SORP 2005 Statement of recommended practice

Contents What is changing What is changing SORP 2005 SORP 2005 Charities Act Charities Act Trustee responsibilities for Accounts and reports Trustee responsibilities for Accounts and reports Requirements Requirements Book keeping Book keeping Receipts and Payments accounts Receipts and Payments accounts Accruals accounts Accruals accounts The Annual report The Annual report

What changes under SORP 2005 It applies to ALL churches It applies to ALL churches It applies to all accounts for periods ending after 31 March 2006 It applies to all accounts for periods ending after 31 March 2006 The accounts and annual report are effectively combined The accounts and annual report are effectively combined The report and accounts should show how the church has performed against its objectives The report and accounts should show how the church has performed against its objectives

What is coming A new Charities Act probably in 2007 A new Charities Act probably in 2007 Churches will cease to be “excepted” and be covered by normal Charities act and treated like all other charities probably from October 2007 Churches will cease to be “excepted” and be covered by normal Charities act and treated like all other charities probably from October 2007 Only largest churches will need to register (> £100,000 turnover) Only largest churches will need to register (> £100,000 turnover) Others can register Others can register Registered churches will get a Charity Number Registered churches will get a Charity Number Registered charities must submit a return to the Charity Commissioners Registered charities must submit a return to the Charity Commissioners

Trustee responsibilities The report and accounts are the responsibility of the Trustees not just the Treasurer! The report and accounts are the responsibility of the Trustees not just the Treasurer! The Trustees are accountable for the way the resources are used The Trustees are accountable for the way the resources are used Usually the Elders Meeting are the Trustees Usually the Elders Meeting are the Trustees Status of finance should be reviewed regularly Status of finance should be reviewed regularly

The Annual report It should tell the story of the church It should tell the story of the church What is the church trying to do What is the church trying to do How is it going about it How is it going about it Content is more defined Content is more defined Should contain the following sections: Should contain the following sections: Reference and administration Reference and administration Structure, governance and management Structure, governance and management Objectives and activities Objectives and activities Achievements and performance Achievements and performance Financial review Financial review Plans for future periods Plans for future periods Statement from Auditor/Examiner Statement from Auditor/Examiner

The Annual Report - 1 It must contain: It must contain: Administration details Administration details –The name of the church or charity –Charity Registration number (if applicable) –The address of the church and for correspondence if different –The names of the trustees Usually the serving elders Usually the serving elders Including those retiring and appointed during accounting period & up to approval date Including those retiring and appointed during accounting period & up to approval date

The Annual Report - 2 The constitution or legal framework The constitution or legal framework The URC Acts The URC Acts Appointment of trustees Appointment of trustees Objectives and purpose Objectives and purpose Achievements and performance Achievements and performance Numbers or members, average attendance Numbers or members, average attendance Special events Special events Purpose of special or designated funds Purpose of special or designated funds Reserves policy Reserves policy The accounts and report should be presented and approved by Elders or a church meeting The accounts and report should be presented and approved by Elders or a church meeting

Size of accounts Based on greater of income or expenditure Based on greater of income or expenditure Up to £10,000 Up to £10,000 Receipts and payments and assets and liabilities; no independent examination Receipts and payments and assets and liabilities; no independent examination £10,000 to £100,000 £10,000 to £100,000 Receipts and payments and assets and liabilities; independent examination Receipts and payments and assets and liabilities; independent examination £100,000 to £250,000 £100,000 to £250,000 Accrual accounting, statement of financial activities plus balance sheet; independent examination Accrual accounting, statement of financial activities plus balance sheet; independent examination Over £250,000 Over £250,000 Accrual accounting, statement of financial activities plus balance sheet; audit Accrual accounting, statement of financial activities plus balance sheet; audit Smaller churches can use accrual accounting; larger churches must use it Smaller churches can use accrual accounting; larger churches must use it

Book keeping Keep it simple Keep it simple Show all transactions as gross Show all transactions as gross Keep records for EVERY transaction Keep records for EVERY transaction Separate funds Separate funds Unrestricted Unrestricted Designated Designated Restricted Restricted Endowment Endowment Reconcile against bank statements Reconcile against bank statements Take care over cash handling Take care over cash handling

