Charity Commission Review of Charities with Net Current Liabilities
A recent report by the Charity Commission (published as part of its Accounts Monitoring Review) highlights the importance of charities with net current liabilities using their Trustees' Annual Report to explain how they are managing the situation.
A charity has net current liabilities where its current debts exceed the funds available to cover them. The Commission identified 1,348 charities (with income over £500,000 per year) with net current liabilities based upon information provided in annual returns. The Commission then selected a random sample of 98 charities to review, and found that 42 were silent in their TARs as to how they were managing the situation.
As a result of its findings, the Commission has emphasised that it is a key requirement of SORP that charities communicate their financial position, and reminds Trustees that it is in the interests of the charity's funders, donors and stakeholders that they should explain how they are handling net current liabilities.
The full report can be accessed here.