Don Bawtree: A Budget that barely touched the sector

Plus: the wasted £194bn and the EU

Don Bawtree
Don Bawtree

This year's Budget came and went with very little in it to disturb the charity sector. One of the biggest concerns before the event was the future of business rates, but that has stayed unchanged - some smaller properties might save rates in future as a result of small business rate relief changes, and others might experience increases as local authorities change their attitude to discretionary reliefs.

Elsewhere, the eligibility criteria for the VAT refund scheme for museums and galleries will be broadened to support a wider range of free museums across the UK.

As has become customary, there are also some funds coming the sector's way, with £45m of the fines levied on banks in relation to the Libor scandal earmarked over the next four years to support a variety of military charities and other good causes. In addition, the so-called tampon tax will provide an estimated £12m for some charities that support women's causes. The government will also add £20m to the First World War Centenary Cathedral Repairs Fund.

CIMA study

One of the features of the housing sector's regulatory regime is the focus on value for money. This is not a particular focus for the Charity Commission, or any of the charity regulators, so trustees might want to look at a new study by the Chartered Institute of Management Accountants. Based on a poll of members, this says that British institutions wasted £194bn last year, mainly from cancelled projects, over-payment for goods or services and unnecessary purchases. Interestingly, half of all organisations seem to have had no strategy to drive cost competitiveness.

EU referendum

In March, the Charity Commission published guidance for charities on getting involved with the EU referendum. This guidance includes comments specifically on charities receiving EU funding, and says: "Many charities are funded by the EU or its institutions, and conditions are usually attached to the funding. For charities that are in direct receipt of such funding, the possibility of a loss of funding will clearly be an issue.

"However, knowing that the outcome of the referendum could result in a loss of funding would not in itself justify political activity directed at the UK remaining in the EU. The key issue is how remaining in or leaving the EU would affect your charitable purposes and the ability of your charity to continue its work."

The commission says it requires the charity's engagement with the issue to be proportionate, to consider the risks around future funding and to publicly acknowledge funding sources.

Corporate reporting

The Financial Reporting Council has recently issued two letters about corporate reporting - as ever, charities might want to consider whether the points can be applied to them. First, a letter to audit committee chairs offers pointers for the 2016 corporate reporting season. It cites points that might be of interest as trustees consider their annual reports under the new Statement of Recommended Practice. The FRC's comments include: that the strategic (annual) report provides the opportunity to give the most current view of the organisation's future prospects; that disclosure of the directors' judgements as to the principal risks and their potential impact is key to an understanding of the company's prospects; that accounts should be drawn up on the basis of conditions existing at the balance sheet date; and that a material post-balance-sheet event should be disclosed.

The FRC has also issued a generic letter to investors, encouraging them to engage with companies to provide a steer on the information they believe is relevant and to challenge where reporting falls short of these expectations. Matters that might chime with charities include: risk, internal control and viability; the EU referendum; governance reporting; accounting policies and the impact of new standards; and transparency.

Don Bawtree is lead partner for charities at accountants BDO LLP

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