Intelligent Giving

It would be interesting to find out whether there are trends in the way different types of charities score in IG's profiling process. It strikes me that we all expect to present our annual reports to a variety of potential readers (Charity commission, local authority, donors, grant givers, businesses from whom we plan to lease property etc.)

A charity that doesn't expect donations from the public, but hopes to get an Arts Council grant might craft its report differently from one that never expects to get public money. It might be an interesting little research project for some of your volunteers? 

Charity Chris: you're absolutely right to point out that the Unicorn submitted its accounts to the Charity Commission seriously late last year. Charities are allowed ten months from their year-end to prepare their accounts, but the Unicorn failed to meet this deadline. As a result, they've received a lower Quality of Reporting score than they otherwise would have done. 

As for the auditors' statement, I have to admit that I'm still slightly puzzled. It seems odd that they don't actually use the phrase 'going concern' in their observation. Does anyone have any idea why? Usually, auditors use this standard phrase to make it totally clear what they're talking about - and to avoid the confusion Ginsters raises.

Adam, Intelligent Giving

If a charity with a well planned level of reserves suffers a temporary reduction in funding, it may well be able to survive by using those reserves to bridge a gap.

Not so in this case; the levels of reserves are very low, and thus there is an uncertainty over the going concern concept. This is why this sentence doesn't appear in every audit report going.

Fundamental uncertainty paragraphs like this are, when they appear, usually worded in a very similar way. 

It doesn't mean, though, that the auditors think 'there is a good chance the charity will go bust in the coming year'. If they thought that, and the accounts were still prepared on a going concern basis, their report WOULD be qualified. In this case it is not.

All that said... I haven't double double checked, but it looks to me as though these accounts were delivered pretty late. Signed off March 08 for a March 07 year end?

Sorry, I've no idea why that post went up twice!

Don't shoot the messenger

"If the levels of funding were to decrease significantly, then the continued operation of the company would be brought into doubt"

I agree with Martin, this is a completely redundant sentence given that it's self evident and universally applicable. Perhaps they could add: "A substantial uplift in income may put the company in a more secure financial position."  

Don't shoot the messenger

"If the levels of funding were to decrease significantly, then the continued operation of the company would be brought into doubt"

I agree with Martin, this is a completely redundant sentence given that it's self evident and universally applicable. Perhaps they could add: "A substantial uplift in income may put the company in a more secure financial position."  

Don't shoot the messenger

After taking advice from Intelligent Giving's Treasurer, Gavin Sturge FCCA, I would like to correct our opinion regarding the Unicorn Theatre.

It was incorrect for us to assert that the Theatre 'may go bust' in the year. The Theatre is in posession of significant tangible fixed assets, against which it may borrow in tough times. In addition, the Theatre's balance sheet makes clear that the value of the Theatre's fixed assets is in excess of its debts.

Nonetheless, it remains that the Theatre gives poor disclosure of its financial position in its annual report. Its trustees' report or notes to the accounts ought to have made the Theatre's financial position clearer. Likewise, the auditors' observation relating to the 'fundamental uncertainty' should have been better explained. 

We apologize for giving an incorrect impression of the Theatre's financial position. But we continue to believe that the Theatre's reporting is un-transparent and perplexing. We assert that it should not need the input of a chartered accountant and qualified auditor to understand any charity's basic financial position.

Adam, Intelligent Giving

Rspcacambridge: you raise a valid point here. I've asked a qualified auditor to look again at the Theatre's auditors' statement, and to give his opinion on whether it justifies our conclusion in the profile above. As I say below, I'm still confident that our conclusion can be justified - after all, most arts charities don't attract this sort of attention from their auditors - but it's very important we get this right.

Adam, Intelligent Giving

I would have thought the auditors were simply expressing justified worry about the current situation with regard to Arts Council (and other) grants - "go bust" is perhaps a bit OTT?

In that respect, cultural organisations are a bit different from charities with more widely-spread sources of income (legacies, donations, fundraising etc.) in that there's not much the charity can do if the grant-maker decides to turn off the tap, whereas fundraising can be stepped up if needed. 

Yes, Martin, you've got a point there. The wording of the auditors' statement is unusual - most observations on 'Fundamental Uncertainty' are more explicit than the one I've quoted from the Unicorn Theatre. Usually, they make it very clear that the charity is in imminent financial peril. This statement is fuzzier - but it remains that the auditors are casting significant doubt on the charity's ability to continue as a going concern, even though the wording is a bit odd.

Also, I emphasize that observations like this are very, very rare - another reason why we draw attention to it.

Adam, Intelligent Giving

"If the levels of funding were to decrease significantly, then the continued operation of the company would be brought into doubt"

Haha. Very funny.
The copied sentence applies to every company and charity I can think of. Including the business I own.
What in particular makes this charity so special?
Come to think of it, are there any charities that don't depend on external funding to keep going?
How about IG? Do they have guaranteed income? Do they depend on external funding to avoid going bust?

1. The auditors' report says: "Fundamental uncertainty - In forming our opinion, we have considered the adequacy of the disclosures made in note 1(a) of the financial statements concerning the continued external funding of the company. Such funding cannot be guaranteed ad infinitum. If the levels of funding were to decrease significantly, then the continued operation of the company would be brought into doubt. Our opinion is not qualified in this respect." This sort of note might sound mild, but it's exceptionally rare for auditors to stick their necks out like this, which is why we draw attention to it in our overview paragraph. We've read over 1,300 annual reports over the past couple of years, and a 'Fundamental Uncertainty' obervation has appeared (I'm fairly sure) in fewer than a dozen of them.

2. No, we only take the charity concerned into consideration when writing our profile.

Adam, Intelligent Giving

1. Please can you justify the assertion that 'according to its auditors, there's a good chance that the charity will go bust some time this year' as I cannot see anything in the auditors report that comes close to this. Have you consulted them directly?

2. There is an related charity, no. 480920. Do you consider both entities when giving your opinion in cases like this?