CHURCHES are currently finding their way through truly uncharted waters…
At this point in time, the onus is on church treasurers and trustees to consider the impact of the coronavirus pandemic on their charitable organisations – and particularly the way financial statements are reported.
The Charities SORP committee recently published its COVID-19 guidance – and this document is available by clicking this link.
But what should church treasurers be doing now?
Here, ACAT’s Treasurer Greyham Dawes provides his expert insight.
Greyham explains: “For those church treasurers who haven’t yet seen it, here is an extract from the recent “SORP-guidance” (non-mandatory) on the potential impact of Covid-19 on charity accounts for year-ends after 31 December 2019.
“Whilst Anglican churches do not need to adjust their December 2019 Accounts for any “Going-Concern” uncertainty resulting from the reduction in church collections in 2020 and beyond, the government lockdown’s impact on their cashflows and unrestricted reserves going forward might well need careful comment in the Trustees’ Report – especially if implying Parish Share reductions.
“For treasurers preparing accounts for later year-ends, however, the lost income resulting from temporary church closures is an accounting issue which they’ll need to consider carefully.”
So, just what do church treasurers accounting under the Charities SORP need to consider?
Post balance sheet events…
Trustees must ensure that changes are made for “adjusting events”.
Greyham adds: “Adjusting events are those events occurring after the end of the reporting period but before the accounts are approved which provide evidence of conditions existing at the reporting date that affect items in the balance sheet and items reported in the statement of financial activities – see module 13 of the SORP here.
“In particular, consideration will be needed as to whether economic disruption means that the value of debtors… may be overstated or that the likely impact of the virus on the charity’s principal sources of income means that the charity may not be a going concern.
“Post balance sheet events only need to be adjusted for where there is evidence of conditions existing at the reporting date.
“For example, as the COVID-19 crisis developed in 2020, it will be the case that December 2019 year end accounts are far less likely to be subject of an adjusting event.
“Trustees will also need to consider including disclosures on non-adjusting balance sheet events – see paragraph 13.7 contained in this document.
“The disclosure of non-adjusting events provides useful and relevant information about the charity to users of the accounts.”
Going Concern considerations…
When assessing their charity’s ability to continue to adopt the going concern basis of accounting under the Charities SORP, church treasurers and trustees should consider all available information about the future at the date they approve the accounts.
Greyham concludes: “In particular, they should give consideration to information from budgets and forecasts for income, expenditure and cash-flows not just for the current financial year but beyond that for at least twelve months after the annual accounts are signed off.
“Attention should be given to the available unrestricted funds and reserves, credit facilities (such as overdrafts), and any other forms of financial assistance available to the charity.
“The assessment of going concern is a forward looking assessment – for which church treasurers and trustees need to ensure that they’re familiar with paragraphs 3.14 and 3.38 contained here.”
