implementing charities sorp...reference & administration details trustee annual report funds...
TRANSCRIPT
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Implementing Charities
SORP31 January 2019
Angela Monahan
Audit Senior Manager
Mazars
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1. An Introduction
2. Overview of Charities SORP
3. Key Areas of Charities SORP
4. Challenges in first time adoption
5. Where do I start?
6. Q&A
Charities SORP | Content
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1.An Introduction
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Charities SORP | Introduction
Senior Manager
Audit & Assurance
Angela Monahan▪ Institute of Chartered Accountants
▪ Certificate in Charity Law, Trusteeship and
Governance
▪ Member of Mazars Ireland Not for Profit
team
▪ Participates in the technical screening for
the Good Governance Awards
▪ Provides external audit, financial reporting
advisory, technical accounting, regulatory
and other assurance services to Not for
Profit clients
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2.Overview of
Charities SORP
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Charities SORP | Main Areas
Trustee Annual Report / Annual Report
Fund Accounting
Accounting Standards, Policies and Principles
Statement of Financial Activities (SOFA)
Balance Sheet
Statement of Cashflows
Subsequent Events
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Charities SORP | Fund Accounting
FUNDS OF A CHARITY
Unrestricted funds
General
Designated
Restricted funds
Income Endowment
Expendable
Permanent
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Charities SORP | Impact of Fund Accounting – Disclosure
Reconciliation of funds by activity
Analysis of the funds of the
charity
Purposes of each fund
Material transfers
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Charities SORP | SOFA Overview
Classifications
See attached handout
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Charities SORP | Notes to the Accounts
Ex Gratia
payments
Allocation of
overheadsStaff costs
Related
Party
Transactions
Expenses
paid to
Trustee /
Directors
Directors /
Trustee
Remuneration
Analysis of
income &
expenditure
CEO
Remuneration
Contribution
of
volunteers
Donated
goods and
facilities
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3.Key Areas
of Difference
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Income Expenditure Funds
Regulation &
Governance
Trustee Annual Report
Charities SORP | Key Areas of Difference
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Charities SORP | Key Areas of Difference
• Donations and legacies
• Charitable activities
• Other trading activities
• Investments
• Other
Recognition of Income
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Charities SORP | Key Areas of Difference
• The use of the accrual model for accounting for
grants is not permitted under Charity SORP
Recognition of Income
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Charities SORP | Key Areas of Difference
Illustrative Example
A charity has received a grant towards capital
expenditure of €100,000. The estimated useful
life of the asset acquired is 10 years.
• How will this look under FRS 102, and in line
with existing Company Law?
• How will this be accounted for under Charity
SORP?
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Charities SORP | Key Areas of Difference
FRS 102
Step 1: Record the grant
DR Bank 100,000
CR Deferred Grant 100,000
Step 2: Purchase the asset
DR Asset 100,000
CR Bank 100,000
Step 3: Depreciate the asset
DR Depreciation Expense 10,000
CR Accumulated Depreciation 10,000
Step 4: Amortise the grant
DR Deferred Grant 10,000
CR Amortisation 10,000
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Charities SORP | Key Areas of Difference
Charities SORP
Step 1: Record the income
DR Bank 100,000
CR Income 100,000
Step 2: Purchase the asset
DR Asset 100,000
CR Bank 100,000
Step 3: Depreciate the asset
DR Depreciation Expense 10,000
CR Accumulated Depreciation 10,000
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Charities SORP | Key Areas of Difference
SORP
Treatment
FRS 102
Treatment
SOFA
Income and endowments from
Charitable activities 100,000 -
Expenditure on
Charitable activities 10,000- -
Net surplus 90,000 -
BALANCE SHEET
Fixed assets (NBV) 90,000 90,000
Deferred income - capital grants - 90,000
Net Assets 90,000 -
Total Funds 90,000 -
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Charities SORP | Key Areas of Difference
Yes
Is there an agreement in place?
