This season’s bulletin covers an update to The Charity Governance Code, amendments to FRS 102, fresh Covid-19 guidance for the sector, responsible investment and more...
4 February 2021
Charity Governance Code
The Charity Governance Code has been updated and the new version was published in December 2020. The refresh of the Code led to an update of two sections:
Principle 3: Integrity
The update places emphasis on:
- The charity’s values; and
- Ensuring the right to be safe – beyond the legal requirements for safeguarding
Principle 6: Equality, Diversity and Inclusion (previously this principle was called Diversity)
Here the update emphasises that addressing equality, diversity and inclusion will enable the Board to make better decisions, allow the charity to stay relevant to those it serves and aid in the delivery of its public benefit.
The Code outlines 4 key recommended practises:
- Assessing understanding of systems and culture
- Setting context-specific and realistic plans and targets
- Taking action and monitoring performance
- Publishing performance information and learning
The Charity Governance Code can be found here.
There are two versions of the code; one for smaller charities (with income less than £1 million) and one for larger charities. It’s worth noting that the Code is not a legal or regulatory requirement, but is intended to signpost best practice to charities to help promote good governance.
Amendments to FRS 102
In October 2020, the Financial Reporting Council (FRC) published an amendment to FRS 102 to clarify the approach to be taken when rent concessions are granted as a direct consequence of the COVID-19 pandemic.
These could take the form of a temporary rent reduction or a rent holiday. The amendment applies to temporary rent concessions that meet the following conditions:
- the change in lease payments results in revised consideration for the lease that is less than the consideration for the lease immediately preceding the change;
- any reduction in lease payments affects only payments originally due on or before 30 June 2021; and
- there is no significant change to other terms and conditions of the lease.
Under these amendments – which are effective for periods commencing from 1 January 2020 (although early adoption is permitted) – the lessee shall recognise any change in lease payments arising from rent concessions on a systematic basis over the periods that the change in lease payments is intended to compensate.
It is important to note it is not spread over the lease.
Lessors will account for rental income on the same basis. Also additional disclosures will be required in the financial statements.
Update to government guidance: Coronavirus (COVID-19) guidance for the charity sector
Last month, the Government updated their COVID-19 guidance for the charity sector. It comprised just a small change – an update to the section on ‘charity meetings’ following the latest lockdown restrictions in England and Wales. You can read it here.
In short, the Government is encouraging charities to hold trustee or member meetings online or by telephone and gives further guidance on this. If charities cannot do this, they are permitted to hold trustee or members’ meetings in person if this is necessary to provide voluntary or charitable services.
‘Responsible investments’ are financial investments which are also in line with their charitable purposes. Previously, The Charity Commission’s guidance on Responsible Investment did not give trustees of charities the confidence to enter into those investments. In recognition of this The Charity Commission has updated their guidance, and this is expected to be released in Spring 2021 for consultation.
In our Spring 2020 update we reported on a temporary concession from HMRC, which allowed gift aid to be claimed when an event was cancelled and the donor decided to donate their ticket refund to the charity.
Through the concession, the charity could claim gift aid on events cancelled (but not postponed) due to COVID-19 without the need for the charity to physically refund the ticket and the individual re-donate.
Although it has not been formally announced, HMRC has indicated to the Charity Tax Group that they are proposing to make this a permanent change. We do not yet know what exact form this change will take until it is published. So watch this space!
Fundraising reporting and other resources for accounting and reporting
There is a legal requirement for all charities with income over £1 million to report on their fundraising activities in their Annual Report and Accounts, where they raise funds from the public.
The Fundraising Regulator has published their findings on their review of financial reporting compliance and the results were poor. It has subsequently updated its guidance on Fundraising Reporting and you can find it here.
You may also find these other links with accounting and reporting resources useful:
The Charities SORP (FRS 102) – second edition. See here
Implications of COVID-19 control measures and charity financial reporting. See here
Can we help?
If your Charity has questions or concerns relating to the latest guidance, please do get in touch with our specialist team. You’ll find their details on the right of this page.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact.
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