Advice for trustees
The Charity Commission and the Office of the Scottish Charity Regulator (OSCR) have issued an information sheet on how trustees should prepare a strategic report.
All large and medium-sized companies are required to prepare a strategic report for periods ending on or after 30 September 2013.
Small charitable companies, as defined in section 381 and section 382 of the Companies Act 2006, are exempt.
A company qualifies as small in relation to its first financial year if two or more of the following qualifying conditions are met in that year:
(i) Annual turnover (gross income) is not more than £6,500,000.
(ii) Balance sheet total is not more than £3,260,000.
(iii) Average number of employees is not more than 50.
A group qualifies as small in relation to its first financial year if two or more of the following qualifying conditions are met in that year:
(i) Aggregate annual turnover (gross income) is not more than £6,500,000 (or £7.8m gross – before consolidation adjustments).
(ii) Aggregate balance sheet total is not more than £3,260,000 (or £3.9m gross – before consolidation adjustments).
(iv) Average aggregate number of employees is not more than 50.
The information sheet explains that 'affected charities should incorporate the Strategic Report into the Trustees' Annual Report and Accounts (TAR). In approving the TAR, charity trustees must also approve the Strategic Report.'
The information sheet states that all charity companies that are not small must prepare a strategic report, which needs to be approved by the charitable company directors.
It must contain:
Section 4.3 highlights that 'as most of the information required by the Strategic Report is already required under SORP 2005, to remove unnecessary duplication, the Strategic Report should be included within the Trustees’ Annual Report as a separate clearly delineated section headed Strategic Report.
Where information is provided in a "Strategic Report" section of the Trustees’ Annual Report, it will form also part of Trustees’ Annual Report and so will not need to be repeated in other sections of the Trustees’ Annual Report in order to comply with the SORP’s requirements.'
The information sheet also states that in 'approving the Trustees’ Annual Report, the trustees must include a clear statement that they are also approving the Strategic Report in their capacity as company directors'.
The information sheet also contains a suggested structure for this combined report. They suggest the following headings:
- achievements and performance
- financial Review
- plans for future periods
- principal risks and uncertainties
- funds held as custodian trustees on behalf of others
It is also important to remember that the strategic report should be consistent with the size and complexity of the charitable business.