10 years of OSCR: Top 3 difficulties currently faced by the ‘Not for Profit’ sector

2016 marks the 10 year anniversary of Scotland’s Charity Regulator OSCR. Their work over the last decade has supported charities, given them a clear regulatory structure under which to operate, and importantly, increased public confidence in the charity sector through increased transparency.

Whilst these are all positive things to happen to the charity sector, we look today at the 3 main difficulties currently faced by charity trustees when trying to meet these increasing standards:

1. Increased Transparency

Charities preparing accounts for periods ending 31 December 2015 and later are going through a period of transition as they prepare their first set of accounts under either the new FRSSE or FRS 102 Charities Statement of Recommended Practice (“SORP”). Both new SORPS require an increased amount of disclosure, for example the amount of donations made by the charity’s trustees themselves now has to be disclosed under FRS 102.

Previously, the public had access to a charity’s accounts by way of a request to OSCR. To reinforce transparency, OSCR are now publishing all the annual reports and accounts on the OSCR website.

2. Risks and Reserves

Charities over the audit threshold are required to include a statement of risk management within the trustee’s annual report. In order to make such a statement, consideration must be given to not only the financial risks faced by the charity, but wider risks such as operational and reputational risks. Once the risks have been identified, appropriate responses must be identified and put in place. It is clear that regulators are encouraging charities to think more about risks as the questions asked in the new annual return focus on the system of internal controls in place.

One aspect of risk management is to set a reserves policy. This is about finding a balance between adopting a prudent approach whilst ensuring that charity funds are not tied up and are being used for the charitable purposes.

3. Tax changes

Gift aid is available and allows charities to claim 25% on donations made, where a gift aid declaration is provided by the donor. From 6 April 2016, the amount available to claim under the gift aid small donations scheme (ie. cash donations of £20 or less) has been increased to £2,000 in a tax year. This is a great development for increasing the amount of funds coming into the charity, however it comes with added administration to ensure that the gift aid claims meet the rules set by HMRC.

Charities get many reliefs from other taxes such as income tax, VAT and capital gains. Reliefs are also available from business rates.  Again, it takes time to keep on top of these exemptions and to claim all reliefs available.

At Johnston Smillie we work with many clients operating in the not for profit sector. We not only assist them with the preparation of accounts that meet the Charity SORP requirements but also provide added value services and advice on the many issues faced.

At Johnson Smillie we can support and guide ‘Not for Profit’ organisations. If you would like to discuss any aspect of this, please contact Angie Harvey on 0131 317 7377 or angie.harvey@jsca.co.uk and she will ensure you are connected with the most relevant and available member of the team.