Over half of charity accounts still fail to explain how the charity is meeting its objectives, while a quarter do not meet basic standards for users, rising to almost half in the very smallest charities, according to research from the Charity Commission
The regulator analysed a random sample of 107 charity accounts against two criteria: how charities are reporting on the public benefit requirement, and whether the accounts meet readers’ needs
It found that 54% of charities did not meet the public benefit reporting requirement. Of these, 13 failed the requirement as they did not describe the difference that their charity had made; 21 charities did not include the statement that they had complied with the public benefit requirements and read the Commission’s guidance and 24 charities did not do either.
Nigel Davies, head of accountancy services at the Charity Commission of England and Wales, said: ‘This review indicates that too many charities are missing out on an important opportunity to tell the public why their work matters, and what difference they are making.
‘The easiest way to improve the quality of your accounts and report is to use our templates; we know the charities that do use our templates produce accounts of much better quality.’
The Commission also examined whether the charities’ accounts meet basic user needs, based on a range of criteria, including whether the annual report explains the activities the charity had carried out during the year to meet its purposes and whether the accounts had been appropriately scrutinised in an audit or independent examination.
This work found that 75% of the accounts were of acceptable quality, and identified some areas of particular strength: for example, all of the charities that required an audit had filed an audit report.
However, 25% of charities did not meet the basic standard, for example because the accounts were inconsistent or not transparent.
Separately, the Commission scrutinised a random sample of 109 accounts of small charities with incomes of under £25,000 to examine their overall quality. This survey found that 55% were of an acceptable standard, only marginally higher than the 47% achieved in the previous two years.
The regulator found a range of reasons for some charities falling short of requirements; for example, five charities provided incomplete accounts that did not include information on their assets and liabilities.
The report found that those charities that use the accounts templates often present accounts of a much higher quality, and is encouraging smaller charities to make use of the available templates.
The Commission says it has provided guidance to the trustees of the charities that did not submit accounts of acceptable quality and will be using opportunities, such as its quarterly newsletter, to share the key lessons arising from its account scrutiny work with other charities.
The Charity Commission reports on Accounts monitoring: Do charity annual reports and accounts meet the reader’s needs? are here.
