However, balancing the compliance requirements of the Charity Commission’s guidance and the Financial Reporting Standard’s Statement of Recommended Practice (SORP) with the need to clearly convey the organisation’s impact to a myriad of stakeholders, can be challenging.

Trustees must ensure that their report not only meets regulatory expectations but also effectively communicates the difference the charity is making to the lives of beneficiaries and the wider community.

One of the elements of work that we most enjoy is helping charity managers to interpret the formal financial reports in a way that is consistent with the impact statements that they proudly publish on websites and in key documents such as grant applications and donor engagement.

The guidance provides six key sections, outlined below. In future blog posts we will take each section and provide further detail, advice and examples to help you prepare a Report that is accessible to your donors, financers and beneficiaries, whilst keeping the Charity Commission onside and being respectful of the time and resources you are able to allocate to this annual task.

Objectives and Activities:

This section should clearly state the charity’s purposes as outlined in its governing document and describe the main activities undertaken to achieve these purposes.

For charities in England and Wales, it’s also necessary to explain how these activities further the charity’s purposes for the public benefit and confirm whether the trustees have had regard to the Charity Commission’s guidance on public benefit.

Achievements and Performance:

Here, Trustees should provide a summary of the charity’s main achievements during the reporting period, highlighting the impact of its work on beneficiaries and any wider benefits to society. This narrative helps stakeholders understand the effectiveness of the charity’s activities.

Financial Review:

This part offers an overview of the charity’s financial health, including a review of its financial position at the end of the reporting period. It is like an executive summary of the accounts that this Report is attached to but should be in language that stakeholders can follow and focus on the key points only.

In particular, Trustees must explain the charity’s policy on reserves, stating the amounts held and the reasons for holding them. In our experience this section is often glossed over and the Charity Commission are reviewing Reports looking for proper disclosure, as a matter of priority.

If there are uncertainties about the charity’s ability to continue as a going concern, these should be clearly disclosed.

Structure, Governance, and Management:

In this section, Trustees should describe the charity’s organisational structure, including details of how decisions are made and the processes in place for appointing new trustees. This transparency ensures stakeholders understand the governance framework guiding the charity’s operations.

Reference and Administrative Details:

This includes essential information such as the charity’s name, registration number, principal address, and the names of trustees and key management personnel.

Plans for Future Periods:

Trustees should outline the charity’s future aims and objectives, detailing planned activities to achieve them. This forward-looking statement helps stakeholders understand the charity’s strategic direction and anticipated developments as well as give more credence to the level of operational expenses and reserves needed to achieve longer term objectives.

By thoroughly addressing these sections, trustees can produce an annual report that not only complies with regulatory requirements but also effectively communicates the charity’s mission, activities, and impact to all stakeholders.

The Trustees Annual Report is a hugely valuable document, and we would be pleased to read yours and provide feedback, or consult with you on a plan to make it more impactful and less burdensome to those preparing it.