The Charity Commission for Northern Ireland

The Charity Commission for Northern Ireland is the regulator of charities in Northern Ireland, a non-departmental public body sponsored by the Department for Social Development.

Our vision

To deliver in partnership with other key stakeholders in the charitable sector “a dynamic and well governed charities sector in which the public has confidence, underpinned by the Commission’s effective delivery of its regulatory role.”Further information about our aims and activities is available on our website

Equality

The Charity Commission for Northern Ireland is committed to equality and diversity in all that we do.

Accessibility

The Commission’s website has been designed to W3C standards of accessibility and includes a number of features to enhance accessibility for a wide range of individuals. These include colour contrast and resize options. Materials may be made available in alternative formats on request. If you have any accessibility requirements please contact us.

Online or in print

If you are viewing this document online, you will be able to navigate your way around by clicking on links either within the contents page or text.

Our approach to consultation

During our consultation process and our engagement with stakeholders, we will adhere at all times to the principles of:

  • commitment
  • honesty and integrity
  • openness
  • adherence to the best approach
  • early involvement
  • information sharing
  • accessibility
  • separation of functions
  • evaluation
  • clear communication.

These are set out in the Commission’s Participation strategy and consulted on in 2014.

Accounting and reporting guidance consultation document1 December 2015

Contents

Section 1: / Consultation details / 4
1.1 / Background information
1.2 / What are we consulting on?
1.3 / What are we not consulting on?
1.4 / Who do we want to hear from?
1.5 / How long is the consultation open?
1.6 / Responding to the consultation
1.7 / What happens after the consultation?
Section 2: / Introduction to the range of guidance / 8
Section 3: / The annual monitoring return / 10
3.1 / Part C now compulsory for larger charities
3.2 / Activities question removed
Section 4: / Independent examiner directions / 11
Appendix 1: / Consultation questions / 14
Freedom of information and data protection / 30
Contact details / 32

Accounting and reporting guidance consultation document 2015/161

Section 1: Consultation details

1.1 Background information

The Charity Commission for Northern Ireland (the Commission) began compulsory registration of all charities in Northern Ireland in December 2013. As part of the Commission’s ongoing regulatory and monitoring work, all registered charities must provide information on their activities, governance and finances and submit their accounts and reports to the Commission for inspection on an annual basis. Thisis known as annual reporting and consists of the following main elements:

  1. Annual monitoring return
  2. Annual accounts
  3. Trustees’ annual report
  4. Audit or independent examination report.

Annual reporting is being introduced into Northern Ireland on a phased basis.Interim reporting arrangements, phase one, have been in place from 1 April 2014 and the introduction of the full accounting and reporting regulations on 1 January 2016 marks the beginning of phase two.

Full accounting and reporting regulations have been developed by the Department for Social Development (DSD). The regulations set out the form and content requirements for charity accounts and the level of review or audit these charity accounts must have. They also set out the content requirements of the trustees’ annual report. These regulations are live as of 1 January 2016 and apply to registered charities for their first full financial year beginning on or after that date,ortheir date of registration with the Commission, if later.

Phase one, the interim reporting programme, will remain in place for registered charities only where their first full financial year after registration begins priorto 1 January 2016.These arrangements are for a transition period only.Accounts produced for subsequent financial years, beginning on or after 1 January 2016, must be prepared in accordance with the full regulations. For more information on phase one, including who will be affected, please see the annual reporting section of the website

Interim reporting arrangements have enabled registered charities to keep their entry on the register accurate and up-to-date, and provide key information to the public, beneficiaries and other interested parties.The introduction of annual reporting requirements on a phased basis has also helped to make the process as smooth and accessible as possible, allowing registered charities to use the interim requirements to get used to reporting annually to the Commission.

1.2 What are we consulting on?

The Commission has developed a suite of guidance to explain the requirements of the full accounting and reporting regulations and set out charities’ obligations. It is essential this guidance is clear, comprehensive and user friendly. Therefore, the Commission is seeking the views of those who will be using the guidance. We would like to know what works in the guidance, what could be clearer and where there are any gaps. This will help us to improve the guidance before final versions are published later in 2016.

1.3 What are we not consulting on?

We are not consulting on the full accounting and reporting regulations for registered charities. DSD was responsible for developing these regulations and consulted on them in autumn 2015.

1.4Who do we want to hear from?

We particularly want to hear from charities, as requirements to report information will impact directly on them. Equally we want to hear from any professionals or third parties that provide administrative and accountancy services to the charity sector.We would also welcome views from anyone who is involved in the charity sector or intends to use Northern Ireland’s register of charitiesand is interested in our approach to collecting and publishing information about charities.

We are keen to hear the views of a wide range of stakeholders during this consultation. This includes, but is not limited to:

Charity sector

  • charity staff and volunteers
  • trustees (who may also be known as a management committee or directors)
  • large, medium and small charitable organisations
  • organisations with different structures, for example, charitable companies and charitable trusts
  • umbrella bodies.

