Charity Setup

Funds

Accounting for the particular funds held by a charity is a fundamental feature of charity accounting. There are two primary classes of funds; those that are unrestricted in their use and can be spent for any charitable purpose, and those that are restricted in their use and can only be used for a specific purpose. Restricted funds are further analysed between restricted income funds and endowment funds. The diagram below details the classes of charity funds.

Unrestricted funds are spent or applied at the discretion of the trustees to further any of the charity’s purposes. Unrestricted funds can be used to supplement expenditure made from restricted funds. For example, a restricted grant may have provided part of the funding needed for a specific project. In this case unrestricted funds may be used to meet any funding shortfall for that project.

Funds held on specific trusts under charity law are classed as restricted funds. The specific trusts may be declared by the donor when making the gift or may result from the terms of an appeal for funds. The specific trusts establish the purpose for which a charity can lawfully use the restricted funds. It is possible that a charity may have several individual restricted funds, each for a particular purpose of the charity.

For further information on the purpose and use of funds please refer to 'Accounting and Reporting by Charities: Statement of Recommended Practice applicable to charities preparing their accounts in accordance with the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102).

Creating Funds

Funds can be created by going to Settings > Charity Setup > Funds.

Two Funds will exist here by default, Unrestricted General and Restricted. All user created Funds will also show here. From the Charity Funds screen you can choose New, Open or Delete. Default Fund descriptions can be modified by selecting Open. To create new Funds select New from the left corner.

To create a Fund you will need to enter the following details:

Description: This is for internal purposes only. This will not show on the face of the financial statements.

Name: This is the description which will show on the face of the 'Analysis of Movements on Funds' note. This is the only location where a breakdown of the individual funds is shown.

Type: There are 3 options in this dropdown:

• Restricted
• Unrestricted
• Endowment

If you choose to create an Unrestricted Fund you will need to select the Unrestricted Type, whether the fund is a Designated fund, General fund or Pension fund.

If you choose to create an Endowment Fund you will need to select the Endowment Type, whether the fund is Permanent of Expendable.

When the above details have been selected and descriptions entered, select Save. Continue to create as many Funds as are required.

Activities

A charity’s Statement of Financial Activities (SoFA) or related notes should provide an analysis of a charity’s significant activities in a way that is relevant to both the charity and the users of its accounts.

Significant activities are those which, due to their scale or importance, are key to the charity in meeting its aims and objectives. The analysis of activities should provide an understanding of how a charity raises its funds and uses them to further its purposes. For example, charitable activities may be analysed according to services provided, projects or programmes undertaken, or by the particular aims or objectives taken forward.

The activities reported should also be consistent with the significant activities noted in the trustees’ annual report. The narrative provided by the trustees’ annual report should help the user of the accounts to understand the nature of those significant activities and what has been achieved as a result of the expenditure incurred on them.

Activities include operations and programs undertaken, as well as the provision of funds or other support. Activities can be financial or non-financial. For example, fundraising, community services, employing staff and doing administrative work are all activities.

The analysis of income and expenditure by activity is encouraged for all charities preparing accruals accounts. Within BrightAccountsProduction no alternative method has been provided therefore all income and expenditure must be presented by activity.

Activities per Category

There are 12 main categories of Activities in BrightAccountsProduction (Bright AP) which fall under either Income or Expenditure. These are as follows:

Description	Income/Expenditure
Donations and legacies	Income
Income from charitable activities	Income
Other trading activities income	Income
Investments	Income
Other income	Income
Raising funds	Expenditure
Expenditure on charitable activities	Expenditure
Governance costs	Expenditure
Other trading activities expenditure	Expenditure
Other expenditure	Expenditure
Exceptional items	-
Realised gains and losses	-

Multiple sub categories of activities can be created from any of the above Activities, except for Exceptional items and Realised gains and losses. Only one of each of these Activities can be created and these will exist by default in the dataset. All sub categories of Activities will be accumulated to the main heading on the Statement of Financial Position and then broken down in the notes. Figure 5, Figure 6, Figure 7 For example, a charity may create multiple types of Activities that will report under Donations and Legacies, such as:

• Individual giving/committed giving
• Public fundraising/appeals
• Legacies
• Corporate donations
• Revenue commissioners tax relief

The above 5 items with the assigned descriptions will be broken down in the notes to the financial statements but the SoFA will show all amounts under Donations and Legacies.

