How to prepare a good Trustees’ Annual Report
As part of OSCR’s work to monitor compliance with accounting requirements, we recently undertook a review of the accounts submitted by 90 charities, which were selected at random from the 25,000 organisations on the Scottish Charity Register. Our aim was to better understand the areas where improvement is required and additional support for charities may be needed. The full findings can be found in our report, Reviewing Charity Accounts: Random Sampling.
One of our key findings was in relation to the Trustees’ Annual Report. We found that some charities were failing to include a Trustees’ Annual Report with their financial statements or, where the report was included, it did not meet the legal requirements.
What is a Trustees’ Annual Report?
The Trustees’ Annual Report (TAR) is part of the legal reporting requirements for all Scottish charities.
It is the narrative part of your annual report and accounts and contains information about your charity, who the trustees are and how it is run. It is an opportunity to tell the story of your activities, achievements, and performance in the year under review. It also helps to explain the numbers in the accounts and helps readers understand where your money has come from and how it has been spent.
There is certain information that must be included in a Trustees’ Annual Report. Read our guidance and good practice for Trustees’ Annual Reports to find out more about this. The type of accounts you prepare will determine what information you must include in the report. The guidance sets out the legal requirements for both Receipts and Payments accounts and Fully Accrued accounts.
However, there is flexibility in the way that the report can be presented. A good Trustees’ Annual Report should be easy to understand. People read and take in information in different ways and so the use of photographs, quotes or case studies involving the people who have been supported can help to bring the story of what your charity has done to life and help to engage readers of the report. The use of graphs or charts can help to make the financial information easier to understand than the figures in the main body of the accounts.
The Trustees’ Annual Report is your opportunity to:
- tell your story.
- explain what the numbers in the accounts mean.
- show how you spent your money.
- show what difference you made.
- show stakeholders that you are accountable and transparent.
Who is responsible for preparing the Trustees’ Annual Report?
The charity trustees are responsible for preparing the report and should take an active role in preparing it.
Trustees may get assistance from the charity’s staff or from professional advisors in drafting the report, but they are the ones who must approve the final report and have the ultimate responsibility for what is in it.
One or more charity trustees must sign and date the report as a means of approving it on behalf of all the other charity trustees.
Benefits of a good Trustees’ Annual Report
A good Trustees’ Annual Report clearly demonstrates how your charity is run and what it does. In addition to meeting the requirements of the legislation, a well-prepared report can:
- encourage funders to support the charity.
- provide assurance to stakeholders.
- indicate good governance.
- demonstrate public accountability and transparency.
For more guidance to help you complete your accounts, including your Trustees’ Annual Report, please see our charity accounting guidance.
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