Operations

Annual Reports: the Essentials

| Updated April 9, 2018

What you need to cover

Your annual report helps the outside world understand what you do: it shows how you raise income, and what you do with it. It celebrates successes and achievements, and demonstrates impact. Internally, producing your yearly report can be a useful milestone for gathering and analyzing data, reviewing progress and looking ahead.

But it’s not just a nice-to-have: it’s an important tool for transparency and accountability, and all registered U.K. charities are legally required to produce an annual report and make it available to the public on request.

If you have the resources, you might want to use your report to showcase your work to a much wider audience, too — but make sure you start with the essentials.

Note: the information below is correct as of the time of publication and is subject to change. Regulations below apply to England and Wales; while principles are similar in Scotland and Northern Ireland, charities operating in these jurisdictions should check with regulators there for specific requirements.

The essentials — for all charities

What you need to include in your annual report depends on a few things, including size and type of organization. Detailed requirements as well as examples and templates are available at the following links:

In brief: all registered charities operating in England and Wales with gross income of more than £25,000 need to send a brief annual report and set of accounts to the Charity Commission within 10 months of the end of each accounting year. The report must cover:

  • Objectives: your organization’s charitable aims and purpose
  • Activities: what the charity does to achieve these aims
  • Public benefit: benefits arising from the charitable aims
  • Achievements and performance: a summary of main achievements over the year
  • Financial review: financial position, relevant policies adopted and concerns or risks (for example all charities must state how much money they have in reserves, why they’re holding that money, and their policy on reserves)
  • Structure, governance and management: how the charity is constituted, how trustees are recruited, and decision-making processes
  • Administrative details: registered office, charity or company number and list of trustees
  • Details of funds held as a custodian trustee (if you’re administering the funds of another entity on its behalf)

While the above are the minimum requirements, the Charity Commission encourages trustees to go further (for example providing the detail required of larger charities, below) for greater transparency and accountability, and to help outsiders understand clearly how the organization has made a difference to public benefit.

Additional requirements for larger charities

Larger charities (those with an income over £500,000 for periods starting on or after 1 January 2016) and other charities subject to a full audit must provide additional information in the above sections, as well as information on:

  • Plans for future periods (trustees’ perspective of the future direction of the charity)
  • Risk management (how risks are identified and managed)
  • Grant making policies, for charities who give grants
  • Remuneration policies (outlining how pay is set for senior leadership teams, including any benchmarks, parameters or criteria used)
  • Governance (organization structure, policies and procedures, trustee induction and training)
  • Investment performance
  • Financial effect of any significant events held by the charity

As part of the Charities Act 2016, larger charities who fundraise from the public also need to include some additional information about fundraising in their annual reports. The requirements affect charities required by law to have their accounts audited. If you fall into this category, your annual report will need to include statements about:

  • Approach to fundraising
  • Work with and oversight of any commercial participators or professional fundraisers
  • Fundraising conforming to recognized standards
  • Monitoring of fundraising carried out on the charity's behalf
  • Fundraising complaints
  • Protection of the public, including vulnerable people, from unreasonable intrusion on privacy, unreasonably persistent approaches or undue pressure to give

All charities: remember your public benefit

In 2016 the Charity Commission reported that charities in England and Wales were not talking enough about the "public benefit" they provide.

By law every charity must report how they have carried out the charity’s purposes for the public benefit. This is core to what makes a charity, and ensuring these purposes are furthered is one of the fundamental responsibilities of a trustee.

Many charities have been filing reports, according to the commission, "that look well-presented but are not transparent about what the charity does." They also failed to mention how trustees were dealing with financial risks shown in the accounts.

Remember, at a minimum, the Charity Commission requires you to say:

  • What your charity’s charitable purposes are
  • What it has done during the year to carry out those purposes
  • That you have taken the commission’s public benefit guidance into account when making any decision it is relevant to

And if your income is more than £500,000 you'll also have to:

  • Explain your strategy for meeting the organization's charitable purposes
  • List any significant activities you undertook as part of this strategy
  • Give details of what your charity achieved in carrying out these activities to meet its purposes

For more on this, see the Charity Commission's publication on public benefit reporting (PB3).

This article was produced in partnership with Nishka Smith, a chartered management accountant and founder of the London-based Visual Finance Ltd., which supports charities to strengthen their financial management and planning capabilities.

MissionBox editorial content is offered as guidance only, and is not meant, nor should it be construed as, a replacement for certified, professional expertise.

References

GOV.UK/Charity Commission: Prepare a charity trustees' annual report(2013)

GOV.UK/Charity Commission: Example trustees' annual reports and accounts for charities (2013)

GOV.UK/Charity Commission: Charity reporting and accounting: the essentials (2013)

Office of the Scottish Charity Regulator: charity accounting

Charity Commission for Northern Ireland: reporting and accounting

GOV.UK/Charity Commission: Public benefit: reporting (PB3) (2013)

GOV.UK/Charity Commission: Charity accounts: 'Too many small charities do not know about their reporting obligations' (2016)

Charity Comms: Get clued up on the new fundraising reporting requirements by Kellie Smith (2017)

Fundraising Regulator: The Charities (Protection and Social Investment) Act 2016: Frequently asked questions

Charity Comms: A year in the life: a best practice guide to annual publications by Jennifer Campbell and Kay Parris (2017)

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