How can trustees stay compliant with the Charity Commission?

As a trustee of a charity, you’ll have a legal responsibility to ensure that the work you do, and the general running of the charity itself, follow the compliance guidelines set out by the Charity Commission.

Your primary focus will always be championing your charity’s cause for the public’s benefit. This is why it’s essential to understand how to work within the guidelines of your recommended practices.

Here’s what you need to know about compliance with the Charity Commission guidance.

 

Charity law

Charities set up in England and Wales must register with the Charity Commission unless they:

All charities must keep proper financial records and prepare annual accounts by law. You must keep all financial paperwork for six years as per the Charities Act 2011.

As a trustee, you must arrange for accounting books and records (including cash books, invoices and receipts) to be readily available at any point.

To stay compliant, charities must inform the Commission of any changes to the information on the register of charities, including trustee details and changes to governing documents.

 

Audits and examinations

Your charity may require an audit or an independent examination, depending on its size and turnover. This is essential as it’s a process of providing a transparent view of your charity’s inner workings when it comes to handling its finances.

Charities with an income of £5,000 – £25,000 must legally produce a trustees’ annual report, which must be available by request. Those with an income above £10,000 must submit an annual return to the Commission within ten months of the end of their financial year.

If your charity’s gross income is between £25,000 and £250,000, you’ll be required to have your annual accounts independently examined or audited.

Any charities with an annual income between £250,000 and £1 million (with assets worth less than £3.26m) will need to keep accruals accounts which must also be audited or independently examined by a Commission-approved body.

By law, a charity with an annual income over £1m (or £250,000 with assets worth more than £3.26m) must undergo a full audit and keep accruals accounts which will be under scrutiny during the audit.

 

Managing resources

At all times, trustees must act responsibly and honestly in their role, especially when it comes to the charity’s assets and finances.

Any assets belonging to the charity must be used only to support and carry out the charity’s work, and trustees shouldn’t take risks with the assets or the reputation of their charity.

If your charity requires further funding, either through investment or lending, you and your co-trustees have the duty to ensure that everything is correct and responsibly accounted for in line with your statement of recommended practice (SORP) and governing documents.

 

Conflict of interest

You can only comply as a trustee if there aren’t any personal interests conflicting with your charity’s best interests.

For example, you could be dealing with a conflict of interest if you:

  • receive a payment from the charity for goods or services, or as an employee
  • make a loan to or receive a loan from the charity
  • own a business that enters into a contract with the charity
  • use the charity’s services
  • enter into a financial transaction with the charity.

As well as applying to you as trustee, these rules apply to any connected persons (close relatives, business partners or a company you’re connected with).

You should take care to identify any potential conflicts of interest and be ready to respond to them in a transparent way. It’s a good idea to establish a policy on dealing with these as part of your governing documents.

 

Helping you stay compliant

Compliance is vital when working in a charity, not only for the benefit of the charity itself but for its beneficiaries, your investors and the public. We work closely with charities by helping them keep their accounts in order to manage everything by the book.

Get in touch to discuss how we can help you stay compliant.