Charity Accounts & Reporting in Scotland

1. Charity Accounts & Reporting in Scotland 2006

2. Charity Accounts & Reporting • New and enhanced accounting and reporting regime for charities in Scotland • Revised requirements apply to all accounts for financial year beginning on or after 1st April 2006.

3. Setting the Scene • Approximately 21,000 live charities in Scotland • Most of these are very small • 66.5% have less than £25,000 income • 4.5% have more than £500,000 income • 600 English charities operating in Scotland – most being large, UK wide charities

4. Context Importance of recognising the legal & social context within which charities operate: • Enhanced public interest in charity affairs • Enhanced scrutiny of activities & finances • Information widely available & instantly transferable • Press interest & media comment widespread

5. Key Elements of New Charity Law • Establishment of new legal basis for OSCR & its monitoring & supervisory powers over charities in Scotland • A compulsory charity return • Enhanced accounting & reporting obligations • Public filing obligations for charities

6. Charity Annual Returns • All charities must file Annual Return • Charities with £25k or above must also complete Monitoring Return • 2005 pilot exercise – 17,000 returns • If Charity is also a Company, Company Return still has to be completed

7. Accounting Records • Adequate records to show & explain transactions. • Indicate assets and liabilities • Disclose charity’s financial position & funds • Trustees responsible for safe custody of day to day accounting records if charity ceases • Accounts must be kept for minimum of 6 years • OSCR to be notified of whereabouts.

8. Form & Basis of Annual Accounts • Must comply with Charities SORP 2005 • Unincorporated charities – less than £100k income – receipts & payments basis. • Charitable companies, industrial & provident societies and in due course Scottish Charitable Incorporated Organisations must prepare accrued accounts. • SCIO registration not until Summer 2007.

9. Compulsory Audit & Exemptions • General exemption from audit – Charities with less than £500k income • Less than £500k - Independent examination (Unincorporated charities) BUT enhanced qualification criteria for examining accrued accounts of charities with between £100k and £500k income

10. Compulsory Audit & Exemptions • Charitable Companies – use exemption if income below £500k & assets not more than £2.8m • Income between £90k & £500k – independent report from “reporting accountant” • Under £90k – independent examination

11. Filing Time Limits • Annual accounts & reports must be filed with OSCR within nine months of financial year end. • If charitable company, accounts & reports must be filed with Companies House within ten months of financial year end. • If “foreign charity” obligations to OSCR and regulator in their home territory.

12. Whistleblowing • Duty on charity auditors & independent examiners to report to OSCR any matters of concern. • Obligation arises when something of material significance to the exercise of OSCR’s functions is detected in the charity’s affairs or activities.

13. Penalties • Legislation imposes penalty regime • Largely based on potential criminal fines against charity and its trustees. • Charitable companies still subject to Company Law penalty regime too. • Possibility of disqualification.

14. Purpose & Effect of New Regime • Provide rules & requirements designed to suit Scottish charity sector. • Enhanced obligations will encourage greater transparency & accountability • Annual accounts and reports will provide greater breadth and depth of information about charities’ financial affairs, their activities & achievements.

15. Summary • General and coherent regime provides greater consistency & clarity of reporting. • Beneficial to regulatory bodies and to funders, donors and other stakeholders, including general public. • OSCR will use monitoring & enforcing abilities to encourage and if necessary enforce compliance. • Key role for support agencies to assist charities to understand and meet the requirements.