Other stakeholder groups

  • accountants or individuals who may assist charities with financial reporting and administration
  • professional bodies and individuals, for example, solicitors
  • media
  • funders.

Public sector

  • political parties and local representatives
  • local government
  • funding bodies
  • Government departments and arm’s length bodies.

General public

  • all members of the public
  • donors
  • beneficiaries.

We are keen to engage with people across Northern Ireland and to ensure the consultation is accessible to anyone who wishes to comment. If there is anything we can do to help you provide feedback, please let us know.

1.5 How long is the consultation open?

The consultation will run for 12 weeks, beginning on Friday 18December 2015 and closing at 5pm on Friday 11March 2016.

We recognise that this consultation will, in part, run over the Christmas period which is not ideal for some charities. While the Commission tries not to run consultations during holiday periods we were keen to balance offering a full 12 week period for discussion and comment with having final guidance in place for charities as soon as possible after the full accounting and reporting regulations come into force.

All information and necessary documentation for the consultation, including the consultation event schedule, is available on the Current consultationspage of our website

1.6 Responding to the consultation

You can take part in the consultation using any of the following methods:

  • Complete the online questionnaire available at
  • Complete the questions set out in appendix 1 of this document and either:
  • Email it to or
  • Post it to Charity Commission for Northern Ireland, 257 Lough Road, Lurgan, Northern Ireland, BT66 6NQ
  • Attend a consultation event.

Further information is available on the ‘Current consultations’page of our website at

1.7 What happens after the consultation?

Following the completion of the consultation process we will produce a consultation report and a summary document, which will be available on our website once finalised. This will make it clear where and how we have taken into account the responses provided during the consultation process.

The feedback will be used to amend and update the draft guidance with the final version of the guidancetobe published in April 2016.

Section 2: Introduction to the range of guidance

Charity trustees have a duty under Part 8 of the Charities Act (Northern Ireland) 2008 to:

  • keep accounting records
  • prepare accounts for each financial year of the charity
  • have the accounts independently examined or audited
  • providean annual report on the activities of the charity.

The new regulations made by DSD set out the form and content requirements for charity accounts and the trustees’ annual report, and the level of review and scrutiny these documents must have. Registered charities are now required to comply with these regulations for each full financial period following 1 January 2016or their date of registration with the Commission, if later. In order to assist charities to comply with the regulations the Commission has produced a range of guidance documents. The following documents are being consulted on:

  1. ARR01 Charity reporting and accounting: guidance summary

All charities should read this guidance. This document gives you a brief summary of the suite of guidance produced by the Commission on accounting and reporting requirements. It will helpyour charity understand which pieces of guidance are most relevant to you, depending on your circumstances.

  1. ARR02 Charity reporting and accounting: the essentials

All charities should read this guidance. It covers the new accounting and reporting framework in place for registered charities from 1 January 2016, providing an overview of the Charities (Accounts and Reports) Regulations (Northern Ireland) 2015.

  1. ARR03 Receipts and payments accounts and the trustees’ annual report

Read this guidance if you are a small, non-company charity and you qualify to prepare receipts and payments accounts. Generally, this applies to charities with gross income of £250,000 or less. It provides detailed guidance on the new legal requirements, suggested formats for receipts and payments accounts, and requirements for the trustees’ annual report.

  1. ARR04 Accruals accounts and the trustees’ annual report

Read this guidance if you are required to prepare accruals accounts. Generally, this applies to charities with gross income of more than £250,000 or to charitable companies. You should also read this document if your governing document, a funder, or any other legislation requires your charity to prepare accruals accounts. It provides guidance on the legal format for accruals accounts and requirements for the trustees’ annual report.

  1. PBR1 Public benefit requirement guidance – public benefit reporting

All charities must read this guidance which will be included as a new section in theCommission’s current Public benefit requirement statutory guidance. Public benefit reporting is a key element within the trustees’ annual report and requires trustees to have regard to the Commission’s guidance. The guidance sets out how trustees can meet the requirements and some practical examples of the information they can provide.

These guidance documents cover complex material. For this reason, the Commission is seeking feedback on the range of guidance documents in their draft form before they are finalised and published on the website.

Section 3: The annual monitoring return

The annual monitoring return will request information on a charity’s activities, governances and finances. The Commission is responsible for making non statutory-regulations that set out the information requirements of the annual monitoringreturn.

We previously consulted on the questions that should be asked in the annual monitoring return resulting in the Charities (Annual Return) Regulations (Northern Ireland) 2014. The legal basis for requesting the information in the annual monitoring return can be found in section 70 of the Charities Act.

The annual monitoring return was a component of the interim reporting programme (phase one) and will continue to form a key part of the full reporting programme (phase two). The annual monitoring regulations that will apply from 1 January 2016 are theCharities (Annual Return) Regulations (Northern Ireland) 2016.

