Standard Form of Accounts

Contents:

• Key Tasks
• Reporting Obligations Overview
• Top tips for Preparing Annual Accounts
• Receipts and Payments
• Standard Form of Accounts - Receipts and Payments
• Accrual-Based Accounts
• Standard Form of Accounts - Accruals
• Property Valuation
• Accounting for property, land and buildings

The Standard Form of Accounts (SFA) is designed to assist churches, circuits and districts in preparing their annual accounts. There are two Standard Form of Accounts that can be used for church, circuits and district – Receipts and Payments and Accrual Based Accounts.

• For charities with annual gross income of less than £250,000, the annual accounts can be prepared using the Receipts and Payments method.
• The charities with a gross income exceeding the £250,000 threshold must prepare full Accruals accounts that comply with Charities (Accounts and Reports) Regulations 1995 in England and Wales, The Charities Accounts (Scotland) Regulations 2006 in Scotland and follow the Charities SORP. In the Channel Islands and in the Isle of Man, the Standard Form of Accounts must also be used, to comply with Standing Order requirements.

Churches must submit their accounts to the meeting of the church trustees for approval. They are then submitted to the Circuit Meeting. Circuit accounts are approved at the Circuit Meeting and then submitted to the district. District accounts are approved by the district trustees and then submitted to the Connexion. The deadline for these meetings is determined locally. However, where the church, circuit or district is a registered charity, the accounts along with the Annual Report must be submitted to the deadlines set by the relevant regulatory body listed here.

Key Tasks

1. Prepare – In September, obtain any year end statements from the bank, CFB or TMCP and then prepare the end of year financial accounts for all funds under the control of the Church Council, circuit or district.
2. External Scrutiny – The accounts are to either be independently examined or have a full audit depending on the gross annual income (see Section 3 for further information). Any actions from either report are to be addressed.
3. Submit – Prepare and present The Standard Form of Accounts for approval by the managing trustees, the overseeing body3 and to the regulatory body if you are a registered charity.
4. Retain – File the accounting information, books, invoices, cheques and paying-in stubs away for retention for six years, preferably on church premises or circuit/district office in a fire-proof cabinet.

The outline below shows the reporting obligations based on the annual income of the charity. Click here for further information on Charity registration.

Any charity with an annual gross income over £100,000 must file and submit their annual accounts with their relevant regulatory body. Click here for guidance on calculating gross income.

Please note that other reporting obligations outside of the annual accounts include Annual Returns, Statistics for Mission and the Data Protection Checklist.

Reporting Obligations Overview

Reporting obligations (1) depend on the gross annual income (2) of the charity:

Under £100,000 (Excepted Status)

• Prepare and submit Standard Form of Accounts to the overseeing body by 31 March (3)
• Present accounts to the managing trustees
• Submit Annual Account to the Charity Commission (England and Wales): Not required
• Accounts type required: Receipts and Payments

£100,000–£250,000

• Prepare and submit Standard Form of Accounts to the overseeing body by 31 March (3)
• Present accounts to the managing trustees
• Submit Annual Account to the Charity Commission (England and Wales) (4)
• Accounts type required: Receipts and Payments

Over £250,000

• Prepare and submit Standard Form of Accounts to the overseeing body by 31 March (3)
• Present accounts to the managing trustees
• Submit Annual Account to the Charity Commission (England and Wales) (4)
• Accounts type required: Accrual Based Accounts

Top tips for Preparing the Annual Accounts

• Be consistent – present the same items in the same way in the accounts year by year. If any changes have to be made in presentation, ensure the reader’s attention is drawn to them in the notes. Restate any comparative figures if necessary to restore comparability.
  
• Detailed information about the figures should be given in subsequent notes leaving the front page uncluttered as regards detail. However, notes form an integral part of the accounts and are there to provide more detailed information. Current practice involves showing relatively few headings on the front page, with additional detail contained in the notes. Local requirements will decide the method to be adopted but the treasurer will wish to present to the Church Council meeting a clear and concise picture of the financial situation of the church. It is a requirement to quote the previous year’s figures alongside the current year for comparison purposes.
  
• The trustees of the Church Council are responsible for ensuring that all funds under its control are reported in the annual accounts of the church.  Accounts of other internal organisations, such as the Junior church, can be included in the main church accounts, or filed separately according to the wishes of the local church.
  Click here to download the Internal Organisations' Reporting Form. As well, managing trustees will need to submit a letter verifying the transactions. Click here for a template letter for related-party transactions.
  
• If they prepare their own accounts, the Standard Form of Accounts report form should be completed by individual treasurers and returned to the church treasurer. Click here for further guidance on Internal Organisations.
  
• The independent examiner’s or auditor’s report should normally confirm that the accounting records have been kept in such a way as to enable a proper understanding of the accounts to be reached, and will bring any matters for report to the attention of the Church Council. In the event that such confirmation cannot be given, the managing trustees must take immediate and appropriate action to rectify any shortcomings.

