C+T team on hand to help recipients of the Early Stage Growth Challenge Fund

One requirement of receiving funding under the Early Stage Growth Challenge Fund is that – throughout the duration of the loan or whilst Scottish Enterprise (‘SE’) holds shares in your company – you must provide an annual report which sets out how the funding has been spent.

The report must be prepared by an independent firm of accountants and submitted within 30 days following each anniversary of the date of payment of the funding. your Funding Award. We will prepare the report in the required format and send to SE.

Chiene + Tait can produce these annual reports, which demonstrate that your funds have been spent in line with your application. Working together with you, we will undertake an independent inspection of the relevant accounts records in accordance with the terms of your Funding Award. We will prepare the report in the required format and send to SE.

For more details on how we can help your business download our flyer or contact us today at mail@chiene.co.uk.

 

Grants: the benefits to your business

This post is part of our Entrepreneurial team’s regular series of blogs.

Grants are available on a wide range of business activities, providing funding that can enhance research and development, regional assistance, environmental aid and much more. Grants provide financial support to an entity to cover a percentage of eligible expenditure incurred on a project.

The percentage and nature of the eligible expenditure will be determined on a grant-by-grant basis and will be set out in an offer letter. Two of the most common grant-giving bodies for Scottish businesses are UK Research and Innovation (UKRI – commonly seen as Innovate UK) and Scottish Enterprise.

The incentive

Grants are a great way to reduce the net outgoings on research and development projects of a business. Grants aren’t limited to businesses with a primary function of research and innovation or businesses at early / pre-revenue stages, so they can be used by more mature businesses undertaking projects which meet relevant criteria from grant-giving bodies.

The considerations

Grant funding is generally set at a percentage of eligible expenditure up to a maximum amount, but may also include a minimum eligible cost expenditure. Consideration should be given to the cashflow impact on the business of seeking and accepting grant funding. Whilst a percentage of costs will be covered under the grant funding it is rarely 100% of the expenditure. Receipt of grant funding is likely to occur following a quarterly submission and expenditure has to be defrayed in the period, creating a cashflow timing difference that will need to be managed.

If the business is claiming R&D Tax Credits these could be impacted depending on the nature of the grant. It is always worth speaking to your tax advisor at an early stage of the process as the financial impact to the business may be more complex than the expenditure on the project less the total grant receipts.

The reporting requirements

Typically claims are submitted on a quarterly basis to the grant-giving body. As mentioned above, the terms of what qualifies as eligible expenditure is set out in an offer letter along with total expected eligible expenditure. The total value of the grant will determine how often an Independent Accountant’s Report needs to be submitted to the grant-giver. Frequency of reports can range from each quarterly grant claim to only being required for the final claim. It’s important to check what the requirements for Independent Accountants Reports are to avoid a delay in receiving funds.

The help

Our audit team have extensive experience providing Independent Accountant’s Reports on grant claims to meet your obligation under the grant terms.

Maybe your business has recently received grant funding for the first time and you would like support to create systems to monitor the spend on the project, which feeds into the submission to the grant-giving body. We’re adept at being able to provide solutions to reduce the administrative burden on businesses of record keeping in a tailored and logistical manner.

If you have any questions, please contact our Entrepreneurial team.

Auditing remotely: how we delivered audits during lockdown

In this post, Stuart Beattie looks at auditing remotely. But, while this post is specific to audits, we have used similar tools and processes for all of our client work done remotely this year.

October heralds the end of the busiest time for the audit department. Looking back on a busy season that has been quite unusual, I am happy to note that the vast majority of our audits have continued.

Despite not being able to work onsite with our clients we have still been able to access all the required information, data and evidence that we normally require as part of the audit process. This is down to effective planning and communication with our clients.

The keys to success

Generally, there are three key points to auditing remotely:

  • The normal planning and audit completion meetings take place through video calls
  • All our staff have the hardware and software to carry out audit at a distance – they all have laptops, and all have access to our secure portal for sharing files
  • We communicate regularly, and proactively: we get in touch with finance teams regarding forthcoming audit bookings to put plans in place for how the work can be delivered, and we continue to liaise with clients through the audit process via phone or video conferencing.

Useful tools

Before lockdown started at the end of March, we were already using software that allowed our audit files to be accessed remotely and securely, plus we had a variety of ways for clients to get in touch and send us information. So, when we were no longer permitted to work onsite (or indeed from our offices), we had the core tools in place to ensure we could continue to deliver an excellent service.