The annual monitoring return covers general and financial content and is based ona fair and proportionate approach whereby small charities are not required to provideas much information or detail as larger charities. Part A must be completed by allcharities,Part B only by those charities with income in excess of £10,000 and Part C only by those charities with income in excess of £250,000.

3.1 Part C now compulsory for larger charities

Under the interim reporting arrangements, Part Chas been voluntary, however, now that full accounting and reporting regulations arein place, part C is now mandatory for larger charities. This was set out in the consultation document during the consultation on the interim reporting requirements in 2013.

3.2 Activities question removed

The annual return will no longer ask for details of the activities carried out by the charity to supplement its charitable purposes. This information will be captured in the trustees’ annual report which is now a compulsory element of annual reporting. This is being removed to avoid duplication of work by charity trustees.

Section 4: Independent examiner directions

The Commission is drafting guidance for independent examiners. This will be a legal document that contains Directions that independent examiners must follow when carrying out any independent examination. The guidance will explain the roles and duties of an independent examiner including what must be in their report, and the Commission’s Directions that must be followed in any examination. The Commission will work with critical friends and other stakeholders to finalise the guidance and will undertake work to raise awareness during 2016. We are now taking views to inform the development of guidance on the proposed Directions which are summarised below.

Direction / Summary
1. Examination and accounting thresholds / The examiner shall carry outall necessary checks to reasonably determine that an audit is not required ensuring that:
(i) section 65(1) (audit) of the Charities Act (Northern Ireland) 2008 does not apply to the charity
(ii) where the charity is a small company charity, that it is exempt from audit in accordance with section 477 of the Companies Act 2006
(iii) where accounts are prepared on a receipts and payments basis under section 64 (3) of the Charities Act (Northern Ireland) 2008 this is permitted by reference to the legally established accounting thresholds.
2. Documentation / The examiner shall record and document the examination procedures carried out and any matters which are important to support conclusions reached or statements provided in the their report.
3. Understanding the charity / The examiner shall make sure they understand the charity’s constitution, organisation, accounting systems, activities and the nature of its assets, liabilities, incoming resources and application of resources in order to tailor the examination procedures as appropriate.
4. Accounting records / The examiner shall review the accounting records maintained in accordance with section 63 of the Charities Act (Northern Ireland) 2008 or, in the case of a charity that is a company, the accounting records maintained in accordance with section 386 of the Companies Act 2006, in order to provide a reasonable basis for the identification of any material failure to maintain such records.
5. Comparison with accounting records / The examiner shall compare the accounts of the charity with the charity’s accounting records in sufficient detail to provide a reasonable basis on which to decide whether the accounts are in accordance with the accounting records.
6. Analytical procedures / The examiner shall carry out analytical procedures to identify unusual items or disclosures in the accounts. Where concerns arise from these procedures, the examiner must seek an explanation from the charity trustees. If, after following such procedures, the examiner has reason to believe that in any respect the accounts may be materially misstated then additional procedures, including verification of the asset, liability, incoming resource or application, must be carried out.
7. Form and content of accounts / The examiner shall carry out such procedures as they consider necessary to provide a reasonable basis on which to decide whether or not the accounts prepared under section 63 of the Charities Act (Northern Ireland) 2008 comply with the form and content requirements of the regulations including their preparation in accordance with the methods and principles set out in the applicable SORP. In the case of a charity that is a company, the examiner shall verify whether the accounts are prepared in accordance with section 396 of the Companies Act 2006 and in accordance with the methods and principles of the SORP.
8. Accounting policies, estimates and judgements / When accounts are prepared under section 64 of the Charities Act (Northern Ireland) 2008, or in the case of a charity which is a company, prepared under section 396 of the Companies Act 2006, the examiner shall review the accounting policies adopted and consider their consistency with the applicable SORP as well as their appropriateness to the activities of the charity. The examiner must also consider and review any significant estimate or judgment that has been made in preparing the accounts.
9. Trustees’ annual report / When accounts are prepared under section 64 of the Charities Act (Northern Ireland) 2008, or in the case of a charity which is a company, prepared under section 396 of the Companies Act 2006, the examiner shall compare the accounts to any financial references in the charity trustees’ annual report (if any) identifying any major inconsistencies and consider the significance such matters will have on a proper and accurate understanding of the charity’s accounts.
10. Examiner’s report / The examiner shall review and assess all conclusions drawn from the evidence obtained from the examination and consider the implications on the report to be made under Regulation 24 of the 2015 Regulations. If the examiner has cause to make a positive statement on any matter arising from the provisions of Regulation 24(h) or 24(i), or to make a statement on any matter arising from the provisions of Regulation 24(j), then the examiner must ensure so far as practicable that the report gives a clear explanation of the matter and of its financial effects on the accounts presented.

Appendix 1: Consultation questions

For each question, please identify your answer by inserting an X in the selected box. Please insert only one X per question. Please add additional comments in the spaces provided.