TaxCalc Blog

Top 10 charity accounting mistakes – and how to avoid them

Charity accounting is complex. Many charities - particularly smaller ones - still get the basics wrong.

Between evolving regulations, unique governance structures and the quirks of SORP, even experienced accountancy professionals can stumble.

At TaxCalc, we’ve reviewed hundreds of charity accounts and seen the same mistakes crop up time and again.

Many of these issues stem from charities preparing accounts manually in Word or Excel, where errors are easy to make and hard to catch. Here’s a rundown of the most common pitfalls - and how you can avoid them.

1. Using the wrong accounting basis

Charitable companies must use accruals accounting. CIOs and unincorporated charities can opt for receipts and payments, but that doesn’t mean they can ignore proper fund control. Mishandling grant income under receipts and payments can lead to terrible mistakes, and result in overspending and governance issues. 

2. Misunderstanding income thresholds

A single grant (like lottery funding) can push a charity into a higher compliance band, triggering new reporting obligations. Many charities fail to check their constitution for additional scrutiny requirements, risking non-compliance. 

3. Poor income classification

Is it a donation, grant, legacy or contract? The answer affects recognition, restriction status and cost allocation. Misclassification leads to misstatement - and confusion for trustees and stakeholders.

4. Governance gaps

Trustees must be more than ceremonial figures. They need to understand their responsibilities, especially around internal controls and fund protection. Too often, boards lack training or fail to challenge poor practices in connected entities.

5. Property and lease misjudgements

Charities must carefully assess how they treat property - whether it’s for charitable use or investment. Misjudging this can distort the accounts and mislead stakeholders. With SORP 2026 introducing new lease accounting rules, this area will become even more complex. (Look out for our upcoming blog on what’s changing and how to get ready.) 

6. Incorrect or outdated statutory references

It’s surprisingly common to see charity accounts referencing outdated legislation—such as the old Charities Act or the now-defunct FRSSE. These errors often stem from using legacy templates or copying from previous years without updating the references. Not only does this undermine the credibility of the accounts, but it can also signal to regulators that the charity isn’t keeping pace with current standards.

7. Inconsistent fund balances or breakdown between funds and activities

Charity accounts must clearly show how funds are allocated and used. Yet inconsistencies often appear between the Statement of Financial Activities (SOFA) and the balance sheet. For example, restricted fund totals might not match across sections, or activities may be misclassified. These discrepancies can confuse stakeholders and raise questions about financial control.

8. Mismatched opening and closing balances in the movement in funds notes

The movement in funds note is a key part of charity reporting, showing how funds have changed year-on-year. But manual input errors—especially in Excel—frequently lead to mismatched opening and closing balances. These mistakes can distort the financial narrative and make it harder to track the charity’s performance over time.

9. Inadvertent public disclosures

One of the more embarrassing errors is leaving internal email correspondence or draft comments in the final published accounts. These oversights often occur when documents are prepared manually and not properly reviewed before submission. Once filed, these disclosures become part of the public record -potentially exposing sensitive information.

10. Failure to comply with charity-specific disclosures

Charities are not limited companies, and their accounts must reflect that. Using templates designed for companies - without adapting them for charity-specific requirements - can lead to missing disclosures, incorrect formats, and non-compliance with the Charities SORP.

How TaxCalc can help

TaxCalc’s new Charity Accounts module is designed to eliminate these common errors and simplify compliance.

Key features include:

• Fully SORP-compliant across all charity types
• Unlimited funds and activities with full drill-down
• Automatic error detection via Check and Finish®
• Built-in prompts for charity-specific disclosures
• Seamless integration with TaxCalc’s wider ecosystem

Whether you’re preparing accounts for a small trust or a large charitable company, TaxCalc helps you get it right - first time, every time. 

Want to see Charity Accounts in action for yourself? Watch our Power Hour on-demand. Or book a demo.