Quality and transparency in charity accounts has fallen with only 70% of trustees’ annual reports and accounts meeting the Charity Commission’s basic benchmark of user requirements, it has said.
According to the Commission’s ‘Public reporting review’, this has fallen from last year’s 74%. The quality benchmark was based on recent research into trust in charities which found that ‘ensuring a reasonable proportion of donations make it to the end cause’ and ‘making a positive difference to the cause they work for’ were the most important factors driving public trust and confidence in charities.
To test how well charities were meeting this benchmark, the Commission scrutinised a random sample of 105 charity accounts submissions, covering accounting years ending during the 12 months to 31 December 2016, and assessed these against public expectations and public benefit reporting requirements.
The main reasons why accounts did not meet the Commission’s basic benchmark were failure to evidence that they had been subject to independent scrutiny by an auditor or independent examiner, as required by law, and / or not providing meaningful information about their charity’s purposes or the activities carried out to achieve those purposes.
Only 52% met the public benefit reporting requirements, although this is a 1% increase on last year.
The reviewers looked for evidence of some reflection on the difference that the charity’s activities had made. Positive examples of compliance included explaining why the trustees believed that the charity’s activities provided public benefit; explaining who had benefitted from what the charity had done, whether a particular group of beneficiaries or the wider public; and explaining the impact of what the charity had done, such as examples of how the charity’s services had led to improvements in people’s lives.
The regulator has provided guidance to all trustees included in the reviews that did not meet its expectations. Support to assist trustees and independent examiners on the preparation and scrutiny of reports and accounts is also available on GOV.UK.
Nigel Davies, Head of Accountancy Services at the Charity Commission said:
“The public want and deserve to know how charities spend their money so this deterioration in the quality of accounts is of serious concern. The trustees’ annual report and accounts are a key way to build confidence among supporters, so many charities are clearly missing an opportunity.
“I would urge those charities that find reporting difficult to take advantage of the pro-forma reports and accounts available on our website.
We also need to see a step-change in trustees’ attitudes to public benefit reporting. It is disappointing that nearly half of charities fail to explain the activities they undertake and the impact they have. We want to see charity thrive, so charities must be clearer about who they help and what difference they are making.”