It is a simple fact that all UK charities with a gross income over £10,000 are under a statutory obligation to file their annual reports and accounts with the Charity Commission within 10 months of the end of the financial year.

As the rule is clear, and the timescale seems reasonable, it may be thought that the requirement would pose few difficulties. Not so.

The Commission's records show that 35 per cent of accounts were submitted late in 2002. Newer figures are not yet available, but there is little reason to suppose that things have changed in the interval.

Nor is lateness the only problem. In the same year the Commission carried out a survey of 350 annual reports and accounts received over a two-week period. It found that three-quarters contained a significant defect or error.

There are growing signs that the Commission is unhappy about the situation. It now posts the names of late filers on its website, for example, perhaps in the hope that name-and-shame tactics will encourage voluntary organisations to take the issue seriously.

If a charity is late in filing, it will not face a fine - at least, nor yet. But any organisation that is in default of this requirement could face an investigation, something that no charity will enjoy. Moreover, if a voluntary body is also a charitable company then an incremental fine system from Companies House comes into play when the 10-month deadline is exceeded.

If a charity is late in filing, it will not face a fine - at least, not yet.

What's the problem?
Why do so many organisations appear to experience such difficulties in completing the task on time, and why, moreover, do so many accounts contain faults? There are a number of possible explanations. It will perhaps come as no surprise to learn that the majority of charities listed on the website are smaller organisations. It is also unsurprising that many of the accounts containing errors were unaudited. Audited accounts contained far fewer deficiencies.

But small organisations are not the only offenders. Last year the Charity Commission sent an email to the trustees of some 8,000 charities across the UK. It reminded them of the importance of compliance with the deadline. It also declared that if a charity uses accountants who carry out the work free or for a nominal sum, those accountants will be doing their clients no favours if the result is a poor service or lateness.

And there are other factors involved. Many charities - perhaps because they are inadequately advised - fail to devise a suitable timetable to be certain that the work will be completed on time. Ultimately, it is the responsibility of the trustees to ensure that the accounts are finalised, audited and submitted within the deadline, but most charities will need professional assistance if they are to meet their obligations.

That is why we are convinced that it is essential that an accountancy firm has specialist knowledge and experience of the sector.

It is always important that trustees identify key dates well in advance. Two of the more important are the date at which the accounts will be ready for the auditors, and the date of the trustees' meeting at which they will be approved. There is an understandable inclination to submit the accounts to trustees for approval at the last available meeting before the deadline. But this could cause difficulties, for a variety of reasons.

Many charities, particularly larger ones, produce annual reviews for distribution to funders and other interested parties, and extracts from the accounts often form part of these publications. It is important to remember that if extracts are to be included, the accounts must have been finalised and the audit completed.

As auditors, we are required to check any financial information that is to be included to ensure it is consistent with the statutory accounts. There are also specific statements from the trustees and auditors that must be included alongside the extracts. It may also be that the deadline imposed by printers shifts the audit timetable forward. All of these issues should be considered well in advance.

The annual audit and accounts completion process is not just an exercise in compliance, but an important form of communication with donors and supporters.

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