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Charity sector facing major challenges in time of change

By Claire Thomson, assistant manager, audit

Published 26/04/2016

Claire Thomson, assistant manager, audit
Claire Thomson, assistant manager, audit

The past year has been one of considerable change for the charitable sector and in the recent Ulster Bank and CO3 third sector index 78% of respondents categorised the environment in which their organisation is operating as “very or quite challenging”.

As well as financial challenges, charitable bodies are facing a raft of financial, legal and administrative changes including new financial reporting, statutory registration, complex tax issues, and increased scrutiny of charity governance arrangements.

For reporting periods starting on or after January 2015, a new financial reporting framework (FRS102) is mandatory for the majority of UK entities, including charities. The changes introduced have been applied to the statement of recommended practice ‘Accounting and Reporting by Charities’ (the Charities SORP).

Best practice would suggest charities ought to adopt the new financial reporting regime, requiring the adoption of new accounting policies and the restatement of comparative balance sheets. The new Northern Ireland legislation relating to charity accounting and reporting which came into effect from January 1 will, however, yield some concessions for smaller organisations.

Charities with significant grant income, unusual financing arrangements (such as loans, or related party loans at non-commercial rates), or significant fixed assets may expect revisions to the measurement of assets and liabilities in their financial statements.

In terms of regulation, most charities in Northern Ireland are now aware of their obligation to register with the Charity Commission for Northern Ireland (CCNI).

On the positive side, the Treasury has launched a consultation on simplifying the Gift Aid donor benefit rules. At present, Gift Aid can “gross up” donations by 25%, although the charity must ensure the system is correctly administered and does not fall foul of HMRC’s rules. In these challenging times charity governance is becoming more critical, and it is an area of increased public scrutiny. In the forthcoming weeks this column will consider the implications for charity trustees and executives.

Contact: claire.thomson@ie.gt.com

Grant Thornton (NI) LLP specialises in audit, tax and advisory services

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