Activities related to Income are analysed by Fund, Activities related to Expenditure are analysed by Cost.

Creating Activities in BrightAccountsProduction

To create an Activity in Bright AP, go to Setting > Charity Setup > Activities.

All 12 main Activities will exist here by default. All user created Activities will also show here.

From the Charity Activities screen you can choose New, Open or Delete. Default Activity descriptions can be modified by selecting Open. To create new Activities select New from the left corner.

To create an Activity you will need to enter the following details:

Activity Name: This will be the description which will show in the financial statements. 

Activity Type: Choose one of the previously mentioned categories from the drop down. This will determine where amounts posted to this Activity show on the Statement of Financial Activities and notes.

When the above details have been selected and descriptions entered select Save. Continue to create as many Activities as are required.

Costs as per SORP

The SORP requires that charities reporting on an activity basis must disclose:

• details of the accounting policy adopted for the apportionment of costs between activities and any estimation technique(s) used to calculate their apportionment;
• the total amount of support costs incurred in the reporting period;
• an analysis of material items or categories of expenditure included within support costs, with the total amount of governance costs incurred separately identified, and
• the amount of support costs apportioned to each of the charity’s significant activities as disclosed in the SoFA or in the notes to the accounts.

While some costs relate directly to a single activity, the cost of certain central or regional support functions may be shared across more than one activity undertaken by the charity. For example, governance costs, payroll administration, purchasing, budgeting and accounting, information technology, personnel (human resources), building management services and finance are functions that are likely to support more than one area of activity. These costs must be apportioned across the activities that the function supports in order to arrive at the full cost for each reported activity.

To ensure that the accounts present the costs of activities fairly, charities should ensure that the method(s) of cost allocation adopted are reasonable and consistently applied. In attributing costs to activities, the following principles must be applied:

• Direct costs attributable to a single activity must be allocated directly to that activity (for example the salary cost of someone solely employed on a particular activity or the cost of running a vehicle used wholly for a particular activity).
• Shared costs which contribute directly to more than one activity must be apportioned between those activities (for example the cost of a staff member whose time is divided between a fundraising activity and working on a charitable project).
• Support costs which are not attributable to a single activity must also be apportioned between the activities being supported.

Creating Costs in BrightAccountsProduction

There are 3 categories of cost types in BrightAccountsProduction, Direct, Other and Support. As Support costs are the only costs which require detailed analysis in the financial statements this is the only category which you will be able to create in BrightAccountsProduction.

Direct and Other costs will have one category only which will be selected from the journals and all amounts relating to these costs will be shown in the financial statements. To create Support costs, go to Settings > Charity Setup > Costs.

All user created ‘Support’ costs will be presented here along with one default item for each category. Select New to create a new Support cost.

To create the cost you will need to enter the following details:

Cost Description: This is the description which will show on the face of the financial statements.

Cost Name: This is for internal use only.

Basis of Apportionment: How the cost is apportioned. This can be entered at any point and does not need to be entered as the costs are created. Examples of this are as follows:

• usage of a resource or activity in terms of time taken, capacity used, requests made or other measure;
• per capita, based on the number of people employed within an activity; 
• floor area occupied by an activity; or 
• time, where staff duties span more than one activity.

If details relating to apportionment are not entered here the apportionment column of the Support cost analysis note will not show in the financial statements.

When all of the above details have been entered, select Save. Continue to create as many Support costs as are required.

Default Yearend Activity & Cost Code

While you perform year end for a Charity dataset, if any PL Nominal Code appears, by default the the journal posting will have Activity Code set as CostCharActs01 and Cost Code set as Direct. You can modify or update this Activity Code and Cost Code as per your requirement, before performing Year end.

