It's the time of year when charities with 31 March 2009 year-ends are finalising their statutory accounts, so it's a good time to look at the changes the Charities Act 2006 has brought to reporting.
The debate on the principles of public benefit has taken place and the Charity Commission has published its final statutory guidance on the subject. This year, for the first time, charities need to consider the impact of this guidance on their reporting.
The new legal requirements mean trustees must confirm that they have considered the commission's guidance and must focus on public benefit when they explain their activities in their annual reports. Boards should see this requirement as an opportunity to use the report to explain more clearly to readers what is at the core of their charity in terms of the benefits it brings to the public.
The Statement of Recommended Practice already provides a framework for annual reporting that takes the reader on a journey through the legal purposes of a charity, the strategies it has adopted, the activities it delivers, the objectives set and the results that follow. Reporting public benefit fits well into this framework. For example, strategies and plans can be influenced by the commission's guidance on public benefit, and accounts of activities will focus on taking forward the purposes of a charity and explaining whom it seeks to help and the benefits they receive. Accounts alone might tell you how much was spent, but they can never explain the difference a charity has made to people's lives.
This is also the first year small company charities can opt for independent examination, a less stringent examination of accounts than full audit. The old regime for charitable companies below the audit threshold of £500,000 has been abolished, so company and non-company charities are now treated equally. But if companies want to opt for independent examination, they should remember that they need to opt out of the Companies Act audit regime first. Small charitable companies that are over the Charities Act audit threshold can opt for audit by the commission, but there is probably little point because the audit requirements are very similar to those of the Companies Act.
If a small charitable company has subsidiaries, group accounts will need to be prepared and audited under the Charities Act where aggregate income exceeds £500,000. But if you also want to use these accounts for Companies Act purposes - for example, filing with the registrar of companies - it's important to make sure they also meet Companies Act requirements for group accounts.