The Financial Reporting Council has issued its annual report, setting out how it will complete the delivery of its three-year strategy.
Actions will include:
- Taking forward work on corporate governance and stewardship.
- A new project to focus on company culture and succession planning.
- Promoting clear and concise reporting.
- Continuing the programme of work to promote audit of a consistently high standard.
- Finalising the project on public interest actuarial risks and standards.
Charities do not necessarily consider themselves as falling within the FRC's areas of interest, but this is a mistake. In terms of maintaining an effective regulatory framework for corporate governance and reporting in the public interest, many of the themes outlined above are fully applicable to the charity sector.
The Charity Commission has confirmed its four strategic priorities for the future, while recognising the limitations of its budget.
The priorities are:
- Protecting charities from abuse or mismanagement.
- Enabling trustees to run their charities effectively.
- Encouraging greater transparency and accountability.
- Operating as an efficient, expert regulator with sustainable funding.
Once again, it is noteworthy that financial governance, in the form of transparency and accountability, features strongly on the list.
This focus on the quality of reporting is reflected in a recent survey of more than 290 investment professionals carried out by the Chartered Financial Analyst Society of the UK. Highlights that will be of interest to charities include:
- Most respondents (60 per cent) believe financial reports contain too much irrelevant information.
- However, many (55 per cent) believe reports omit important information.
- Almost half (47 per cent) say the area of the reports in greatest need of improvement is disclosure of risks and uncertainties.
- Overall, most respondents (71 per cent) agree that the quality of financial reporting has improved over the past 10 years.
All this has resonance in the charity sector - even if the focus will be a bit different. Trustees would do well to ask how their charity's report would rate and whether it is an improvement on last year's.
In the First Tier Tribunal, the North of England Zoological Society charity, which runs Chester Zoo, argued it should be allowed to recover more than £1m in VAT on animal maintenance costs. It stated it should be able to offset this against the profits from its cafes, restaurants and gift shop, as all the activities were interrelated. The tribunal understood the zoo would often make a loss without its retail and catering income and, although the animals were the main attraction for visitors, the other income was vital.
This case analysed whether there was a direct and immediate link between animal-related costs and catering supplies. The tribunal accepted the zoo's argument and allowed recovery of VAT.
Gift Aid review
The Treasury and HMRC have issued a call for evidence to form the basis of a review of Gift Aid benefits. They are interested in how the rules work and are understood, the problems they create and how things might be simplified. This is an area of Gift Aid that is positively Byzantine, and avoided by charities for that very reason. Any simplification would be welcome.
Don Bawtree is lead partner for charities at accountants BDO LLP