In a review of a sample of charities, 38% of charities with incomes below £25,000 per annum were found to be submitting inaccurate data.

Small charities make up two thirds of all charities on the register and basic information on income and expenditure is the only financial information most are routinely required to provide to the Commission.

Whilst more than 90% of the total income and expenditure figures reported by charities with incomes of more than £25,000 agreed to their accounts, the reporting by smaller charities was much less reliable. Part of the reason was that 16% of small charities either stated that they had not prepared accounts or did not provide any accounts, despite reminders.

The Charity Commission checked the accuracy of financial information provided by its samples of charities in their annual returns by comparing it with their accounts.

In two thirds of cases (66%) the smallest charities reported income which tallied with accounts, 65% reported expenditure in line with accounts and in 62% of cases both income and expenditure agreed with the accounts.

For 13 of the 24 small charities in the sample, the Commission could identify from their accounts the figures that they had incorrectly reported in their annual returns. In addition to excluding different categories of income and/ or expenditure, there were also examples of the accounts provided not covering the same period as the annual return and the netting off of income and expenditure. However, for nearly half of these charities there was no obvious reason for the differences.

Larger charities, with incomes over £500,000, must provide more information and in this sample, the Commission found a 95% accuracy rate for their balance sheet figures, but income and expenditure analyses were just over 80% accurate.

The Commission, concluded that many charities task someone with insufficient knowledge of their organisation’s accounts with completing their annual return figures, resulting in errors.

Its analysis suggested there were several examples where the compiler of the annual return was uncertain over whether, or where, the different types of charitable funds should be included in the annual return.

This was a significant factor in most of the errors involving incorrect total income and/or expenditure as well as incorrect analyses of charitable funds. Examples included excluding restricted or unrestricted income and/or expenditure from the annual return and classifying designated funds as restricted funds in the annual return. Input error appeared to be a less significant factor behind the incorrect analyses.

Nigel Davies, head of accountancy services at the Charity Commission, said: ‘Not providing accurate financial information is misleading and can have an impact on public trust.

‘People want to know how charities spend their money; so this result is clearly not good enough.’

Accounts monitoring review: assessing the standard of charity financial information is here

Report by Pat Sweet