses that start by giving us a telling off for writing these reports then another one for not doing it properly).

If you have got a decent handle on restricted & designated funds etc then the rest really just follows on via the SORP.

You do have to bear in mind that if the charity is also a company, the CA 1985/2006 still applies so much the the same disclosure still applies.

You may like to ask yourself if you are sure you want to get involved with charities. As you have found out, it requires an investment in learning/CPD etc that does not transfer to other clients. James mentions that VAT issue that usually causes problems sooner or later (unless you happen to be a VAT expert charity issues will have you up all night reading or worrying that you have dropped a bollock already).

You also have the issue about getting a fee out of it...

 

[Vikas]

James and Zeno, thank you for the replies. As far as I kno VAT shouldn't be a problem as the firm deals with all tax in a seperate department (it is a semi senior position so they don't really expect much from me expect to be able to put a set of accounts together).

Zeno, so much of what you say is like a flashback to when I used to work on charity accounts in terms of the experience. The fees usually were low so the time to be spent was minimal on top of which it just seemed like a bit of a minefield. But the position I am interviewing for is for a firm that have a 60% client base of charities so I assume they charge full fees and decent software for accounts production (I found CCH very poor for charities).

If I was currently employed then I would probably give a charities role the miss but apparently it is a nice firm and I can't really really be to picky and it is worth a shot.

 

[Zeno]

60% of fees from charities sounds like an awful lot to me. I would be inclined to agree that they must have some pretty decent tools (most accounting packages & accounts production software do not handle charities well).

You will know yourself that charities can be a nightmare to work with. Their internal politics alone would drive you to distraction.

Best of luck with the interview.

 

[David Griffiths]

As I see it, charities can be broadly split into two. There are the traditional local charities, run by volunteers and raising funds by shaking tins and running coffee mornings. They expect everything for next to nothing and are often a nightmare to deal with. A change of treasurer is all too common and nobody knows anything about what the old treasurer did, so they start doing the books their way.

On the other hand, more and more organisations set up as charities deliver services with money from central or local government. This is often work that in the past would be on the borderline between social care and healthcare. This kind of organisation usually has knowledgeable trustees and professional administrators. They also have plenty of cash - if they need more they ask their funders for it, and it's usually given.

We used to deal with a couple of organisations like this, when they were set up as unincorporated associations and not formally registered as charities. When they incorporated and registered with the Charity Commissioners, I looked at the accounting requirements and decided that there would have been too much investment in training and resources to make it worthwhile for the jobs that we had, so referred them to another local firm which specialises in this area, and seems to do very well out of it.

I had a go - purchased the charity templates from our software suppliers and then spent at least two full days trying to get meaningful accounts out from the TB! If I'd done the training course, that would have been two full days out of the office with the travel, and of course I'd still have had to do the accounts for the client. I just couldn't make it pay, or get anywhere close, so I'm happy to leave it to the firms that have carved themselves a nice little niche.