How to write a Trustees’ Annual Report – part 2
In the concluding part, Jen Gerrard of Gerrard Consulting completes her look at the structure of a charity’s Trustees’ Annual Report (TAR), reviewing the key elements to be covered by each of the seven headings, as required under the Charities SORP 2015.
Last month’s instalment covered:
- Objectives and activities
- Achievements and performance
- Financial review
- Plans for future periods
This month we review:
- Structure, governance and management
- Reference and administrative details
- Funds held as custodian trustee on behalf of others
- Group accounting and the impact on your TAR
Structure, governance and management
The report should provide the reader with an understanding of how the charity is constituted, its organisational structure, its trustee “systems” and the decision-making process of the charity. The following are the key areas:
i.The nature of the governing document (e.g. memo and arts etc)
ii.How the charity is constituted (e.g. limited company, etc.)
iii.Organisational structure of the charity and how decisions are made
iv.“Group” structure e.g. subsidiaries or affiliations with other charities
i.Methods adopted for the recruitment and appointment of new trustees
ii.Policies adopted for the induction and training of trustees
iii.Relationships between the charity and related parties, including subsidiaries
- State if trustees exercise reasonable skill and care
- Liabilities incurred by charity
- Charity can insure
- Limit to liability – must be prudent, lawful and with governing document
- If breach of trust – jointly and severally liable
- Must exercise proper control
- Refer to CC49 (insurance) and CC8 (financial controls)
- Personal liability insurance
iii.Payments to trustees – not expenses
- Purchase of a service needed by charity
- Payment for being a trustee
- Payment for a post within the charity
- Statement that all risks to which the charity is exposed, as identified by the trustees, have been reviewed and systems or procedures have been established to manage those risks
Reference and administrative details
- Name of the charity and any other name in which is it known.
- Charity registration number(s) and company registration number (if applicable).
- Address of principal office and registered office (charitable company).
- Names of trustees and directors (if applicable) in the period and at the report approval date - if corporate trustees, names of directors of the body corporate at the report approval date.
- Who the trustees delegate day-to-day management to and are taking advice from, including:
ii.the name of any chief executive officer or other senior staff members to whom day to day management of the charity is delegated to the charity trustees
iii.names and addresses of other relevant organisations or persons providing banking services or professional advice to the charity, including solicitors, auditor and investment advisers.
Funds held as Custodian Trustee on Behalf of Others
Where a charity is, or its trustees are, acting as custodian trustees, the following matters should be disclosed in the report:
a.A description of the assets
b.The name and objects of the charity the assets are held on behalf of and how this matches your own objectives
c.Details of the arrangements for safe custody and segregation from the charity’s own assets
Group accounts – specific requirements
The SORP requires that where group accounts are prepared the Annual Report includes:
i.The relationship between the charity and related parties, including its subsidiaries.
ii.When considering the objectives and activities, and the strategies and activities undertaken to achieve them, where significant activities are undertaken through subsidiary undertakings these should be explained.
iii.When setting out the achievements and performance of the charity and the group, the information provided enables the reader to understand and assess the achievements of the charity and its subsidiary undertakings in the year.
iv.When setting out the financial review, the review is of the financial position of the charity and its subsidiaries.
Where group accounts must be prepared because the income of the group exceeds the threshold for preparing group accounts, all the items set out above should be covered, with the parent charity and its subsidiary undertakings being considered together. When applying the SORP recommendations particular attention is paid to:
- aims and objectives
ii.strategies and achievements
iii.principal sources of income
iv.consideration of major risks
vi.investment policy and performance; and
How to make it less painful
Every year I hear things like:
“Next year I’m going to start this much earlier”; and
“It’s never as bad as you think it’s going to be/ it doesn’t take as long as you think, it’s the getting going that’s difficult”
I recommend to my clients that their TARs be a work in progress throughout the year, alleviating the ‘pain’ of having to sit down with a blank sheet once the pressure’s on. Top tips to breeze next year’s include:
- Upon finalisation of your annual accounts, ask your accountant to send you the final complete version of your TAR in Word, ready for you to update for the current financial year;
- Little and often – set up a Word document somewhere to record all the great things which happen as you go through the year. It doesn’t have to be full sentences, bullet points will do, but you’ll be amazed at how many of the little things (which often had a huge impact) you might have forgotten about had you not noted them down at the time.
Fleshing this out to a full written document suddenly becomes much simpler and your TAR automatically follows a timeline, assisting with structure.
- Add key financial management sections to your board meeting agenda, at least annually, for review – such as investment policy, reserves policy, risk management. This way you will (hopefully) have minutes detailing a full discussion and associated decision-making process to which you can refer in your TAR. Always great to see a charity demonstrating good governance through doing rather than simply paying ‘lip service’ in their TAR.
Trust me, it will be worth it.
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Jen is a Fellow of the Association of Chartered Certified Accountants (FCCA) and the founder and managing director of Gerrard Financial Consulting, a specialist accounting firm for the charitable sector. She has over 17 years’ experience working in accounting and finance and has also worked as an accountancy tutor for a leading training...