No
Recognise when entitlement exists
Are there terms & conditions? ("Ts & Cs")
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Charities SORP | Key Areas of Difference
Are there terms & conditions? ("Ts & Cs")
Which of the following T&Cs apply?
Performance RelatedOtherAdministrative
Is the charity in control of meeting the T&C?
Recognise when conditions are met
Recognise when committed in writing
YesNo
Yes No
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Charities SORP | Key Areas of Difference
• Deferred Income
• Example 1
• Example 2
Analysis of Grant Agreements
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Charities SORP | Key Areas of Difference
• SORP Analysis
• Charitable Activities
• Cost of Raising Funds
• Other
• Allocation of costs
▪ Direct costs
▪ Shared costs
▪ Support costs
Expenditure
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Charities SORP | Key Areas of Difference
• Support Costs
• Governance costs
• Payroll admin
• Budgeting/accounting
• IT
• Personnel – HR
• Finance
• Methods of allocating costs
▪ Usage
▪ Per capita
▪ Floor area/capacity
▪ Time
Expenditure
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Charities SORP | Key Areas of Difference
Donated Goods, Services and Facilities
• Recognition criteria
• Measurement bases
• Donated assets
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Charities SORP | Key Areas of Difference
Fund Name Fund
balances
brought
forward
Income Expenditure Transfers Gains and
losses
Fund balances
carried forward
Unrestricted
Restricted
income
Restricted
endowment
Notes to the accounts
• Purposes of each fund and restrictions imposed on each fund;
• Reasons for any material transfers;
• Where endowment has been converted to income, details of the amount
converted and the legal power for its conversion;
Funds
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Charities SORP | Key Areas of Difference
Financial
Review
Exemptions
from Disclosure
Achievements &
Performance
Objectives &
Activities
Structure,
Governance &
Management
Reference &
Administration
Details
Trustee Annual Report
Funds held as
a custodian
Plans for
future periods
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Charities SORP | Key Areas of Difference
Regulation & Governance
• Compliance with other legislation – Governance Code, Internal Financial
Controls, Fundraising Principles
• Areas of Governance:
• Organisational chart
• Strategic plan
• Risk register
• Policies & Procedures
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4.Challenges
of
Implementation
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Charities SORP | Challenges
Challenges
Knowledge
Capacity
Inputs
Trustee Report
Funding
Reserves
Staff Costs
Accounting Policies
Audience
Format
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5.Where Do I Start?
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Charities SORP | Where Do I Start?
• What is the nature of my funding?
• Can I decipher what funding is restricted or
unrestricted?
• What makes up my current level of reserves?
• Do I have the appropriate personnel and resources to
implement SORP?
• What is the capacity of my accounting system to
implement fund accounting?
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Charities SORP | Where Do I Start?
To do list – short term
• Review of current and historic funding arrangements and contracts in place
• Review and analysis of existing reserves
• Identify any prior year adjustments on transition to SORP
• Identification of activity streams
• Update of nominal ledger cost centres
• Review of management reporting package
Divide and Conquer
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Charities SORP | Where Do I Start?
To do list – medium - long term
• Establish a strategic plan
• Review governance structures, make up of boards and committees, relevance and expertise
• Establishment of organisational risk register and strategy for identification and mitigation of the key risks facing the organisation
• Start to draft the headings and content for Annual Report
• Review and documentation of robust policies and procedures
• Develop skill in impact reporting
Divide and Conquer
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6.Q&A
Discussion
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This presentation does not constitute professional accounting, tax, legal or any other professional advice. No liability is accepted by Mazars for any action
taken or not taken in reliance on the information set out in this presentation. Professional accounting, tax, legal or any other relevant professional advice
should be obtained before taking or refraining from any action as a result of the contents of this presentation.
Contact Us
Should you require any further information, please contact our charities team:
Aedín Morkan
Partner
Direct dial: +353 (01) 449 4453
Email: [email protected]
Angela Monahan
Senior Manager
Direct dial: +353 (01) 449 4413
Email: [email protected]
Kate O’Brien
Manager
Direct dial: +353 (01) 512 5561
Email: [email protected]