I have a client who recently disclosed that they had a bank account accumulating donations which they kept off the books. However 5 years ago they used the funds to purchase a land abroad and they now need to disclose the asset. Will i need to adjust the accounts for the previous periods?
Thx
Alex
Replies (10)
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Donations off the books?
Fraud then?
I should think the charity commission might wanty to know why.
Points to consider
The first point to consider is whether the Charity's own Trustees have already reported the matter to the Charity Commission by way of a 'serious incident report' in respect of the receipt of donations (and the purchase of an asset) which were not reflected in the accounting records and annual accounts of the charity at the time. If they have done so, then obtain from them a copy of their report.
If they have not made a 'serious incident report' then tell the Trustees to give full consideration to the making of such a report (and advise them that they should obtain legal advice if they are unsure what to do or are unfamiliar with their duties under charity legislation).
Next consider whether you have a statutory obligation to make a report yourself to the Charity Commission. You may have a duty to report whether or not the Trustees have already submitted a 'serious incident report'. See the relevant guidance HERE.
Next consider whether you have an obligation to report to your MLRO or to SOCA under s330 PoCA 2002 / Money Laundering Regulations 2007. That obligation may arise in addition to any obligation to report to the Charity Commission.
Next consider whether you need to be reporting formally to the Trustees as a body in advance of the completion of the annual accounts of the charity.
Then turn your attention to the preparation of the annual accounts and your report on them.
However, contrary to a previous poster, DO NOT report this matter to the police as that would be a breach of client confidentiality. (A report to the Charity Commission or to SOCA under a statutory obligation is not regarded as a breach of client confidentiality, as the statutory obligation over-rules the normal contractual and ethical obligation to keep a client's affairs confidential.)
David
Independent examiner
Broadly speaking, if a charity has an annual gross income exceeding £500,000 then it requires an external audit of its accounts, if its annual gross income exceeds £25,000 (but does not exceed £500,000) then it requires an external independent examination of its accounts, if its annual gross income does not exceed £25,000 then it does not require external scrutiny of its accounts.
There are certain circumstances however in which an audit or independent examination may be required even where the relevant annual gross income limit is not exceeded.
I was assuming the OP (original poster) had become involved because the charity's accounts needed an independent examination (perhaps for the first time) and he was (or his firm were) the independent examiner.
If the OP is acting as auditor rather than independent examiner then my answer would be exactly the same (as an auditor has the same duty to report to the Charity Commission). See in particular s156 Charities Act 2011 and s46(1) which is widely drawn.
If the OP is neither the auditor nor the independent examiner then I would omit the third paragraph in my earlier response (dealing with the statutory duty to report the the Charity Commission). But the remaining paragraphs would still hold good.
If the OP is either the external examiner or the auditor then I cannot see how he might have nevertheless obtained the information in another capacity - or more correctly I cannot see how he could have obtained the information in another capacity and not (also) have obtained it in the capacity of external examiner or auditor.
David
As I understand the Charities Act, it only imposes a duty to report on an Independent Examiner or Auditor. However, it does not preclude others from rasing issues with the Charity Commission. The Commission would be interested in receiving such a report, I am sure.
If the OP has some scruples concerning breach of client confidentiality perhapsthey should speak to ttheir Institute for guidance?
Sloppy accounting but thats all I would say
Just do a PYA to recognise the asset on the balance sheet.
I presume the income came from oversaes donations or some other fundraising activity?
Prior year adjustment
The prior year adjustment will be reflected in the latest accounts effectively by an amendment to the Balance Sheet figures at the start of the prior year (so that the latest accounts are in effect prepared on the basis of the correct opening balances - rather than the Balance Sheet as previously published).
There is no need to re-prepare accounts for any earlier years.
But preparing the annual accounts is the easy bit!
More troublesome is the Trustees' 'serious incident report' to the Charity Commission and the Independent Examiner's report to the Charity Commission, as discussed in my earlier response.
I do think the failure previously to disclose an overseas bank account triggers a need to submit a 'serious incident report' even though the amounts are not particularly large, because it shows a serious weakness in accounting procedures which has persisted over several years.
David