A-Z of Charities Terms – Part 1

Not sure what some of the words used in the charity sector really mean?  In this blog we explore some of the common terms and some you may not be so familiar with; explain their meaning and why they are important to your charity:

A is for:

Accruals basis method of accounting that adjusts receipts and payments for the amount that should have been collected or paid before the end of the accounting period

Annual Report This is a concise but comprehensive review of the activities of the charity prepared by the trustees for each accounting year. The Charities Act 2011 requires all registered charities to prepare a Trustees’ Annual Report (TAR). Charities with gross income over £25,000 in the accounting year must file their TAR with the Charity Commission

Accounting Policies the specific principles, bases, conventions, rules and practices applied by a charity in preparing and presenting financial statements. The accounting policies are the specific policies and procedures that are used by a company to prepare its financial statements. The accounting policies include methods, measurement systems and procedures for presenting information in financial statements.

B is for:

Budget an estimate of income and expenditure for a set period of time

Bid Writing is the process of writing a request to secure funds

Balance Sheet is a summary of assets and liabilities of a charity at a given date. It also shows the reserves and funds of the charity

C is for:

Charity Commission The regulator for charities in England & Wales.  www.charitycommission.gov.uk holds a wealth of information & guidance for anyone setting up a charity to those already established

 

Chairman trustees are the people who lead the charity and decide how it is run. Some trustees have special roles such as the chair and the treasurer. They are known as officers. The chair helps plan trustee meetings, may represent the charity at events and might also work as a link between trustees and staff. Charity officers don’t have any extra powers or responsibilities than the other trustees. All trustees are equally responsible for finances, for example

Capital Budget the investment in assets needed to achieve income or service delivery

D is for:

Designated Funds are unrestricted funds that have been earmarked for a particular purpose by the trustees

Direct Costs are those for activities or services that benefit specific projects, for example salaries for project staff and materials required for a particular project. Because these activities are easily traced to projects, their costs are usually charged to projects on an item-by-item basis. Direct costs are those incurred only because the charity carried out an activity

Depreciation A method of allocating the cost of a tangible asset over its useful life

E is for:

Endowment Funds are funds which the trustees are legally required to invest or to keep and use for the Charity’s purposes. Endowment may be expendable or permanent: Expendable endowment is an endowment fund where the trustees have the power to convert the property (ie land, buildings, investments or cash) into ‘income’. Permanent endowment is property of the charity (including land, buildings, cash or investments) that the trustees may not spend as if it were income. It must be held permanently, sometimes to be used furthering the charity’s purposes, sometimes to produce an income for the charity.

F is for:

Full Cost Recovery securing funding or recovering all your costs, including the direct costs of projects and all your overheads

Fixed Costs are expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs.

Fundraising Costs Charities should be prepared to inform donors of fundraising costs if requested and consider ways of showing impact or demonstrating outcomes. Possibilities include evaluating the products, services and impact of a charity and communicating this to donors, beneficiaries and other stakeholders.

G is for:

Gift Aid is a UK tax incentive that enables tax-effective giving by individuals to charities in the United Kingdom. It increases the value of donations to charities at no cost to the donor. If you’re a UK taxpayer, add Gift Aid whenever you make a donation and the charity can reclaim the basic rate of tax on your gift – that’s a whopping 25p for every £1 you give

Going Concern means the ability of an organisation to operate for the foreseeable future

Governance relates to consistent management, cohesive policies, guidance, processes and decision-rights for a given area of responsibility

H is for:

Historic/Heritage Assets are tangible assets with historic, artistic, scientific, technological, geophysical or environmental qualities that are held and maintained principally for their contribution to knowledge and culture

 

 

We hope you found this blog useful – if you can think of other charity terms beginning with A through to H, we’d love to hear them – post them on our facebook page. We will be exploring the letters I to P next month!

To arrange a chat about how SDW Accounting could work with your organisation, please fill out our online enquiry form and we’ll get in touch.

 

Comments are closed.