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The charity accountants’ checklist

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28th Oct 2009
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There are numerous value added services accountants can offer to charity clients beyond the traditional year-end provisions. Sarah Hollis offers a rundown of some of the popular options.

In addition to the traditional 'year end' services, charity clients, just like other clients, can be reviewed for additional services. For instance, tax services, internal systems advice and trustee training are all possibilities. Undoubtedly, introducing new services for existing clients is easier than finding new clients.

Charity tax
Many charity clients think charities are exempt from tax, but they’re wrong. Accountants should never take their 'tax hats' off hats when discussing financial matters with charities.

Gift Aid
Being a charitable organisation brings positive tax aspects. Charities should be utilising Gift Aid recovery to its full potential, but many don't. Donations are often received without appropriate paperwork completion. Small charities should implement systems where income is appropriately identified for gift aid claims. Accountants can advise on making the most of the claims available. This is key for the years 2008-2009, 2009-2010 and 2010-2011 where the transitional rules apply to gift aid claims, after which many charities will see their claims falling without taking positive steps to maximise their claims.

Employer tax

As employers, charities are subject to the same regulatory and tax issues as any other employer. Due vigilance is essential for payments made to individuals who are deemed to be employees while ensuring all payroll is correctly recorded. Accountants can also help charity clients by suggesting schemes through which they and their employees might benefit (for example childcare vouchers schemes).

VAT

Charities may need to be VAT registered. Taking advantage of reclaim positions can make VAT registration beneficial. VAT regulations for charities are extremely complex and often require specialist advice. By discussing potential projects and big decisions with accountants, clients can be made fully aware of all the relevant issues.

Trading issues

Charities can be subject to tax on any activities that could be regarded as trading. Many larger charities operate trading subsidiaries and gift aid up the profits which effectively removes the tax charge. However, as smaller charities can unwittingly run over the thresholds it is well worth reviewing all their activities.

Internal systems
As charity trustees often delegate day-to-day running of the charity to its employees, rigid internal systems are a must. Accountants can proactively review these systems and suggest improvements.

Internal audit
The term 'internal audit' indicates a large organisation but in truth it can also be easily adapted for a smaller charity. As charity trustees must consider all risks, the internal audit procedures done by accountants and the resulting reports can provide material for a risk-review. As accountants have access to a number of different client systems, they are also perfectly suited to advise on what might work better.

Trustee training

In an ever-more-regulated sector, trustees have statutory duties in relation to their governance role and often seek advice on how best to meet these requirements.

Risk assessment sessions
Charity trustees are required to consider what risks the charity is exposed to and the best ways to mitigate these. Some accountants now run 'risk review' sessions, leading the trustees in discussions about discovering and assessing the risks.

Strategic sessions
Charity trustees, particularly in small charities, often do not have the full skill mix on the board. Some accountants are getting involved in coaching trustees to think about the future of the charity and development.

Look again

It’s worthwhile for accountants to look more closely at their charity clients to see where they add value and perhaps achieve additional fees in the process. As with all additional services, if the firm is appointed as auditor, it is necessary to consider audit independence issues. It’s also important for accountants to ensure they are not seen to be taking the role of trustee. Stringent regulation in the charity sector calls for very specialist accountancy knowledge and experience, but those involved in the sector have the potential to make a real difference.

Sarah Hollis is a sole practitioner and owner of Hollis Accounting Limited, which specialises in offering accountancy services to charities and SMEs in Scotland.

 

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By User deleted
29th Oct 2009 13:18

Value added services for charities

What would benefit many charities, probably small ones in particular, is if much of this specialist knowledge and expertise were to be made available on a pro bono basis, rather than as part of an exercise to increase fee income.  I'm sure Sarah would argue that by definition "value added services" provide more benefit than they cost.  However, for many small charities dealing with ever increasing and onerous regulations is just an addition to their cost base, which has to be funded from donations, or something on which they give up (possibly at their peril) in order to ficus on the main charitable purpose of their existence. 

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