Guidance on the Preparation of Annual Accounts for a C & V organisation

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One of the major impacts for community and voluntary organisations in the Charities Acts 2009 is the obligation to file annual report and accounts.  If the gross income or expenditure of an organisation exceeds €100,000 in a financial year, the Trustees/Directors (for the purpose of this document, these terms are used interchangeably) must prepare Statement of Accounts in respect of that financial year in the format set out in the Regulations.  If gross income or expenditure falls below €100,000, the Trustees may complete an Income and Expenditure Account and a Statement of Assets and Liabilities (Balance Sheet) instead of the Annual Statement of Accounts. 

Although the exact structure of annual accounts is still to be established by the proposed charity, Authority or Regulator, it would be prudent of organisations to use the already existing Statement of Recommended Practice: Accounting and Reporting by Charities (SORP 2005) when preparing their accounts.  This includes the Statement of Financial Activities (SoFA).  SoFA is designed to show how charitable organisations use their resources in furtherance of the objects of the organisation. It shows all incoming resources, all resources expended and reconciles all changes in funds held by the organisation.  SoFA should be laid out in columns if the organisation operates more than one class of fund (e.g. unrestricted, restricted, endowment.).

Unrestricted Funds are held for the general purpose of the organisation – but they have to be spent within the stated objectives.  Restricted Funds have donor-imposed conditions and Designated Funds are designated internally by the trustees.  An Endowment Fund is a type of restricted fund that must be kept intact and not spent.  An expendable endowment can eventually – at the trustees' discretion – be converted into spendable income.

The SoFA should be laid out as follows: annual accounts for the period 01/XX/20XX to 31/X/20XX

Statement of financial Activities SoFA

Statement of financial Activities
Incoming resources Unrestricted Restricted Endowment Total 2008 Total 2007
Voluntary Income          
Activities for generating funds          
Investment income          
Incoming resources from charitable activities          
Other incoming resources          
Total Incoming resources          
Resources expended          
Cost of generating funds          
Costs of generating voluntary income          
Fundraising costs          
Investment management          
Charitable activities          
Governance costs          
Other resources expended          
Total resources expended          
Net incoming ( outgoing) resources before transfers          
Gross transfers between funds
Net incoming resources before other gains and losses
Other recognised gains and losses          
Gains on investments          
Net movements on funds for the year          
Reconciliation of funds          
Total funds brought forward          
Total funds carried forward          

The Institute of Certified Public Accountants

SoFA terms to note

Incoming resources: These are recognised in the SoFA when the charitable organisation becomes entitled to the resources, when it is certain the organisation will receive the resources and the value can be measured reliably.

Grants and donations: These are included in the SoFA when the charitable organisation has unconditional entitlement to them.

Donated services: These are only recognised in the SoFA when the benefit can be reliably measured and quantified.

Volunteer help: The value of any voluntary help received is not included in the accounts but described in the trustees' Annual Report.

Investment income: This is included when receivable.

Governance costs: These include the preparation of statutory accounts, cost of trustees meetings or legal advice on any governance matters, etc.

Accrual basis: The method of accounting that recognises revenue when earned, rather than when collected. Expenses are recognised when incurred rather than when paid.

Source: Accounting & reporting by charities – Statement of Recommended practice – UK Charities Commission 2005

Balance sheet as of 31/x/20xx

Balance sheet
Balance Sheet Unrestricted Restricted Endowment Total this year Total last year
Fixed assets          
Tangible assets          
Total fixed assets          
Current Assets          
Stock and work in progress          
Short term progress          
Cash in bank and in hand          
Total current assets          
Creditors: amount falling due in money year          
Net current assets/( liabilities)          
Total assets less current liabilities          
Creditors; amount falling due after on year          
Provision for liabilities and charges          
Net assets          
Funds of the charity          
Unrestricted funds          
Restricted income funds          
Endowment funds          
Total funds          

Balance Sheet terms to note:

Liability recognition: Liabilities are recognised as soon as there is a legal or constructive obligation to the charitable organisation to pay out such resources.

Tangible fixed assets: These are capitalised if they can be used for more than one year and are valued at cost or, if gifted to the charitable organisation, at the value to the organisation when gifted.

Investments: These are valued at market value at the financial year-end.

Stock and work - in progress: These are valued at lower of cost or market value.

Source: Accounting & reporting by charities - Statement of recommended practice – UK Charities Commission 2005

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