Annual accounts

The activity report (also called reporting) helps a higher-level body to assess the financial situation of an association and to prepare for the future. The committee gives an account of its activities in the past year to the general meeting. For this purpose, it prepares the annual report and the annual financial statements. The administrative office or the working groups report regularly to the committee. The activity report always has a content-related and a financial component. Together with the controlling reports, it forms the basis for the superior body to assume its responsibilities. The executive committee, for instance, reports to the general meeting on its activities in the past year (annual report and annual financial statements). The administrative office reports regularly to the committee. Activity reports are submitted orally or in writing.

The annual accounts show the financial aspects of the association’s activities. They provide information about profit or loss and show how much money was raised and what it was used for. The committee must submit the annual accounts for approval to the general meeting.

Question

Does the association year always have to be the calendar year?

Answer

As a rule, no. The majority of all associations are, however, likely to align their activities with the calendar year, which is useful as the two years then run parallel to one another. On the other hand, associations that are active, for example, in the area of education or childcare tend to plan their activities according to the school year or on a semester basis. In such cases, it makes sense for the association year to deviate from the calendar year. Under certain circumstances, there may be a certain amount of additional work due to the fact the some administrative tasks (insurance, tax, etc.) also always have to be completed with the reference date of 31 December for legal reasons.

The balance sheet provides information about all assets and liabilities of the association and also shows whether the association has closed the year with a profit or loss. The closing balance is usually prepared as per the end of the association’s business year.

The financial statements are prepared as per the end of the association’s business year. They include an income statement and a balance sheet. If provided for by law or the articles of association, the accounting records and the annual financial statements are submitted to the auditors for review before the general meeting. Together with the annual report (management report), the annual financial statements must be submitted to the general meeting for approval. This approval relieves the committee (discharge).

The income statement provides details of income and expenditure and allows a comparison to the budget. The income statement shows whether the association records a profit or loss in the financial year (or during a certain business period).

Question

A member wishes to inspect and recheck the complete accounts (balance sheet and income statements) for the last five years of the association's existence. The member is not part of the committee and thus also has no direct access to the accounts. Is it permitted to deny the member access to the accounts? Or, as a rule, do all members have the right to check the complete accounts themselves or at least to view them?

Answer

The provision of Article 802(2) of the Swiss Code of Obligations (SCO) also applies to associations:
"Unless the company has an auditor, company members have unrestricted access to the company books and files. If the company has an auditor, the books and files may be inspected only if a legitimate interest is credibly demonstrated".

If the association has an auditor, the member in question must therefore justify their interest in viewing the accounts. A general need to check the accounts or distrust do not represent relevant reasons.

The committee is planning (budgeting) the allocation of funds for the coming year together with planning the association’s activities. The budget lists how much income is expected and for which areas or activities how much money can be spent. Depending on the articles of association, the budget must be presented to the general meeting for information or approval. As the budget provides information about the association’s activities in the future, it is important that the general meeting be informed.

Question

As our association finds itself at somewhat of a standstill, we have taken the decision within the committee to spend money on new flyers, a website and a special campaign, increasing the budget accordingly.  We are convinced that the association can afford this rather steep additional expenditure, but do not know whether the members will also see things the same way.
As the chair of the meeting, how should I proceed if the budget is rejected at the general meeting?

Answer

As authority for approving the budget at your association lies with the general meeting, the committee and the chair of the meeting need to ensure that they are well prepared and equipped with good arguments. It is also important that the entire committee is behind the proposal and that the relevant figures are made transparent, meaning that they are comprehensible for the members. It is also helpful to present a longer-term financial plan.

The members can put forward amendments to the proposed budget; it is not a matter of all or nothing. If the passing of the budget appears to be at risk, the chair of the meeting can call on the members or individual voters to make targeted requests for deletion or, where necessary, suggest (tolerable) reductions him- or herself.
Otherwise, the association's democratic rules have to be adhered to.