Our secure client portal allowed clients to send through back-ups of their accounting system, Excel documents and various other material that we required. We also use screen-sharing facilities and video calls to assist with fieldwork.

All of our clients worked extremely hard to provide the relevant information and we would like to thank them for this.

New challenges and new support

Being in contact with each of our clients to discuss their systems, their access to documents and more importantly, how else can we assist them during the lockdown was very important at a time of new challenges. The pandemic and lockdown shone a new light on the concept of ‘going concern’ – that is, is the organisation in shape to survive? Some organisations thrived in lockdown; others faced a cessation to their activities like never before, and we were able to support by testing the underlying strengths of our clients.

Additionally, some of our clients were not sure initially how to access COVID funding or the furlough scheme. We were able to put them in touch with our payroll and corporate finance departments who assisted them with the preparations of forecasts or in their applications for assistance.

New perspectives

It has also been fantastic to speak to our clients remotely through video calls and see the variety of backgrounds and homeworking set ups that have been adopted during the lockdown. Gone are the meetings in an office – this has been a chance for our clients to see a slightly different side to us. The auditor is a human and one who is dealing with all the same lockdown issues. I hope also that my clients have enjoyed seeing my own home working space and can forgive the interruptions by young children and dogs!

At present we are likely to be working remotely for at least the reminder of the calendar year and therefore we would like to continue to let both our current and new clients know that we are here and are ready.

Contacting us

You can email or call your audit manager and partner in the usual way. Our switchboard will continue as normal.

You can also contact us by email at mail@chiene.co.uk

Receiving updates

We will keep our website updated with relevant sector news and continue to email out updates (unless you have opted not to receive these).

You can also follow us on LinkedIn (here) and Twitter (here), where we post our updates.

The Trustees’ Report: tips and key points when drafting, part one

In my experience of producing or auditing annual accounts for charities, it is not unusual for the trustees’ report or directors’ report to be left to the end of the process.

Often the mere mention of the report as an outstanding item can elicit a sigh and a level of enthusiasm usually deployed during dental visits or preparation of a personal tax return.

Ironically, this part of the annual reporting process should be the fun bit – the figures should, in theory, appeal more to accountants like myself. If a Hollywood star advertised charity accounts like hair shampoo, they would start off with explaining the wonderful things the product was meant to do and how it changed their life, and only for completeness at the end go into the science bit of the figures.

So, for those who find drafting the trustees’ report rather a painful process, here are some general pointers which may be of assistance:

Start working on it early

There is no need to wait until the dust has settled on the financials. While these are important, they are a nuts-and-bolts representation of the charity’s activities and achievements during the year; the substance of what the organisation is all about and how it has performed should, in most cases, be clear at any time of the year. This has the added benefit of goals, activities, and outcomes being fresh in the mind – it is generally easier to write about things soon after they have happened, especially if you have something positive to report!

Delegate specific areas of the report

Delegation is a key skill of effective management, so think about who else on the board or senior management team can help with different elements of the report, depending on their particular focus. This can also promote ownership of what is, after all, the report of the trustees plural. This delegation is something that many charities, in particular larger and more complex ones, frequently do, though it remains important for one person to review the overall report and ensure messages are consistent and that it hangs together.

Look at how other charities draft their trustees’ reports

While copying what others do word for word is not advisable, the voluntary sector has a much better record of working collaboratively with third parties than the commercial sector. Using examples of good practice from different areas can also be applied to drafting the trustees’ report – and don’t just look at direct peers. Consider both larger and smaller charities, as well as those working in completely different areas of charitable endeavour – there are some great and innovative ways of conveying information in narrative reports out there.

Not seeing the wood for the trees

A trap that some organisations can easily fall into and one that usually springs up in the activities and achievements part of the report. Problems can occur when trying to include too much detail. A long list of items in the style of a ‘what I did on my holiday’ exercise might fulfil a does-what-it-says-on-the-tin approach, but can detract from an understanding of the overall objectives of an organisation. It is important to stand back a little and think of reporting in a top-down approach: start with general objectives and then link each specific achievement and activity back to how they helped you work towards your strategy. Detailed examples can be a good way of highlighting the day-to-day actions of your strategy, but an overabundance can muddy the waters and risks reader fatigue: this is, after all, the ‘fun’ part of financial reporting.