Click here for a best practice example of accounting policies and notes to the accounts.

Receipts and Payments

This should be used for those churches, circuits or districts when gross annual income is less than £250k. Gross income is the total receipts recorded in the statement of accounts from all sources, excluding the receipt of any endowment, loans and proceeds from the sale of investments or fixed assets. If there are no restricted or endowment funds and if the church meets the criteria A-D on page 1 of the Guidance notes for Churches Receipts and Payments, then the short form can be used.

Items to note for Receipts and Payments accounting

A Receipts and Payments account is a factual summary of money received and paid out during the financial year (ie between 1 September and 31 August) irrespective of the period to which those transactions relate. The statement of assets and liabilities is a straightforward schedule of information the completion of which does not require the accountancy knowledge needed to prepare a balance sheet. The heading to the accounts should reflect the fact that Receipts and Payments accounts are being presented. Click here for a template for a cash analysis book to help track income and expenditure.

The statement of assets and liabilities is an integral part of the Receipts and Payments accounts but should be kept as simple as possible.

Trustees should bear in mind the need to be open, honest and accurate in the presentation of the accounts. Its purpose is to show how money and non-monetary assets are split between the various types of funds (ie unrestricted, restricted and endowment funds) and in which bank accounts those funds are held – ie current account, deposit account, Central Finance Board (CFB) account, Trustees for Methodist church Purposes, (TMCP) deposit. Click here for further information about funds.

For those churches who have investments lodged with the TMCP, a statement should be sent by email in September each year giving details of each investment held and also the value of those investments as of 31 August. These valuations are to be quoted in the statement of assets and liabilities. Any bills due for payment as at 31 August and still outstanding at that date need to be noted on the statement of assets and liabilities, as do any amounts owing to the church. Click here for further information about investments.

Property Valuation

No valuations are required, though trustees are encouraged to put a property valuation figure in the statement of assets and liabilities (this can be the buildings insurance figure). The statement should include the value of other assets such as furniture, silverware, organ, computer and other equipment (which may be specified separately on the insurance policy).

Treasurers should bear in mind that any change from the Receipts and Payments method to Accruals accounting will affect the way the accounts are presented.  Receipts and Payments accounts could be prepared in the following year if income dropped, but it would be prudent to continue to prepare Accruals accounts if there was a continuing high level of expenditure, e.g. on a major building project.  To facilitate this, the bookkeeping system would need to be enhanced to cope with a balance sheet and the previous year’s figures would need to be re-stated to ensure consistency. Advice should be obtained well before the income limits are breached.

The following templates and guidance notes are available for receipts and payments accounts:

Accrual-Based Accounts

This should be used for those churches, circuits or districts whose gross annual income is greater than £250k. Accruals accounting involves making a number of adjustments to the actual amounts received and paid during the year. This method of accounting does not preclude the appointment of treasurers who are competent to manage the basic information. It is recommended that the services of an accountant or someone with appropriate experience are used when further advice is required in the production of the annual accounts. These adjustments at the yearend date will involve the following where appropriate:

1. Expenditure which has been incurred but not paid - known as creditors if specifically known or accruals if the amount is estimated.
2. Amounts which are owed to the church (known as debtors).
3. Expenses which have been paid prior to the yearend date, which refer in whole or in part to the period following the year end date (known as prepayments).
4. Assets and liabilities will be recorded on the balance sheet and some if not all assets may be required to be depreciated.
5. Accounting policies will need to be determined and recorded in the ‘Notes to the accounts’ which will also include further information on items contained in the main body of the accounts in accordance with normal accountancy practice.
6. When accruals accounting is adopted, trustees are required to disclose a true and fair view of the assets of the church.

Click here for further information on accounting for Fixed Assets.

The following templates and guidance are available for accruals accounts:

Property Valuation

A professional valuation is not necessary, though a reasonable basis should be used. The church, circuit or district may choose to base the valuation on the buildings insurance figure. However depending upon the basis of cover and the value of the land, a suitable adjustment should be made. Generally speaking the insurance value will be greater than the likely value on sale since the insurance figure allows for rebuilding. However, in some areas the value of land will be such that the value of the site will far exceed the value of any buildings upon it.

1. If a property is held as investment (for example a house left as an endowment is let out for rent), then the property must be recorded in the accounts at market value.
2. If the property is a functional asset (ie used for charitable purposes such as a church or hall), then it can be recorded at cost or valuation.

Accounting for property, land and buildings

Further guidance can be found below:

• Accounting for Disposals and Redundant Properties
• Treatment of Chapels (land and buildings) in Accounts

Advice and Help

If you require help in completing the forms, you should contact your Circuit or District Treasurer who should be able to offer advice. You can also contact the Reporting Team in the Finance Department for help and advice on 020 7467 3760.