The economic effect of COVID-19 has, of course, been far reaching for the charity sector, whether due to dramatic falls in donations and trading activities, uncertainty over current or future funding, reduction in investment values and returns, not to mention increased demand for many services.
The significance of this does require trustees and management to focus clearly and quickly on their finances, in order to understand the charity’s position with respect to sustainability and going concern.
Useful guidance on dealing with this in the current circumstances is included in information provided by the Office of the Scottish Charity Register (OSCR) here and also in more detail by the Charity Commission here.
It is also crucial that the impact of COVID-19 is set out within your Trustees Annual Report, and elsewhere in your statutory financial statements this year. Laura Anderson of OSCR has explained some of the issues in a blog post that can be viewed here.
Guidance for trustees and preparers of charity accounts has also been published by the SORP making body. The guidance here looks at the implications for the trustees’ annual report and going concern issues that need to be considered when preparing SORP compliant accounts.
Also referred to by the SORP making body here is guidance from the Financial Reporting Council on how directors should assess the going concern of their company.
External scrutiny impacts?
How charities report on the impact of COVID-19 on their operations, finances, and ultimately their sustainability will be a focus of work being undertaken by your auditor and independent examiner this year.
Specific guidance has been produced jointly by the Charity Commission for England and Wales, the Office of the Scottish Charity Regulator, and The Charity Commission for Northern Ireland for independent examiners here. This covers practical aspects of undertaking work with reduced access to individuals and accounting records, as well as considerations of the higher risks of use of funds, financial controls, and going concern amongst others.
For auditors, other specific guidance has been released by the Financial Reporting Council which deal with matters such as materiality, new clients, audit opinions, evidence gathering, and going concern.
In the case of both audits and independent examinations, more thorough scrutiny will be likely in many cases so it is important to plan for this as part of your year end processes.
If you have a query about financial management or going concerns at your charity, contact Euan today at email@example.com.