What Is the Difference Between a Trustee Report and Financial Statements?

Introduction

Every registered charity must prepare annual accounts, but these accounts are made up of two key parts: the trustee report and the financial statements. While they are submitted together, each serves a different purpose.

The trustee report explains what the charity has done, why it exists, and how it has achieved its objectives. The financial statements, on the other hand, show the charity’s financial performance and position in numbers.

Understanding the difference between the two is important for trustees, donors, and anyone involved in charity management. This article explains what each document includes, why both are required, and how they work together to demonstrate transparency and accountability.

What Is a Trustee Report?

The trustee report, sometimes called the trustees’ annual report, is a narrative summary of the charity’s activities during the year. It is written by the trustees and provides context to the financial figures.

The aim of the report is to show how the charity’s work has furthered its charitable objectives and provided public benefit. It helps readers understand not just what money was spent, but why and what difference it made.

The Charity Commission requires all registered charities to produce a trustee report every year. The level of detail depends on the size of the charity: smaller charities can prepare a simpler version, while larger ones must include more comprehensive information.

Key Information in a Trustee Report

A well-written trustee report usually covers the following sections:

• Charity details: Name, registration number, address, and names of trustees.

• Objectives and activities: The charity’s purposes as stated in its governing document and how these aims have been pursued.

• Public benefit statement: An explanation of how the charity’s work benefits the public.

• Achievements and performance: Key milestones, projects, and outcomes during the year.

• Financial review: A summary of income, expenditure, and reserves, presented in plain language.

• Risk management: A discussion of the main risks facing the charity and how they are managed.

• Plans for the future: Objectives and priorities for the next year.

• Structure, governance, and management: How the charity is organised and how decisions are made.

The report should tell a clear, honest story about the charity’s impact and how it uses resources to fulfil its mission.

What Are Financial Statements?

The financial statements are the numerical part of the annual accounts. They provide a detailed summary of the charity’s income, expenditure, assets, and liabilities.

These statements are prepared according to accounting standards known as the Charities Statement of Recommended Practice (SORP). The format and complexity depend on the charity’s income level and whether it is incorporated.

The financial statements show how the charity’s money is managed, where funds come from, and how they are used. They give trustees, regulators, and donors confidence that finances are handled properly.

Key Components of Charity Financial Statements

The financial statements typically include:

• Statement of financial activities (SOFA): Similar to a profit and loss account, this shows all income and expenditure for the year, divided into unrestricted, restricted, and endowment funds.

• Balance sheet: A snapshot of the charity’s assets, liabilities, and reserves at year-end.

• Cash flow statement: Shows how cash has moved in and out of the organisation during the year (required for larger charities).

• Notes to the accounts: Detailed explanations that support the main figures, such as accounting policies, breakdowns of income and expenses, and trustee remuneration disclosures.

Each part provides transparency about how charitable funds are received, spent, and safeguarded for future use.

The Main Differences Between the Two

Although the trustee report and financial statements are closely linked, they differ in purpose and content.

1. Purpose

• The trustee report tells the story of the charity’s work and achievements.

• The financial statements show the financial facts and figures that support that story.

2. Content

• The trustee report is narrative, explaining activities, impact, and governance.

• The financial statements are numerical, detailing income, spending, and balances.

3. Audience

• The trustee report is written for a wide audience, including donors, funders, and the general public.

• The financial statements are aimed at regulators, auditors, and those reviewing financial performance.

4. Preparation

• Trustees write or oversee the trustee report.

• Accountants usually prepare or verify the financial statements in line with SORP requirements.

5. Compliance

• The trustee report ensures compliance with charity law by demonstrating public benefit.

• The financial statements ensure compliance with accounting standards and financial regulations.

Together, they form a complete picture of the charity’s performance and governance.

How the Two Documents Work Together

The trustee report and financial statements complement each other. The trustee report gives meaning to the numbers, showing how financial decisions align with the charity’s goals. For example, the report might describe a new project that supported 500 people, while the financial statements show the costs and income associated with that project.

When reviewed together, they show transparency, accountability, and responsible management — qualities that build public trust and confidence in the charity’s work.

Example Scenario

Imagine a charity called Healthy Start UK, which helps children access nutritious meals.

In its trustee report, the charity explains how it expanded its meal programme to five new schools, supported over 2,000 children, and developed partnerships with local suppliers. It also highlights the risks of rising food costs and outlines plans to increase fundraising.

In the financial statements, the charity shows £400,000 in income (mainly grants and donations), £370,000 in expenditure (mostly on food, logistics, and staff), and reserves of £100,000.

Together, these documents show both the story and the numbers behind the charity’s work.

The Role of Accountants and Examiners

Many charities work with accountants or independent examiners to ensure both documents are accurate and compliant. Accountants can:

• Prepare or review financial statements in line with SORP

• Advise on how to present figures in the trustee report

• Conduct an independent examination or audit if required

• Help trustees interpret financial data for strategic planning

Professional support ensures that the charity’s annual accounts meet all Charity Commission requirements and demonstrate good governance.

Common Mistakes Trustees Make

• Treating the trustee report as a formality rather than a communication tool

• Providing too much technical jargon or too little information about impact

• Failing to link financial figures in the report with the financial statements

• Submitting accounts without independent review when required

A clear, well-prepared report and set of statements make your charity’s work more credible and transparent.

Conclusion

The trustee report and financial statements serve different but equally important purposes in a charity’s annual reporting. The trustee report tells the story of what your charity achieved, while the financial statements show how it managed its funds responsibly.

Together, they provide a complete picture of your charity’s performance, build trust with donors and regulators, and demonstrate accountability to the public. Preparing them carefully, and seeking professional advice if needed, ensures your charity remains compliant and respected for the work it does.