Don Bawtree says it's not all about changes to the Sorp

The lead partner for charities at accountants BDO LLP provides an update on charity finance

Don Bawtree
Don Bawtree

The new Statement of Recommended Practice has been attracting all the attention recently, along with the new Finance Act. But in the meantime there have been a number of important developments in the world of finance that affect charities.

Corporate code

The UK regulator, the Financial Reporting Council, has published proposed changes to the UK Corporate Governance Code. In practice, many charity trustees will still look to this code, designed for quoted companies, as the standard by which they will be measured.

The proposals reflect a growing emphasis on senior executive remuneration, perhaps mirroring the report published by the National Council for Voluntary Organisations in April.

In the case of the corporate code, the emphasis is on relating senior remuneration more closely to long-term success. Other new proposals relate to more disclosures that explain why the company is a going concern, and a "robust" assessment of the main risks. All of these will find echoes in the charity world and provide a useful steer for how trustees should be thinking.

Audit quality

Over the last few years there has been a drive by regulators all over the world to increase the quality of audit. For larger charities, the audit is an essential part of the governance and assurance framework, so the sector has an interest in maintaining audit quality.

The Financial Reporting Council is planning to continue this drive by issuing best-practice guidance for audit committees on assessing audit quality, considering the future role of the underlying ethical standards (these are the standards that impose auditor rotation periods, for example) and considering the audit/non-audit mix of services delivered by audit firms.

Summary accounts

Some charities have been in the habit of producing summary financial statements, perhaps in annual reviews or other literature. It has always been a requirement to get the auditor to sign these off, and the charity Sorp includes that requirement.

Now that larger companies have to produce "strategic reports", the underlying legislation relating to this requirement has disappeared. This has caused some confusion for charities that still want to produce such information on the basis that they suspect no one reads or understands the full accounts. Charities planning such publications over the next few months should check with their auditors exactly what their approach should be.

Legacies

Legacy fundraisers will want to be aware of proposed changes to the operation of inheritance tax. Wealthy donors will probably have organised their affairs in such a way as to take advantage of rules that allow them to give away property during their lifetimes up to the value of the nil rate band, which currently stands at £325,000.

As things stand, this process can be repeated every seven years, but new rules to be introduced in April 2015 will scale this option back by introducing one special "settlement nil-rate band" that will last for a lifetime.

This should make it even more attractive for donors to consider the additional charitable exemption introduced in 2011, which reduces the tax on estates from 40 per cent to 36 per cent where 10 per cent of the net estate is left to charity.

Trustee benefits

Finally, a salutary warning: the professional conduct department of the Institute of Chartered Accountants in England Wales has reprimanded an accountant, and imposed a fine, for not having proper regard to Charity Commission guidance on charging fees while acting as a trustee, nor managing the resulting conflict of interest.

This absolutely chimes with the Charity Commission's recent comments on conflicts of interest, and is a reminder for all trustees, whether they are acting within their profession or not, to make sure they take note of Charity Commission guidance.

Don Bawtree is lead partner for charities at accountants BDO LLP

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in
Follow us on:

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Charity property: could you be entitled to a huge VAT saving?

Charity property: could you be entitled to a huge VAT saving?

Partner Content: Presented By Third Sector promotion

When a property is being constructed, VAT is charged at the standard rate. But if you're a charity, health body, educational institution, housing association or finance house, the work may well fall into a category that justifies zero-rating - and you could make a massive saving

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now