In accordance with the French law of 1901, associations enjoy considerable freedom in terms of their creation, purpose and organization. It is clear, however, that large associations must be rigorously managed if they are to function properly, and this means keeping accounts that are very similar to those of companies.
You may be wondering whether you should draw up a financial statement for your association. Is it a necessity or an option? Accounting procedures differ according to the size of your association.
What is a balance sheet?
Balance sheets are extremely useful for association managers. It provides a snapshot at a given moment of the association's financial health, showing what it owns and what it owes. Think of it as a snapshot of your association's assets.
The financial balance sheet takes the information from the accounting balance sheet, but presents it in tabular form. What distinguishes it from the accounting balance sheet is that its elements are ordered according to payment due dates for assets and liabilities.
Accounting requirements for associations
For some associations, the question of whether or not to present a financial statement doesn't even arise - it's an obligation. For others, it's up to them. They have the flexibility to opt for this measure as soon as they create their articles of association.
For small registered associations, the authorities require cash flow accounting. In other words, this involves recording cash inflows and outflows, and presenting a financial report at general meetings.
Larger associations, on the other hand, are required to maintain accrual accounting. This means that they must follow a specific chart of accounts, draw up a financial statement which is then validated by an auditor, and finally publish their annual accounts.
Which associations are required to draw up a balance sheet?
To determine whether your association is required to draw up a financial statement, simply refer toArticle L.612-4 of the French Commercial Code. This stipulates that "any association that has received one or more annual cash subsidies from the administrative authorities, as defined in Article 1 of the Law of April 12, 2000, or from public industrial and commercial establishments, the total amount of which exceeds a threshold set by decree, must draw up annual financial statements comprising a balance sheet, an income statement and notes to the financial statements, the terms and conditions of which are set by decree. These associations must ensure that their annual accounts and the auditor's report are made public, under conditions determined by decree by the Conseil d'Etat...".
In short, the obligation to present a financial statement applies if one of the following conditions is met:
- Your association receives annual grants of €153,000 or more.
- Its balance sheet exceeds 3,100,000 euros.
- Sales in excess of €1,550,000.
- Your association has more than 50 employees.
- Part of its business is commercial.
- Most of its funding comes from local authorities or exceeds 75,000 euros.
- It is recognized as being of public utility or has accreditation.
- It relies on public donations.
- It manages health and social establishments.
- Its field of activity is medical and scientific research.
- Its purpose is to finance an election campaign.
- This is a sports association.
Who does the financial reporting?
When it comes to managing your association's accounting, you have several options at your disposal. You can call on an external chartered accountant to take on this task. However, it is entirely possible to keep the accounts in-house, for example by using an association accountant or by entrusting this responsibility to the treasurer, provided he or she has undergone appropriate training. To simplify the process, specialized accounting software is available online. They facilitate the association's accounting management by automatically generating various documents based on expenses and data entered.
Rest assured, drawing up a balance sheet for an association is far less complex than that required for large companies. Since 2020, it is advisable to refer to the new chart of accounts n° 2018-06 of December 5, 2018. This plan is specially designed for the annual accounts of private not-for-profit legal entities. It is an adaptation of the general chart of accounts for associations, foundations and endowment funds.