Section 3 Content of receipts and payments accounts

Published: 18/04/2019
Updated: 18/04/2019

Under the 2006 Regulations, receipts and payments accounts must consist of:

  •        a Trustees’ Annual Report
  •        a report from an external scrutineer
  •        a statement of the receipts and payments
  •        a statement of the balances as at the last day of the financial year
  •        notes to the accounts.

Both the statement of balances and the trustees’ annual report must be signed by one or more of the charity trustees on behalf of all the charity trustees and specify the date on which both were approved.

To allow comparisons to be made, all figures in the accounts must include the corresponding amount for the previous financial year.

The accounts must also distinguish between restricted, unrestricted, expendable and permanent endowment funds held by the charity.

OSCR has produced a receipts and payments work pack that can be used to assist with the preparation of receipts and payments accounts. The work pack includes detailed guidance and templates that can be completed.

 

A charity’s financial statements alone do not provide all the information a reader would need to gain a full picture of the charity. The financial statements cannot easily explain:

  • what the charity has done – its outputs
  • what the charity has achieved – its outcomes
  • what difference the charity has made – its impact.

The financial statements also do not provide information on the structure, governance or management arrangements of a charity. All of these should be addressed in the trustees’ annual report which is an important element of a charity’s annual reporting. Charity trustees should be actively involved in preparing it. The report should enable a reader to understand how the numerical information presented in the financial statements relates to the organisational structure and activities of the charity.

The trustees’ annual report must include the following information:

  • the name of the charity as it appears on the Scottish Charity Register and any other name by which the charity is known
  • the charity’s Scottish Charity Number. This will begin SC followed by six digits the first being 0 (zero)
  • the address of the principal office of the charity.

Where the charity does not have an office the annual report must give the name and address of one of the charity trustees, unless the charity is entitled to exclude the address from its entry in the Register because OSCR is satisfied that to include this information would jeopardise the safety or security of people or premises

  • the names of all the charity trustees during the financial year and on the date the annual report was approved by the charity trustees unless:
  • there are more than 50 charity trustees, in which case the names of 50 charity trustees is sufficient. Office bearers should be included – for example, Chair, Treasurer
  • the charity is entitled to exclude the names of the charity trustees because OSCR is satisfied that to include this information would jeopardise the safety or security of people or premises.
  • the particulars of the governing document of the charity that contains its purposes and regulates the administration of the charity. This would include:

    • how the charity is constituted (for example, unincorporated association, SCIO or trust)
    • the organisational structure of the charity (for example, a membership which elects a management committee or self-appointing trustees)
    • the relationship of the charity to any other body (for example, affiliation with an umbrella group)
  • the purposes of the charity as set out in the governing document of the charity

  • a description of how charity trustees are recruited and appointed, including the name of any external body entitled to appoint charity trustees

  • a summary of the main activities of the charity and achievements in the financial year

  • a description of the policy the charity trustees have adopted to determine the level of reserves to be held by the charity. This should include:

    • the level of reserves held
    • why they are held
    • the amount and purpose of any designated fund, and the likely timing of any expenditure that has been set aside for the future
    • if the charity has a deficit, an explanation of how it came about and what steps are being taken to rectify it
    • an analysis of donated facilities and services, if any, that the charity received during the financial year.

See our Charity Reserves factsheet for more information on reserves and reserve policies. 

The Trustees’ Annual Report must be signed by one or more charity trustees on behalf of all the charity trustees and specify the date on which the statement of account, of which the trustees’ annual report forms part, was approved.

We have specific guidance on Trustee Annual Reports which sets out the legal requirements and good practice.

The statement of receipts and payments provides an analysis of the incoming and outgoing cash and bank transactions for the year. The analysis must show the following categories separately:

Receipts

  • donations
  • legacies
  • grants
  • receipts from fundraising activities – for example, sponsorships
  • gross receipts from trading – for example, charity shop income
  • receipts from investments other than land and buildings
  • rent from land and buildings
  • gross receipts from other charitable activities.

In addition:

  • the proceeds from sale of fixed assets
  • the proceeds from sale of investments

should be shown separately from the above receipts.

Payments

  • expenses for fundraising activities
  • gross trading payments
  • investment management costs
  • payments relating directly to charitable activities, detailing material items
  • grants and donations relating directly to charitable activities
  • governance costs relating to:
    • independent examination or audit
    • preparation of annual accounts
    • legal costs associated with constitutional matters or trustee advice.

In addition:

  • purchase of fixed assets
  • purchase of investments

should be shown separately from the above payments.

The statement of receipts and payments must distinguish between unrestricted and restricted funds, as well as any expendable and permanent endowment funds. This is usually achieved by giving each fund a separate column in the accounts. Where a charity has more than one fund in any of these categories it should present the total funds held in each. The notes to the accounts must then explain in sufficient detail the content of the unrestricted, restricted and endowment funds so that the reader gains a full understanding of the accounts.

Any transfers from a restricted, unrestricted, expendable endowment or permanent endowment fund into another fund must be shown separately from the receipts and payments.

As well as a statement of receipts and payments, the accounts must contain a statement of balances. The statement must reconcile the cash and bank balances at the beginning and end of the financial year with the surplus or deficit shown in the statement of receipts and payments.

As with the statement of receipts and payments, the statement of balances must distinguish between restricted and unrestricted funds, as well as any expendable or permanent endowment funds held by the charity.

In addition the statement of balances must also:

  • summarise the investments held by the charity at their market valuation
  • summarise the other assets held by the charity, including gifted assets, either at their current value if available or at cost. Where the charity trustees consider the valuation to be lower than the cost, the valuation should be used
  • include a total estimate of the liabilities of the charity at the financial year end
  • contingent liabilities must be shown separately.

The statement of balances must be signed by a charity trustee on behalf of all the charity trustees and specify the date on which the statement of account was approved by the charity trustees.

Notes are an important part of the accounts. They expand on or explain the information contained in the statements of receipts and payments and balances, and will help a reader understand the accounts.

The notes to the accounts must contain the following information, unless this information has been provided in the Trustees’ Annual Report:

  • the nature and purpose of each fund held by the charity, including any restrictions on their use

  • the number and amount of any grants paid out by the charity, the type of activity or project supported by those grants, and whether they were paid out to an individual or an organisation

  • the amount of remuneration paid to a charity trustee or person connected to a charity trustee (a connected person). Any remuneration must be in accordance with the 2005 Act and the note must specify the authority under which the remuneration was paid. If no remuneration was paid to a charity trustee or anyone connected to a charity trustee this must be stated

  • the total amount of expenses, if any, paid to charity trustees and the number of charity trustees receiving expenses. If no expenses were paid to charity trustees this must be stated
  • the nature of any transactions between the charity and any charity trustee or person connected to a charity trustee. This may include, for example, a charity trustee purchasing an asset from the charity or a charity paying a firm for services such as professional advice where a charity trustee has a substantial interest in the firm. This note must include:

    • the nature of the relationship
    • the nature and amount of the transaction
    • any outstanding balance at the financial year end
  • any further information required to reasonably assist the reader to understand the statement of accounts.

To assist charities OSCR has published example sets of accounts which illustrate receipts and payments accounts that comply with the 2006 Regulations. These example accounts can be found at Section 6

It should not be assumed that the examples show the only way of presenting an item or that they include all the disclosures for a particular type of charity. Indeed many charities may choose to provide more detailed notes than those required by the 2006 Regulations. Any examples provided by OSCR are not designed to be used as a substitute for reference to sections 3.1 to 3.4 in this Part of the Guide and the 2006 Regulations.