Accountants for charities and non-profit organisations in London and Kent

Trusteeship is a form of a stewardship. It encompasses the role, responsibility, and authority of a trustee, who holds and manages assets for the benefit of others (beneficiaries) or the public.

Charity trustees are therefore people who are responsible for the running of a charity, as well as its management and administration. The way they achieve this is most often by being a member of the board of trustees. Alternatively they can sit on specialised committee dedicated to a particular aspect of the charity’s activities, for example finance, fundraising, or volunteering.

The trustees are not usually remunerated for their services to the charity but can have their expenses reimbursed, if these were incurred in the performance of their duties as a trustee. There are many non-financial benefits of becoming a trustee. These include: a rewarding experience helping good causes, developing skills, meeting people, shaping organisations.

Charities need a variety of skills from their trustees but not every trustee needs to be a specialist. Trustees can add value by being committed and engaged, having a different perspective and sometimes by challenging the status quo.

Trustees ensure that the charity fulfils its purpose correctly, is financially sound and manage risks appropriately. The trustees are the guardians of the charity’s resources and must ensure that these are spent in accordance with the charity’s objects to the best of its ability.

Charities can be structured as:

• Unincorporated association or trust
• Charitable company
• Charitable incorporated organisation (CIOs)

Which structure is most suitable depends on several factors, such as who will run it, whether it will have a wide or narrow membership, whether the charity would be employing staff or entering into contracts. The charity structure will also dictate the level of trustees’ liability for the charity’s debts or other liabilities.

CIOs and charitable companies are incorporated charities which means they have a legal identity which will enable them to enter into contracts, employ staff etc. It also means that their trustees have limited or no liability for their debts or liabilities. Trusts can employ staff and enter into contracts but it is the trustees who act as the legal employers/parties to a contract, not the trust itself.

In each case, the charity must be able to show that it benefits the public.

The Charity Commission in England and Wales had some good guidance on how to choose the most suitable structure.

https://www.gov.uk/guidance/charity-types-how-to-choose-a-structure

Charity governance is a system of directing a charity where the trustees set out the strategy, ensure compliance with the regulations, management of risk, transparency and accountability. In England and Wales, charities are regulated by the Charity Commission. As part of this, charities are required to file an annual report which for many charities will have to include the accounts.

The specific details of these requirements depend on the charity structure and income. CIOs must file annuals return and accounts regardless of the level of income whilst trusts and charitable companies have to file if the income for the financial year exceeds £25,000. Charitable companies have additional requirements for the filing with Companies House.

The accounts follow formats prescribed by the Charity Commission as well as the UK Generally Accepted Accounting Practice and the Charity Statement of Recommended Practice (Charity SORP).

A useful framework of good governance developed to help guide trustees is The Charity Governance code.

https://www.charitygovernancecode.org/

Charity accounts are likely to be subject to scrutiny by law. The level of scrutiny depends on the size of a charity and can take form of an independent examination or an audit.

An independent examination of the accounts (or financial statements) is required where a charity’s income exceeds £25,000 but is below £1,000,000 (or below £250,000 if gross assets exceed £3.26m).

Independent examination is a ‘lighter touch’ scrutiny involving the examiner checking for specific matters only. Unlike audit, examination does not aim to confirm that the accounts show a “true and fair” view, which is what an audit would do. Examiner’s tasks are defined by the Charity Commission in their Directions. In total, there are thirteen directions to complete if the accounts are prepared on accruals basis.

If the charity exceeds the above thresholds, the accounts must be audited.

Although examination or an audit are legally required, they can also benefit the trustees and the charity. They give trustees an opportunity to engage with the production of the accounts, consider various aspects of the financial management and charity’s strategy. The charity itself appears more transparent and accountable to prospective donors, the public and other stakeholders.

https://www.gov.uk/government/publications/independent-examination-of-charity-accounts-trustees-cc31/independent-examination-of-charity-accounts-trustees