Changes to charity reporting

The Charities (Amendment) Act 2024 includes a series of revisions and updates to the Charities Act 2009. It marks the culmination of a long period of consultation, resulting in some significant changes to the legislation, including the provisions for greater financial transparency and defining charity trustee duties. These changes will require ministerial commencement orders before they can come into operation.

The act introduces a number of long anticipated amendments to the requirements on financial reporting. The changes, if commenced, include the categories listed below.

Accounting

• Charitable organisations that are not a company or an education body, and with gross income or expenditure of more than €250,000. These will prepare financial statements the form and content of which can be specified by the Regulator and then set out as requirements in Regulations. This is most likely to be the charities statement of recommended practice (SORP).
• Charitable organisations that are not a company or an education body, and with gross income or expenditure less than €250,000. These may prepare an income and expenditure account and a statement of the assets and liabilities instead of full financial statements. The form and content of these can be specified in Regulations, and is most likely to be FRS 102.

• Charitable organisations that are not a company or an education body, and meet two of the following criteria: a balance sheet of under €10,000, income not exceeding €10,000, and no employees. These are not caught by the requirements above. The €10,000 can be increased in both cases by the minister of state with responsibility for community development and charities to up to €50,000. (Expect cash receipts and payments accounting for these very small entities.)
• Charitable organisations that are a company. These will prepare financial statements in accordance with the Companies Act and any regulations made by the minister (expect SORP, which will be required for more than €250,000 income or expenditure companies).

Audit

• All charities over a prescribed income limit must be audited within nine months of the year end. The minister may set an audit exemption limit for income of no more than €1m. The minister has been reported to have decided to set the limit at €500,000, notwithstanding the larger limit allowed in the legislation.  Revenue will currently not grant tax charitable status to an entity with more than €250,000 income (until recently this was €100,000) that does not undergo an audit. It is hoped that these limits will be aligned after the section is commenced.

• For charities that fall below the prescribed threshold above, the trustees have the option to either have the account examined by an independent person, or to have them fully audited.

Secretarial matters

• All charities, regardless of their legal structure, need to keep a register of members.
• For charities that are companies, the members are considered to be those persons who are company members within the Companies Act 2014 definition. 'Member' in the context of a company limited by guarantee remains a problematic definition, and it will be important for charities to look carefully at their constitution to identify who is considered to be a member within the meaning of the 2014 act.
• For charities that are not companies, the members are those with the power to appoint, nominate or vote for the appointment of a person as a charity trustee of that organisation.
• Every charity must have a minimum of three trustees, the majority of whom are natural persons who are resident in the EU or UK and 'not be a connected relative of another trustee'. The phrase ‘connected relative’, in relation to a person, means a child, stepchild, parent, step-parent, brother, sister, spouse, civil partner, cohabitant, grandparent or grandchild, or a child of the person’s civil partner or cohabitant.