The Charities Statement of Recommended Practice (SORP) outlines the essential content for trustees’ annual reports, ensuring transparency and accountability. But what makes a good Trustees Report? A summary of the requirements for all charities and the additional content required for larger charities is below, along with some additional considerations to help make your Trustees Report stand out.
Content required for all charities
- Reference and administrative details: Clearly state the Charity’s registered name, and any other name which the charity uses, its principal address and the charity registration number. If applicable, the company registration number should be stated too. Also to be included are the names of all Trustees at the point of approval of the report, or who served during the year.
- Structure, governance and management: Describe the charity’s governance arrangements and structure (for example, limited company, Charitable Incorporated Organisation (CIO), Unincorporated association), and details of the methods used to recruit and appoint new charity trustees.
- Objectives and activities: Clearly state the charity’s objectives and the activities undertaken to achieve them and explain how the charity’s activities provide public benefit, ensuring compliance with the public benefit requirement.
- Achievements and performance: Provide a detailed account of the charity’s achievements and performance during the reporting period identifying the difference the charity’s work has made to its beneficiaries and society as a whole.
- Financial review: Include a review of the charity’s financial position at the end of the reporting period, including the amount of reserves held and why. If any funds are in a materially deficit position, the circumstances causing this should be explained along with the steps being taken to eliminate the deficit. The nature of any uncertainties around the charity’s ability to continue as a going concern should also be included. Conversely, where there are significant reserves held, details as to why the reserves are held or details of plans to expend those reserves on the charity’s objectives should be outlined.
Additional Content Required for Larger Charities (those with income above £500,000)
- Reference and administrative details: The name of the CEO and other senior management to whom day-to-day management is delegated to must be reported, this includes those in position at the period end, or who have held the position during the year. The names and addresses of organisations providing banking services or professional advice (such as solicitors and accountants) must also be reported.
- Structure, governance and management: The Report must provide an understanding of how the charity makes decisions, the policies and procedures for the induction and training of trustees and the arrangements for setting pay of the charity’s key management personnel. Any relationships with related parties or subsidiaries should also be disclosed.
- Objectives and activities: A large charity must provide an explanation of its strategy for achieving its stated aims and objectives, the measures it uses to assess success during the year and the significant activities undertaken to contribute to this achievement. When the charity relies on volunteers to undertake a particular activity, the Charity must include an explanation of the scale and nature of activities undertaken. Similarly, if a large part of the charitable activities is grant-making, the charity must explain the grant-making policy and how these activities contribute to the achievement of its aims and objectives.
- Achievements and performance: Large charities must review their achievements against objectives. This includes the performance of investments, if held, and if material expenditure was incurred to raise income, the report must explain the effect this expenditure has had, and is intended to have, on the net return from fundraising activities for both the reporting period and future periods.
- Financial review: Large charities must include a statement on the principal risks and uncertainties they face and the plans for managing those risks. If material financial investments are held, the investment policy should be stated. The review of the charity’s reserves should state the total funds held at the end of the reporting period, the amount of funds which are restricted, any amounts which have been designated and the likely timing of the expenditure of these designated funds, and should compare the amount of reserves held against its reserves policy explaining the steps being taken to bring the amount of reserves held to be in line with the policy.
- Plans for future periods: The Report of large charities must outline the charity’s plans for the future, including key objectives and strategies.
These requirements help ensure that trustees’ annual reports are comprehensive, transparent, and provide a clear picture of the charity’s activities, achievements, and financial health.
Attributes of a good annual report
Whilst the above must be included in the Trustees Report, there are key things to consider to ensure the report communicates the charity’s message effectively to its readers:
- Unbiased: The report should tell the charity’s story in a balanced manner, acknowledging both significant successes and failures.
- Timely: The sooner the report is written and published, the more accurate the information is. But don’t forget, it should be relevant at the point that the financial statements are approved.
- Concise: Ensuring the report flows well using clear language.
- Engaging: Can photographs, quotes and case studies be used to make the report more engaging to readers?
Audience
A Trustees’ Report can be a strategic communication tool, read by a wide range of stakeholders who will all be looking for different things:
- funders may seek evidence of impact and financial sustainability to ensure their contribution will be used effectively. Clear objectives, achievements and milestones will show the Charity is making best use of its funding;
- grant-making bodies will be interested in the reserves held, how these are planning to be used and the future plans. A strong Trustees Report can support grant applications and impact the decision to support the Charity;
- regulators will use the report to assess whether the Charity is operating legally, ethically, and in line with its charitable objectives;
- beneficiaries may want reassurance that the Charity is delivering on its mission and how this impacts them. Including real life stories, case studies and testimonials can support the Charity’s message; and
- the general public may be interested in learning more about the Charity, how it is making a difference and whether it is trustworthy. Being transparent about overcoming difficult periods or events will help build trust and shows resilience and accountability.
For further information on preparing a Trustees Report, see the following publication from the Charity Commission: Prepare a charity trustees’ annual report
Keep an eye out for our round up of the new Charity SORP once published this Autumn, which will introduce additional tiered reporting disclosures.
Please get in touch with one of the team below if you would like to disucss any of the above in further detail.