Steps

1. Navigate to Settings > Charity Setup > Default Yearend Activity & Cost Code.
2. In the Charity Yearend Settings box, select the required Activity Code from the  ACTIVITY CODE drop-down list.
3. In the Charity Yearend Settings box, select the required Cost Code from the  COST CODE drop-down list.
4. Click Save. The Activity Code and Cost Code are updated successfully.
   The updated Activity Code and Cost Code will be reflected in journal posting.

Journals

To create a new multiple line journal, browse to Nominal Ledgers > Journals and choose the type of journal you want to create.

When the journal screen opens you will need to enter the following information:

1. Date: Applicable date for the current year postings.
2. Code: Applicable nominal code for the Nominal codes have no impact on the Statement of Financial Activities or the Income/Expenditure analysis by activity/fund notes. These pages only use the Funds, Activities and Costs to produce figures. The nominal code selected will determine if the amount triggers a section in the Compliance Database to show, or causes standard Company notes to show, such as Operating Profit, Tangible Assets etc.

3. Fund Code: Choose the relevant fund from the drop down provided. Each line posted
   requires that a fund MUST be selected. You will not be able to save the journal without entering a fund in every line.

   If you need to create more funds select F3 when the cursor is in the Fund column and select Add from the pop up screen. The Fund drop down can be expanded to show further descriptions for the funds if you are not sure which fund you need to select. The fund selected will determine under which column the amount posted will show on the SoFA and Income analysis notes by fund.

4. Activity Code: Choose the relevant activity from the drop down provided. All profit and loss

   items require that an Activity is assigned. If you do not assign an activity the
   posting will not appear on the Statement of Financial Activities and applicable notes.
   Balance sheet items should never have an activity assigned to them.
   

   If you need to create more activities select F3 when the cursor is in the Activity column and select Add from the pop up screen. The Activity drop-down can be expanded to show further descriptions for the Activity if you are not sure which Activity you need to select. The Activity selected will determine where on the SoFA the amount will show and in which notes the item is analysed.

5. Cost Code: Choose the relevant cost from the drop down provided. Only items relating to Expenditure should have Costs assigned to them, you must assign a cost if you want it analysed in the Expenditure notes to the SoFA. You should not be analysing income by costs. All amounts associated with a cost and an expense activity will be broken down in the notes to the accounts. Support cost types will have additional disclosures in the notes to the financial statements as these are required to be analysed in detail.

6. Debit/Credit: Enter the relevant amount for the item you are posting.

Important points to note when posting

Posting Funds in Journals

Every line item MUST have a fund assigned.

Posting by Activity

• When posting journals all profit and loss items require that an Activity is assigned.
• If you do not assign an Activity the posting will not appear on the Statement of Financial Activities and applicable notes.
• Balance Sheet items should never have an activity assigned to them.
• The Activity selected will determine where on the SoFA the amount will show and in which notes the item is analysed.

Posting Costs in Journals

• Only items relating to Expenditure should have Costs assigned to
• A cost must be assigned if you want it analysed in the Expenditure notes to the SoFA.
• Income should not be analysed by costs, do not assign costs to income
• All amounts associated with a cost and an expense activity will be broken down in the notes to the accounts. Support cost types will have additional disclosures in the notes to the financial statements as these are required to be analysed in detail.

General

1. Nominal codes have no impact on the Statement of Financial Activities or the Income/Expenditure analysis by activity/fund notes. These pages only use the Funds, Activities and Costs to produce figures.
2. You cannot post unrounded figures.

Accruals, Prepayments and Single line Journals

If posting Accruals, Prepayments or Single line Journals the same requirements as listed above must be applied. If you are posting P&L items you must assign Activities and Costs where applicable. Where a balance sheet nominal code is used (500-999), for example in Accruals or Prepayments the system will ignore the Activity and Costs when considering the balance sheet posting.

Posting Comparative Journals in BrightAccountsProduction

The charity format is the only format in BrightAccountsProduction that allows for the posting of Comparative Journals. This enables users to enter the Funds, Activities and Costs required for analysis.

