PCC Treasurer’s Roadshow

December 2016

SORP 2015

Parish accounts Guide - Annual reports

Receipts & Payments accounting

Wells 1 Dec

Taunton 7 Dec

Bath 13 Dec

Roadshow outline

Introduction

SORP 2016 (FRS 102)

Parish accounts Guide and Annual reports

Receipts and payments accounts

Charity SORP update Ed Marsh FCA DChA

Charity Development Director, Burton Sweet

Year end reporting • Accountability – at the heart of what it is to be a

charity

• A chance to tell the story

Basis of preparation • Charities can choose to prepare receipts and

payments accounts where gross income is less than £250,000.

• Charities must prepare accounts on an accruals basis and in accordance with the SORP if they have gross income greater than £250,000.

Receipts and Payments • No statutory format (SORP doesn’t cover it)

• Usually consist of: • Receipts and payments statement

• Statement (list) of assets and liabilities

• Trustees’ annual report

• Are they helpful?

Accruals basis • Must follow Charities Statement of ‘Recommended’

Practice

• Always consist of: • Statement of Financial Activities (SoFA) • Balance sheet • Detailed notes and disclosures • Trustees’ Annual report • (Charities with income >£500k must also include a statement

of cashflows)

Charities SORP • SORP 2016 (FRS102)

• For accounting periods beginning on or after 1 January 2016 (i.e. 31 December 2016 year ends)

• FRSSE SORP no longer available

• But some small charity (<£500k income) exemptions exist

Read the SORP here: www.charitysorp.org

Statement of Financial Activities

• Comparatives now needed for each fund column

• Governance costs relegated to the notes

• Investment gains and losses now form part of income and expenditure

• New ‘Plain English’ headings

Income from: Donations and legacies (donations, legacies, some

grants, gift aid relief from HMRC, Gifts in kind)

Charitable activities (e.g. Fee charges, admissions)

Other trading activities (e.g. charity shops, rent of premises)

Investments (e.g. bank interest, dividend income, charitable loan interest, NOT gains)

Other Income (e.g. profit on disposal

insurance payout)

Expenditure on: Raising Funds e.g.

•Fundraising activities/events/appeals

•Non-charitable trading

•Charity shop costs (where shop exists principally to raise funds)

•Finance costs (e.g. overdraft/loan)

•Investment management costs

•Allocated support costs

Charitable activities (with allocated support costs, including governance costs)

Other expenditure

Accounting policies • “The charity is a public benefit entity”

• Impact of adopting FRS102 SORP on prior year

• Statement about going concern

Changes to ‘numbers’ • Legacies

• Gifts in Kind

• Employee entitlements outstanding (if material)

• Discounting of long term liabilities

Disclosure changes

“Key management” • Disclosure of aggregate employment benefits to key

management personnel

• How might this be relevant to churches? Who are the key management personnel?

• NB Nil disclosure required

Donations • Aggregate disclosure of the total amount of donations

from Trustees or related parties.

• Includes Gift Aid

• Related parties • includes Trustees and key management and their close

family members plus entities they control.

• How will this information be obtained?

Other disclosures • Staff numbers by average headcount

• Aggregate value of Trustee expenses paid, waived (where material) and settled directly

• Separate disclosure of redundancy and termination payments

Trustees’ report • “Fair, balanced and understandable review”

• Disclosure of principal risks and how managed (not compulsory for small charities)

• Expanded emphasis on reserves reporting

Reserves - Why the fuss? • Reserves are an asset to be maximised managed

• Confidence about financial management, charity ‘resilience’ and funding needs

• What do stakeholders want to see?

The funds of a charity

What are ‘free’ reserves? Start with level of Unrestricted funds.

Subtract:

• Tangible Fixed assets held for charity use

• Programme related investments

• Designated funds

Reserves reporting Annual report requirements:

• A statement of policy on reserves (or why there isn’t one)

• Level of reserves held and why they are held

• Amount and purpose of any designated funds

• Where designated funds set aside for future expenditure, the likely timing of their use

Reserves reporting Charities ‘should’ also:

• Show calculation of free reserves

• Compare the actual level with the target level/range

• Explain what steps are being taken to bring the actual level in line with the target

Questions?

Ed Marsh FCA DChA

Charity Development Director, Burton Sweet

ed.marsh@burton-sweet.co.uk

www.burton-sweet.co.uk/charity

Charity SORP update Ed Marsh FCA DChA

Charity Development Director, Burton Sweet

Session 2

PCC Accountability

Annual reports

Year end procedures

PCC Accountability: The Charities Act

2011 and the PCC - 5th edition

Preliminary pre-publication pdf version available online http://www.parishresources.org.uk/resources-for-treasurers/accounting-and-reporting/

Final online version available from February.

