IOF Cornwall Trustees & Senior Managers Conference – 16th November, 2011 1

Everything you wanted to know about charity accounts but were afraid to ask.

Chris DennisDirector

Community Accounting Services KernowCommunity Interest Company

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Question 1

SORP stands for Statement of Required Practice

TRUE or FALSE?Answer

FALSE – Statement of Recommended Practice

Format of the accounts for all charities.Accounts must be prepared according to SORP with exceptionsLatest SORP in 2005 next in 2012 with not too many changes

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Question 2

SORP doesn’t apply if your income is less than £25,000

TRUE or FALSE?Answer

FALSE – All charitable companies have to use SORP

Unincorporated charities can use simpler receipts and payments accounts up to £250k income.Other things apart from the layout covered by Charities Act 2006 with changes up to 2008. i.e. whether audit is needed.

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Question 3

SOFA, a part of SORP, stands for Statement of Financial Activities. TRUE or FALSE?

Answer

TRUE

Updated in SORP 2005. No management and administration anymore.All income and expenditure matched in the same categories.

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INCOMING RESOURCES RESOURCES EXPENDED

Incoming Resources from Generated Funds Cost of generating funds

Voluntary income Cost of generating voluntary income

Activities for generating funds Fundraising trading, events, goods

Investment income Investment management costs

Incoming Resources from Charitable Activities Charitable Activities

Activity A Activity AActivity B Activity BActivity C Activity C

Governance Costs

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Question 4

Support Costs (overheads, core costs, central costs) can be part of the cost of charitable activities.TRUE or FALSE?

Answer

TRUESORP 2005 recognised that all costs are part of Generating Funds, Charitable Activities or Governance.Costs must be apportioned between those three categories in a reasonable, justifiable and consistent way.Support costs enable those activities to take place.Difficult to compare administration costs but some grant makers do.

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Question 5

Accrual accounting is recognising income when earned and expenditure when incurred not when received or paid for.TRUE or FALSE?

Answer

TRUE

All charitable companies must prepare accounts using accrual accounting and all over £250k income. Income should be recognised with entitlement, certainty and measurement.

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  Jan-Mar Apr-Jun Jul-Sep Oct-Dec  

Insurance Cash £1,000

Accrual £250 £250 £250 £250

Electricity Cash £400

Accrual £300 £100

Grant Cash £1,000

Accrual £1,000

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Question 6

Only charities with an income of over £500,000 need to have an audit.TRUE or FALSE?Answer

FALSE – If your assets are over £3.26M or your governing document requires it you need to have a full audit.

Could change your governing document by resolution.Independent examination is perfectly acceptable to most funders.

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Question 7

The treasurer in a charity is ultimately responsible for the money.TRUE or FALSE?

Answer

FALSE – All trustees have equal responsibility

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Question 8

It is against the law to sign a blank cheque.TRUE or FALSE?

Answer

FALSE

It’s not illegal but something you should never do.

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PRIZES

Q & A

Everything you need to knowhttp://www.sayervincent.co.uk/publications/made_simple_guides

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