Meet our Accounts & Audit charity team
Everyone in our Charity Team is passionate about the sector and genuinely adding value through the compliance process. Here, you can get to know us better as we use our experience to highlight a number of common areas where we have fed back information or considerations for development to our charity clients.
Many charities are not claiming the additional uplift of up to £2,000 available via the Gift Aid Small Donations Scheme. This relates to donations from individuals of up to £20 (increasing to £30 from April 2019) and is particularly useful for plate collections and collection buckets where the necessary Gift-Aid declarations cannot be easily obtained.
The maximum donations limit per tax year is £8,000 resulting in potential additional income from Gift-Aid of £2,000 per year.
Smaller charities are often put off by using accounting software and prefer to stick to paper and excel working papers. But accounting software can help charities see instant financial data; from income and expenditure to the relevant funds and budgets all of which can be a tedious process when calculating in excel or on paper.
Accounting software allows the accounting function to work more effectively, meaning that departments can work more cohesively, monitoring budgets and forecasts against actual performance.
In addition charities can often rely heavily upon volunteers who give up their time to look after their accounting function. Cloud software packages such as Xero allow users access to the software over the internet, giving real time information, so volunteers are able to donate their time more flexibly and easily. Furthermore, multiple users can have access to the software.
But what about the cost? Accounting software such as Xero offers 25% off subscription charges for registered charities.
Salary costs often make up a significant proportion of a charity’s expenditure, and while authorisation controls may be strong over other types of expenditure, salaries may not be checked thoroughly, on the premise they are the same each month or are outsourced to a payroll bureau.
Particularly at risk of error, is the pay of starters and leavers who may be paid for just part of a month. Also, any errors on adding someone to the payroll or increasing pay following a promotion could be replicated for months, potentially costing the charity thousands. Staff will speak up if they think they are being underpaid but might not be so forthcoming if they suspect they are being overpaid.
Robust controls over the payroll, including amendments to pay can be backed up by regular sample spot checks of payroll costs back to employee’s contract.
The Charity Commission has added new questions as part of the 2018 annual return. Charities can view these on the CC website before signing in to complete the return.
Some of the new questions include disclosure on:
- Number of grants and total amounts received from central government or a local authority
- Breakdown of income received from outside the UK by country
- Number of charity’s staff receiving total employment benefits of £60,000 or more in £10k increments and the amount of total employee benefits for the highest paid member of staff
- Whether DBS checks have been carried out on any trustees, staff or volunteers who work directly with children or adults at risk.
There are also four new questions for 2018 that are optional but will be compulsory for 2019. These are in regard to charitable expenditure overseas, and how charities control and monitor the transfer of these funds abroad.
From April 1st 2019, Making Tax Digital (MTD) for VAT will be mandated for all those above the VAT registration threshold. According to the UK government website, the three main purposes of MTD are to make tax administration more effective, more efficient and easier for taxpayers to get their tax right.
However, for many smaller businesses this has sparked concern over added administrative pressures. It is therefore worth remembering that if your organisation is a not for profit that is not set up as a company, there is a six month deferral to October 2019 that should be available to you. This means that your organisation will have an additional 6 months to prepare for MTD and ensure preparations are in place, to ease a smooth transition.
One key allowance we often see being missed by charities is the £3,000 Employment Allowance. This allows a charity to claim relief for Employers National Insurance paid, and unlike some tax allowances is claimed by reducing the amount of Employers NI due, meaning there is no need to first pay money over and then reclaim it.
Charities do need to be cautious when claiming; if you run more than one payroll the allowance can only be claimed once in each legal entity.
All in all, it is one of the simpler tax reliefs which can be claimed and for smaller charities it can often relieve a large proportion of Employers National Insurance payments due for the year.
Charities who are required, must submit their accounts electronically to the Charity Commission within 10 months of their year end.
When uploading the accounts you are asked if they have been “qualified” by the Auditor or Independent examiner. We often see charities ticking that they have been qualified in error, when often the Audit or Independent Examiners report is not qualified. Whilst it would be easy to interpret qualified as meaning “approved by an Independent Examiner or Auditor”, in this instance it actually refers to the Independent Examiner or Auditor informing the reader of the accounts that there is potentially a problem, either with the accounts or around the financial position of the charity. Therefore unless this is the case, you should be stating that the financial statements are unqualified.
Finally, as a reminder, charities which are also registered with other Charity Commissions (i.e. Scotland, Northern Ireland etc) and/or Companies House (charitable companies and CIO’s only) need to file their accounts with all of these organisations separately. Please note that where accounts are being filed with Companies House, this needs to be done within 9 months of the year end.