On 1 June, the obligation for employers to enrol all eligible staff into pension schemes and make contributions towards those pensions – known as automatic enrolment – was extended to employers with fewer than 30 employees. The process started in 2012 with the largest firms, and now applies to all employers, even those with only one employee.
Just like other employers, charities must sign up workers aged between 22 and state pension age (this varies by the individual's gender and date of birth), if they are earning £10,000 or more per annum. Employees have the right to opt out of the scheme, but they must be enrolled into it before they can do so.
Charities need to be prepared before what is known as their "staging date" – the date when their duties come into effect – and those who are still not sure can use their PAYE reference number to check this date online. The process is not to be underestimated and the numbers of compliance notices and fixed penalties issued by the Pensions Regulator increased significantly in 2014. Failure to comply can lead to fines starting at £400, plus subsequent daily fines ranging from £50 to £500 for smaller employers.
Annual return 2015
The Charity Commission's latest CC News publication for trustees reminds charities that they need to confirm they have reviewed their financial controls during the year. Many charities might assume that this is an exercise carried out automatically as part of the audit or independent examination process. Trustees should check with their advisers whether they can rely on that work or should conduct their own exercise. One option is to use the Charity Commission's checklist Internal Financial Controls for Charities (CC8), but many charities will want to adopt a more tailored approach.
The Financial Reporting Council has published its annual inspection report on the quality of audits carried out by the biggest accountancy firms of the accounts of 126 large organisations, including private firms, pension funds, finance sector companies and two charities.
It notes that audit quality is improving, but says there is scope for further progress. Treasurers and audit committee chairs might like to note the most common issues encountered, which include: insufficient scepticism by auditors challenging the appropriateness of key assumptions; insufficient or inappropriate procedures being performed in many audit areas, including revenue recognition; and the failure to adequately identify the threats and related safeguards around auditor independence, and to communicate these appropriately to audit committees. Charities might like to discuss these points when planning their year-end processes, and these lessons could equally apply to independent examination of accounts.
This month saw the launch of SIS Community Capital, a new investment scheme created by the charity Social Investment Scotland. It will be open to investors from across the UK and is aiming to raise £500,000 from investors by utilising the government's new social investment tax relief scheme, which will be used to support between five and 10 social enterprises in Scotland.
"It is uncommon and rare to find a problem in the capital or funding or business model of a firm that cannot be traced back to a failure of governance," said Andrew Bailey, chief executive of the Prudential Regulation Authority, at the Building Societies Association annual conference in May.
Specifically in the context of finance institutions, he said that the board was responsible for managing risks and for setting appropriate pay. Charity annual reports often include specific statements from trustees about risk, and increasingly also include comments on remuneration and setting executive pay.
This is a reminder that these functions cannot be delegated or overlooked.
Don Bawtree is lead partner for charities at accountants BDO LLP