The Charities Act 2009 (“the Act”) contains eight sections – sections 47 to 54 – that address financial recording and reporting matters for charities.
Sections 48 to 52 of the Act require regulation to be made by the Minister for Justice and Equality. In late 2016, the Charities Regulator, at the request of the Department of Justice and Equality, issued the Draft Charities (Accounting and Reporting) Regulations 2016 (“draft regulations”) and undertook a consultation process, involving a number of legal and accountancy professionals, as well as charity representatives and selected stakeholder organisations.
While the draft regulations provide clear visibility to the charity sector as to the possible format and scale of reporting information which will be required, trustees should understand the practical requirements of the relevant sections of the Act.
What do the regulations cover?
- The format of accounts for registered charities
- Audit or independent examination requirements
- Format of annual reports for registered charities
- Provision of information to the Charities Regulator
Who do the regulations affect?
It is currently proposed that the regulations on accounts and audits will apply to all charities except company charities, education charities and very small charities. However, regulation on annual reporting requirements will apply to all charities. The proposed accounts and audit regulations provide for different requirements for larger and smaller charities. For the purpose of the regulations a larger charity is one whose gross income or expenditure exceeds €100,000 per annum.
Accounts of larger Charities
Larger charities will be required to produce an annual statement of accounts which must be prepared in accordance with applicable Financial Reporting Standards and the methods and principals of the applicable Statement of Recommended Practice. The annual statement of accounts will consist of:
- Statement of financial activities
- Balance Sheet
- Cash flow statement
- Notes to the accounts
Accounts of smaller Charities
Smaller charities with gross income or expenditure of less than €100,000 have the option to prepare “simplified accounts” consisting of:
- Statement of receipts and payments
- Statement of assets and liabilities
- Notes to the accounts.
The “simplified accounts” option cannot be used if the charity is required to prepare accruals accounts by its constitution, any other enactment or by a decision of the charity trustees.
Audits and independent examinations
The draft regulations provide for an audit threshold of €100,000. Accounts must be audited where the gross income or expenditure exceeds the threshold in the financial year or in either of the two preceding financial years or where an audit is required by the charity’s constitution, any other enactment or by a decision of the charity trustees.
Where accounts are not required to be audited, they must be independently reviewed by an independent reviewer. The format/content of the auditor’s report and independent reviewer’s report is specified in the regulations.
All registered charities must make an annual report. The format and content of the annual report will be proportionate based on a charity’s gross income or expenditure. Where it is less than €10,000, only minimal information needs to be provided. Where it is greater than €10,000 additional information to include details of reserves policy and explanation of deficits is required. For charities that exceed the audit threshold, even further information including details on the appointment of charity trustees, donated goods and services, risks and risk management and planned objectives for the year ahead is required.
How we can help
Download further details and commentary on the Draft Charities (Accounting and Reporting) Regulations 2016
For further information regarding the services we can provide in relation to your organisations requirements on the above please contact a member of our Not-for-Profit team.