Print version available to order from Church House

publishing from February https://www.chpublishing.co.uk/category/christian-books/legal-and-reference-1413

PCC Accountability- quick tour Introduction and Legal overview

Principles of Trust Funds – fund accounting

The Annual report

Receipts and Payments accounting

Accruals accounting

Moving between R&P and accruals accounting

Consolidation

Independent Examination

How to write a great annual report

Follow the 10 required headings

Use it as an opportunity to report & celebrate what’s been happening

and future plans

Remember this is what brings the figures to life

Ask other members of the PCC to contribute

DO

DON’T

Include “local politics”

Include reports from non-PCC groups – they can be separately

reported to the APCM

10 key headings Aim and Purposes

Objectives and Activities

Achievements and performance

Financial review

Reserves policy Funds held as custodian trustee

Plans for future periods

Risk Management

Structure , Governance and Management

Administrative information

Pro-forma report

R&P Report Chapter 5 page 50

Accruals Report Chapter 8 page 84

Year end accounts reminders

To help you ensure your year end process is completed:

Download our checklist from http://www.bathandwells.org.uk/supporting-parishes/finances/for-treasurers/accounting-returns/

Complete/submit both Annual report & Accounts AND

Finance Return (online if possible)

Prepare one set of accounts for each parish:

Thresholds apply to total income of the parish

Single annual report

Single SOFA/ BS if accruals accounting

Session 2

PCC Accountability

Annual reports

Year end procedures

RECEIPTS AND PAYMENTS

ACCOUNTS

• Accruals or Receipts and Payments (R&P) Accounts?

• Recommendations from the Parish Accounting Guide (PAG)

• Moving from Accruals accounts to Receipts and Payments accounting

Receipts and Payments or Accruals?

Threshold >£250,000 for compulsory accruals

Below that threshold, consider:

Skills / knowledge required

Cost of accountancy / independent examination

Users of accounts…management accounts or statutory?

Statutory (year end) accounts sent to the DBF

Must be fully accruals or fully Receipts & Payments– not a

hybrid!

Recommendations from the PAG

No prescribed format under the SORP, but…

Standard headings are recommended for recording

receipts and payments (page 42)

Netting off receipts and payments is not allowed

R & P Statutory Accounts Components

Listed on Pp 43 – 47 of the Guide

Receipts & Payments Account – for all PCC funds

Statement of Assets and Liabilities (not Balance Sheet)

Notes to the Accounts (give more detail on accounting

policies, fund movements and items of Receipts and

Payments)

Independent Examiner’s Report

R & P Accounts Guidance

Accounts must agree with underlying records

Should be consistent with the Return of Parish Finance

Notes used to bring greater clarity / understanding

Registration with Charity Commission if receipts >

£100,000 (unless exceptionally – exemption must be

applied for and received)

Moving from Accruals to Receipts & Payments

Restate previous year figures

Reverse accruals and prepayments

Reconciliation of brought forward position

Map SOFA headings to R&P headings

Statement of Assets and Liabilities

Accounting policy note explaining the change (& ideally

reconciling the brought forward funds position)

Consider which notes are needed

Restating Previous Year Figures

Worked Example – see pp 102-103 & handout

Remove accruals and payments at beginning and end of

previous year

Brought forward funds = total of cash balances.

Include unreconciled cheques in the cash total

(i.e. cheques issued or received but payment not cleared the

account at the year end - these are not accruals)

Moving to Receipts and Payments

SOFA:

Consider using similar headings to the SORP ones for good

practice

More detail can be provided in Notes

Check reconciliation with total cash balances

Statement of Assets and Liabilities

Does not balance to anything – include a list of amounts owed

to and from the PCC and monetary amounts where available

Accounting Thresholds for Parishes

For receipts across all funds:

Receipts >£0 – Accounts must be filed with the DBF

>£250,000 – Accrual Accounts compulsory

>£500,000 – Small charity exemptions do not apply (implies compulsory cash flow statements, more specific details on Risks and

Reserve Policy required etc).

>£1m– Audit threshold (or >£250k receipts and >£3.26m net assets)

How can we support you?

Training –New Treasurers; Cashbook; Roadshows

Treasurer’s newsletter

Regular updates to the Finance News section of the

diocesan website and online Handbook

“Treasurers Learning Network” Luke 14-28 Forum

- JOIN TODAY

Telephone /email support for diocesan cashbook and

general queries

Thank you!

For giving up your time to come today

For all you do throughout the year managing the finances of your

parishes

For working in partnership with us ensuring Parish Share

contributions are made regularly and promptly- so we can provide

stipends and houses for the parochial clergy.

For all the “behind the scenes” activities - planning new projects,

reading the gas meters, banking the Sunday Schools “penny line”,

sorting out the funeral fees, attending PCC meetings………………

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Notes

Notes