Charities - financial reporting and scrutiny (Northern Ireland)

This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members to understand key requirements relating to the financial reporting and scrutiny of charities registered in Northern Ireland.

Members may also wish to refer to the following related helpsheets:

• Charities – Legal and regulatory framework
• Charities – Financial reporting and scrutiny (England and Wales)
• Charities – Financial reporting and scrutiny (Scotland)

All charities registered in Northern Ireland require external scrutiny. Depending on its size, a charity may satisfy requirements regarding external scrutiny of the annual accounts by either an audit or independent examination.

External scrutiny requirements for charities registered in Northern Ireland are summarised in Appendix 1.

Audit

In addition to the statutory requirements outlined in the appendix, an audit may be required by a charity’s governing documents, election by the trustees or at the request of a major donor.

Charitable companies additionally have to consider the audit requirements of the Companies Act 2006. A charity may for example be exempt from audit under the Companies Act 2006 but may require an audit under the Charities Act (Northern Ireland) 2008. In such cases a Companies Act audit will fulfil the requirements of a Charities Act audit and negate the need for a Companies Act audit exemption statement in the accounts.

Where an audit is required, the auditor should refer to the ICAEW guide on Preparing an audit report for a charity.

Independent examination

Provided an audit is not required, a Northern Irish charity may opt for an independent examination instead of an audit. Independent examinations of charities with gross income between £250,000 and the audit threshold need to be carried out by a member of one of the following specified professional bodies:

• Institute of Chartered Accountants in England and Wales;
• Institute of Chartered Accountants of Scotland;
• Institute of Chartered Accountants in Ireland;
• Association of Chartered Certified Accountants;
• Association of Authorised Public Accountants;
• Association of Accounting Technicians;
• Association of International Accountants;
• Chartered Institute of Management Accountants;
• Institute of Chartered Secretaries and Administrators;
• Chartered Institute of Public Finance and Accountancy;
• Association of Charity Independent Examiners;
• Institute of Financial Accountants; or
• The Certified Public Accountants Association.

Whether members of these professional bodies are in a position to accept an appointment as an independent examiner will be determined by the practicing certificate regulations of each of the professional bodies. Guidance on whether a member can undertake such an examination can be found in the helpsheet Can I undertake an independent examination of a charity?. Advice should be sought if in any doubt.

Further guidance on carrying out an independent examination can be found in the Charity Commission for Northern Ireland’s publication Independent examination of charity accounts: examiner’s guide (ARR07).

Charities are required to prepare their accounts on an accruals basis. Non-company charities with gross income below £250,000 may instead opt for the preparation of receipts and payments accounts, provided that the charity’s governing documents allow it and accruals accounts are not a condition of any donations or grants.

All charitable companies, housing associations, higher education institutions and Co-operative and Community Benefit Societies are required to prepare accruals accounts, as are all non-company charities with gross income in excess of £250,000.

The Charity Commission for Northern Ireland guidance in its publication Charity reporting and accounting: the essentials (ARR02) explains the meaning of gross income as follows:

• For accounts prepared on a receipts and payments basis gross income is simply the total receipts recorded in the statement from all sources excluding the receipt of any endowment, loans and proceeds from the sale of investments or fixed assets.
• For accruals accounts this is the income from all sources in the accounting period, including the conversion of endowment to income, but excluding: gifts of endowment, net investment gains/(losses), all revaluation gains/(losses) on retained assets not due to impairment, actuarial gains/(losses) and such other gains(losses) that are excluded by accounting standards from the calculation of net income.

There is no concept of pro-rating the income threshold in the Charities (Accounts and Reports) Regulations (Northern Ireland) 2015 when the accounting period is not 12 months.

The financial reporting requirements of charities are summarised in Appendix 1.

Receipts and payments accounts

The Charity Commission for Northern Ireland has produced guidance on using the receipts and payments basis for the preparation of a charity’s accounts in its document Receipts and payments accounts for smaller charities (ARR03).

Accruals accounts

Charities preparing their accounts on the accruals basis must use FRS 102 (September 2015), the Charities SORP (FRS 102) and the Charities SORP (FRS 102) Update Bulletin 1 unless another SORP is more appropriate. Additionally, for periods commencing on or after 5 October 2018, Section 3 of the Charities SORP (FRS 102) Update Bulletin 2 must also be applied.

For periods commencing on or after 1 January 2019 (or if the triennial review amendments are early adopted), charities preparing their accounts on an accruals basis will instead apply FRS 102 (March 2018) and the Charities SORP (FRS 102) (second edition - October 2019), unless another SORP is more appropriate.

Charities are excluded from the micro entity regime and are therefore unable to apply FRS 105.

There is an exemption for smaller charities from the preparation of a statement of cash flows as only ‘larger charities’ (those with gross income exceeding £500,000) are required to present one (see Does a charity need a cash flow statement?). There are also other exemptions for smaller charities (those with gross income of £500,000 or below) with regard to the content of the trustees’ report.

Parent charities are required to prepare group accounts if the aggregate gross income is in excess of £500,000. The aggregate gross income is taken after elimination of consolidation adjustments such as intra-group sales. Under the Charities (Accounts and Reports) Regulations (Northern Ireland) 2015, there is no pro-rating the threshold for periods that are not a year in length.

Charities are required to file their accounts and annual return with the Charity Commission for Northern Ireland and in the case of charitable companies are also required to file their accounts with Companies House.

Charities must file their accounts and annual return with the Charity Commission for Northern Ireland within 10 months of the year end.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.