If you have a query about your Trustees’ Report, please contact Euan at euan.morrison@chiene.co.uk or call 0131 558 5800.

Some more specific guidance on Trustees’ Reports is at:

For more hints and tips, read part two of this blog.

Charity Accounts Update (SORP FRS 102 Information Sheet 1: Implementation Issues)

In the past the Charity SORP making body has produced “information sheets” which “seek to clarify the application of the SORP or particular recommendations contained within the SORP”. Information Sheets are advisory in nature and do not form part of the SORP, however, they are considered ‘best practice’ in terms of application of the SORP.

In April 2017 the SORP making body published “Information sheet 1 – Implementation issues” (in addition to the Help Sheets and Update Bulletins they have previously published) which contains guidance regarding interpreting and applying the requirements of the FRS 102 SORP and which should be applied immediately.

This Information Sheet covers various points of clarification and some of the key ones all charities should  be aware of are as follows:

Statements of Cash Flow

Parent and subsidiary charities may take advantage of the provisions of FRS102 which state that a parent charity can be exempt from preparing a Statement of Cash Flow in its individual financial statements that are presented alongside its consolidated financial statements. Similarly, a subsidiary charity is exempt from preparing a Statement of Cash Flow in its individual financial statements, where this statement is included in the consolidated financial statements of the parent. If you take advantage of these exemptions, you do need to disclose this.

However, for Scottish charities, while technically it is possible to take this exemption, it appears that it was not the intention of the Scottish regulations to reduce disclosure in this way, and accordingly it is recommended that it not be used for Scottish charities at present until clarified by OSCR.

Fundraising disclosure brought in by the Charities (Protection and Social Investment) Act 2016

Charities in England and Wales only must include extra information on their fundraising practices in the trustees’ report under provisions of section 13 of the Charities (Protection and Social Investment) Act 2016 (‘the Act’). Further guidance about the particular disclosures required can be found in Charity fundraising: a guide to trustee duties (CC20) and Charity reporting and accounting the essentials November 2016 (CC15d) as issued by the Charity Commission for England and Wales.

The provision applies to charities registered in England and Wales which must have their accounts audited by law, and applies for reporting periods beginning on or after 1 November 2016, although it may be applied early.

Comparative figures for fund disclosures

FRS102 itself (not the FRS102 charity SORP) states that “an entity shall present comparative information in respect of the preceding period for all amounts presented in the current period’s financial statements”. The SORP making body has interpreted this as requiring comparative figures to be provided when making the disclosures required for the summary of assets and liabilities of each category of fund of the charity and for the detail in the movements in material individual funds.

The Information Sheet notes that analysis of charitable funds should therefore, include fund movements from the beginning of the prior reporting period to the end of the prior period; and from the beginning of the current reporting period to the end of the current period.

This would clearly add to the already extensive fund reporting in the notes to charity accounts, and it is difficult to see that adding detailed information from the previous year improves clarity to the user of the accounts. We shall review interpretation of this particular element of the Information Sheet by the sector and consider application when use in practice becomes clearer and when the interpretation is clarified by OSCR.

Aggregate disclosure of the total amount of donations received without conditions

The SORP requires all charities to provide an aggregate disclosure of the total amount of donations received without conditions. Disclosure is considered only to be necessary if the total amount of donations received from trustees or related parties without conditions is judged to be material in the context of the total income from donations and legacies.

Inclusion of Employers NIC as part of employee benefits

When calculating “employee benefits” for the disclosure of remuneration and benefits received by key management personnel the definition of employee benefits should be in accordance with FRS 102 itself. Employers National Insurance Contributions should therefore be included where employee benefits are disclosed as part of KMP remuneration.

Where you are disclosing the numbers of employees that receive employee benefits of more than £60,000 however, employers NI should be excluded (as employer pension contributions currently are).

Other Topics included in Information Sheet 1

In addition to the matters discussed above, the Information Sheet also includes commentary relating to:

  • governance costs;
  • treatment of funding “clawed back” by funders;
  • exemptions from disclosure of related party names;
  • treatment of losses on disposal of assets;
  • and the company charity requirement for a fair value reserve.

Should you require to discuss any of the matters contained in the Information Sheet, or have any queries regarding the charity SORP, please contact Euan Morrison at euan.morrison@chiene.co.uk.