With the vast majority of charities’ year ends fast approaching, now is the perfect time to start pulling together relevant information and ensuring processes are underway, both from a finance perspective and a few from a trustees’ perspective. Below are our top tips to help you prepare:
Has your charity got any new or unusual transactions this year? This could be the purchase or sale of an asset or a new contract, for example. Consider whether a conversation with your auditor would be useful about the nature of the transaction and any particular disclosure or recognition criteria this might trigger.
Year end cut off
Accruals and prepayments are just the beginning. Income recognition can be a tricky area, particularly for contracts, grants and legacies. It is worth beginning to think about areas that could cause issues and, if necessary, speak to your adviser so you can ensure you treat them correctly in the first place.
Writing the trustees’ report is often left until several months after the year end, but why not write it just before the year end? That way the events of the period are fresh in the minds of those contributing to the report. Not having final numbers only affects a very small part of the report and figures can always be slotted in later. Think about any infographics that may be included and ensure supporting documentation can be produced.
Clean up the balance sheet
Review the trade debtors and creditors listings and ensure that balances you are carrying on those ledgers are genuine amounts. Chase up any slow paying debtors, review provisions for bad debts and ensure payments made and received have cleared down the correct balances on the ledgers. Ensure the intercompany balances reconcile and review any ‘other’ debtors and creditors to ensure they are still appropriate balances.
If you hold investment properties or any other assets at valuation, now is the time to contact the valuer to ensure a valuation is obtained in good time. Where the charity participates in a defined benefit pension scheme, the actuary will need to be contacted to ensure the FRS 102 valuation is obtained and that they are aware of your year end timetable.
Book in your audit planning meeting
Your audit planning meeting should, ideally, be held just before your year end. This will ensure there is time to resolve any issues arising that may affect the year end, eg ensuring appropriate agreements are in place. It also gives your auditors time to make contact with the trustees to ensure appropriate communication at the planning stage, be it in written format or attending a trustee meeting.
Ensure your staff know when the audit is happening; staff outside the finance team may be contacted by the audit team and it’s better if they know questions may be asked. During audit time, the finance team should avoid taking holidays. Let your audit team know staff availability at the start of the onsite work so that the team can plan the order of their work accordingly.
Understand your numbers
Whilst most charities produce management information on a regular basis, this can tend to focus on the statement of financial activities (SOFA). Be prepared to explain why numbers have changed significantly. Preparing a commentary on the numbers is very useful, but ensure it is based on the year end numbers, particularly if there are a lot of year end journals and adjustments.
The financial statements require disclosures that are not necessarily drawn straight from the trial balance. Average staff numbers, trustee expenses, trustee donations, operating lease commitments and historic cost of investments, amongst others, are all figures that need to be calculated for the statutory accounts. Ensuring you have these ready will assist the accounts production process.
Minutes, related parties and risk
The auditors will need to see trustee and committee meeting minutes through the year, the latest risk register as well as the trustees’ interests declarations and related parties register (if maintained). Producing these early in the process means auditors can review these as part of the planning and raise relevant queries earlier in the process.
Following the above guidelines should ensure your year end figures are in good shape both for management information purposes and before the audit starts, reducing the number of audit adjustments and queries.