To create a new Comparative Journal browse to Nominal Ledger > Comparative Journals on the left panel and click New. 

When the journal screen opens you will need to enter the following information:

1. Date: Applicable date for the comparative year postings.
2. Year: Select the year for which the transactions are
3. Code: Applicable nominal code for the Nominal codes have no impact on the Statement of Financial Activities or the Income/Expenditure analysis by activity/fund notes. These pages only use the Funds, Activities and Costs to produce figures.
   The nominal code selected will determine if the amount triggers a section in the Compliance Database to show, or causes standard ‘Company’ notes to show, such as Operating Profit, Tangible Assets etc.
4. Fund: Choose the relevant fund from the drop down provided. Each line posted requires that a fund MUST be selected. You will not be able to save the journal without entering a fund in every line.
   If you need to create more funds select F3 when the cursor is in the Fund column and select Add from the pop up screen. The Fund drop down can be expanded to show further descriptions for the funds if you are not sure which fund you need to select. The fund selected will determine under which column the amount posted will show on the SoFA and Income analysis notes by fund.
5. Activities: Choose the relevant activity from the drop down All profit and loss items require that an Activity is assigned. If you do not assign an activity the posting will not appear on the Statement of Financial Activities and applicable notes.
   

   Balance sheet items should never have an activity assigned to them.

   If you need to create more activities select F3 when the cursor is in the Activity column and select Add from the pop-up screen. The Activity drop down can be expanded to show further descriptions for the Activity if you are not sure which Activity you need to select. The Activity selected will determine where on the SoFA the amount will show and in which notes the item is analysed.

6. Costs: Choose the relevant cost from the drop down provided. Only items relating to Expenditure should have Costs assigned to them, you must assign a cost if you want it analysed in the Expenditure notes to the SoFA. You should not be analysing income by costs.
   All amounts associated with a cost and an expense activity will be broken down in the notes to the accounts. ‘Support’ cost types will have additional disclosures in the notes to the financial statements as these are required to be analysed in detail.
7. Debit/Credit: Enter the relevant amount for the item you are posting. You cannot post unrounded figures.

Compliance Database

Within the Report Information under Directors' Report section there are over 70 user definable fields which enable the user to modify the Directors Report to the charities particular requirements.

These user definable fields cover all ranges of items required in the report, for example:

• Compliance Statement
• Mission, Objectives and Strategy
• Structure, Governance and Management
• Committee Details
• Financial Review
• 10 User Defined Additional Paragraphs

Statement of Financial Activities

The SoFA section of the compliance database allows for one user definable line of text on the Statement of Financial Activities to be modified. This item allows the user to enter an additional descriptive breakdown under Income from Charitable Activities. If the default text is removed from this text box the additional line will not show on the SoFA.

Income - Notes

The Income - Notes section of the Compliance Database allows for the entry of user definable text relating to each stream of income on an activity basis,  plus an additional paragraph for Net Incoming Resources. There are 5 main Activity categories relating to Income, if you have posted journals using any of the 5 income categories a text box will become available in this section of the compliance database allowing you to enter relevant information. This text will then show at the foot of the corresponding note on the financial statements.

Expenditure - Notes

The Expenditure - Notes section of the Compliance Database allows for the entry of user definable text relating to each stream of expenditure on an activity basis. There are 5 main Activity categories relating to Expenditure, if you have posted journals using any of the 5 expenditure categories a text box will become available in this section of the compliance database allowing you to enter relevant information. This text will then show at the foot of the corresponding note on the financial statements.

Other Note Information

In Other Note Information you can enter additional information in relation to a number of sections in your financial statements. Each section contains user definable text boxes where more detail can be added. Each section is triggered by options that you have selected in the Compliance Database or by postings made to the nominal ledger. User defined Notes can also be added.

There are 9 user defined notes which can be added. Simply tick the box and enter the relevant information. These notes can then be positioned according to your needs by going to the Produced Accounts screen and selecting Pages. Within this section choose the Notes folder and browse to the user-defined notes. A move up and move down option will be available at the bottom of the screen. The note will display where you position it.