The object of controlling is the procurement, preparation, analysis and communication of data for the preparation of decisions. It is an important planning and steering tool, both at an operational and strategic level. Frequently, regular controlling reports to the subsidising body are the basis of service agreements. It contains statistics on the use of the service as well as budget reports and their interpretation.

Question

Our choir is planning to issue a brochure to mark its upcoming anniversary and gained approval from the general meeting for a budget of CHF 500. It has now materialised, however, that the costs have been completely underestimated. Do we now have to have the members vote again on a higher amount?

Answer

By voting on the issue again at an extraordinary general meeting, the committee is playing things safe. You can better judge for yourself whether the ordinary general meeting would approve of a corresponding cost overrun upon being presented with the accounts. Either way, the committee is well advised to inform the members in a timely and transparent fashion.

If the association gets into financial difficulties because funds are scarce and the budgeted expenses are higher than the expected income, and if no other means are available, the association has to devise a recovery plan. It has to adjust the budget and/or raise additional funds. The recovery can consist of austerity measures or of measures to collect additional funds.

The activity report (also called reporting) helps a higher-level body to assess the financial situation of an association and to prepare for the future. The committee gives an account of its activities in the past year to the general meeting. For this purpose, it prepares the annual report and the annual financial statements. The administrative office or the working groups report regularly to the committee. The activity report always has a content-related and a financial component. Together with the controlling reports, it forms the basis for the superior body to assume its responsibilities. The executive committee, for instance, reports to the general meeting on its activities in the past year (annual report and annual financial statements). The administrative office reports regularly to the committee. Activity reports are submitted orally or in writing.

Question

Is it right that the audit report isn't to be voted on? Is it true that following the approval of the annual report a vote is to be held on the audit report and then the annual financial statements?

Answer

The audit report is prepared by an independent person or body. It recommends whether the financial statements should be accepted or rejected and may also contain further recommendations.

A vote is not held on the audit report; it serves as an opinion-forming aid for members with respect to the annual financial statements. If the members are not satisfied with the work of the auditor, they can vote the auditor out and propose somebody else.

Discharge refers to a discharge from liability. By approving the annual report and the annual accounts, the general assembly grants discharge from liability for the administration of the association to the executive committee or the individual members of the executive committee. From this moment on, the executive committee is no longer liable to the association for its actions; however, this applies only to facts of which the members are aware; it does not apply to third-party liability claims, for which the association or the executive committee can be held accountable if need be.

Question

Can a new committee be elected if the old committee has not yet been discharged?

Answer

Following the approval of the annual financial statements, the general meeting grants discharge to the current committee. This means that from this point onwards the discharged committee is no longer liable for any debt. Instead, liability is assumed by the association in accordance with the provisions of the articles of association. Although a discharge resolution is not required by law, it is generally customary within the framework of the general meeting's supervisory duty in accordance with Article 65(2) of the Swiss Civil Code (ZGB) and is provided for in most associations' articles of association.

If the association's articles of association do not contain any provisions to contrary, it is also possible to elect a new committee without discharging the previous committee members who have stepped down. The former committee is no longer in office. Under civil law, however, any claims for damages can also be asserted against a committee that has already stepped down.
In the interest of ensuring the reasonable continuation of the association's activities, it is advisable for any claims for damages against the former committee members to be asserted in a quick and timely manner so that the issue of liability is clarified.

The executive committee is liable to the association for diligent and correct management. Once the general meeting has granted the discharge (relief of the committee), the committee is relieved from its liability for the past year. However, this only applies to those activities that have been disclosed to the general meeting. By granting the discharge, the general meeting declares to waive any liability claims against the entire committee or individual committee members. If committee members intentionally or negligently harm the association (culpable violation of their due diligence), they are personally liable for the damage. There are two special cases: liability for OASI contributions and VAT. If an association has employees, it is liable for the payment of the contributions according to article 52, OASI law. If it is subject to VAT, it is liable for the taxes due. The committee members are also personally liable if they cannot relieve themselves, which is difficult in this particular case.