Receipts and payments Must include all funds of church including those of sub-groups Must include all funds of church including those of sub-groups Simply adds all common transactions for the year Simply adds all common transactions for the year Classifications for income: Classifications for income: Planned giving; gift aid; grants; money raising; letting; investment income; other income Planned giving; gift aid; grants; money raising; letting; investment income; other income For expenditure For expenditure M&M; charitable giving; ministry expenses; manse costs; building maintenance; worship costs; capital expenditure; other costs M&M; charitable giving; ministry expenses; manse costs; building maintenance; worship costs; capital expenditure; other costs

Assets and liabilities Must include ALL assets and all accounts Must include ALL assets and all accounts Assets Assets Cash and bank deposits Cash and bank deposits Other monetary assets Other monetary assets Loans; tax claims made; unpaid accounts Loans; tax claims made; unpaid accounts Investments Investments Fixed Assets Fixed Assets Buildings; manses; equipment; cars; Buildings; manses; equipment; cars; Liabilities Liabilities Amounts owed but not paid Amounts owed but not paid Special collections not forwarded Special collections not forwarded Grant commitments Grant commitments Loans & hire purchase Loans & hire purchase

Accruals accounts Income and expenditure related to accounting period Income and expenditure related to accounting period Must include Must include Statement of Financial Activities (SOFA) Statement of Financial Activities (SOFA) Balance sheet Balance sheet Notes explaining policies & details Notes explaining policies & details Keep funds separated Keep funds separated Endowment, restricted, unrestricted Endowment, restricted, unrestricted Show previous year figures for comparison Show previous year figures for comparison Not by fund Not by fund

Statement of Financial Activities (SOFA) Format is prescribed by Charity Commission Format is prescribed by Charity Commission Income Income Voluntary income Voluntary income Gifts, donations, collections, gift aid, legacies Gifts, donations, collections, gift aid, legacies Grants, gifts in kind Grants, gifts in kind –Details in notes Activities for generating funds Activities for generating funds Fund raising events, fees for weddings, shop income, lettings Fund raising events, fees for weddings, shop income, lettings Investment income Investment income Other income Other income

SOFA 2 Expenditure Expenditure Costs of generating funds Costs of generating funds Costs of generating income Costs of generating income Costs of trading Costs of trading Investment management fees Investment management fees Charitable activities Charitable activities M&M M&M Maintenance of church and manse Maintenance of church and manse Clergy expenses Clergy expenses Charitable donations Charitable donations Governance costs Governance costs Audit/examination costs and legal and professional fees Audit/examination costs and legal and professional fees Other costs Other costs

SOFA 3 Show any transfers between funds Show any transfers between funds Show any gains/losses on assets and liabilities (pensions) Show any gains/losses on assets and liabilities (pensions) Show funds at start of year, changes and end of year Show funds at start of year, changes and end of year

SOFA notes Disclose details of significant spend or income items Disclose details of significant spend or income items Disclose any payment to trustees including expenses Disclose any payment to trustees including expenses Any wages or salary items split between salary, NI and pension and average number of staff Any wages or salary items split between salary, NI and pension and average number of staff If there is a defined benefit pension scheme details are required If there is a defined benefit pension scheme details are required Explanation of any unusual items Explanation of any unusual items

Balance sheet Format is defined by SORP Format is defined by SORP Must include all assets and liabilities Must include all assets and liabilities Fixed assets Fixed assets Tangible, heritage, investments Tangible, heritage, investments –Includes halls, buildings, manses, equipment, cars Clarity required about depreciation Clarity required about depreciation Current assets Current assets Cash, bank and deposit accounts, investments, debtors Cash, bank and deposit accounts, investments, debtors Liabilities Liabilities Creditors due within 1 year Creditors due within 1 year Loans and Long term liabilities Loans and Long term liabilities Net assets/liabilities Net assets/liabilities Funds by type Funds by type

Notes to accounts Accounting policies should be set out Accounting policies should be set out How assets are valued How assets are valued Major incoming and outgoing resources Major incoming and outgoing resources Purposes of specific funds Purposes of specific funds Authorisation by trustees Authorisation by trustees

Summary The purpose of the report and accounts is to give a clear picture of the church The purpose of the report and accounts is to give a clear picture of the church What is happening What is happening What is good What is good Where there are weaknesses Where there are weaknesses Actions planned for the future Actions planned for the future

What is planned The URC will offer guidance The URC will offer guidance The URC will produce shortly a model Excel spreadsheet for the accounts The URC will produce shortly a model Excel spreadsheet for the accounts Receipts and payments Receipts and payments The Baptist Union has produced draft guidance notes which are good The Baptist Union has produced draft guidance notes which are good The ACAT document has much supporting documentation and advice The ACAT document has much supporting documentation and advice