Fall in quality of charity accounts

In a report published at the end of 2018 the Charity Commission reported that the quality of charities’ financial reporting has fallen when compared to the previous year’s survey.

The Commission selected a sample of 105 charity submissions covering accounting periods ending in the year to 31 December 2016. The review included charities with a reported income over £25,000. Just 70% (2017 report – 74%) of the annual reports and accounts met the basic benchmark for public reporting, whilst only 52% (2017 report – 51%) of trustees’ annual reports met the public benefit reporting requirements.

Annual reports and accounts

The Commission’s criteria assessed whether the accounts included:

• A trustees’ annual report
• An independent examiner’s or auditor’s report on the accounts
• A complete set of SORP compliant accounts

The 30% of accounts and reports that did not meet these criteria failed because:

• Although all documents were submitted, one was inadequate (12%). Generally, they provided little or no information on the charity’s purposes or activities
• Although all documents were submitted, at least two were inadequate (9%). As above but coupled with incomplete accounts or incorrect independent scrutiny report
• At least one document was missing (9%). None of the charities in this group submitted any form of independent scrutiny report. In addition, all were missing at least one of the trustees’ annual report and accounts or the documents were inadequate

Public benefit reporting

The minimum requirements of the Commission were:

• Statement by the trustees confirming due regard to the Commission’s guidance on public benefit (a public benefit statement), and
• Explanation of the activities undertaken in furtherance of the charity’s purposes for public benefit

Most charities met one or other of these requirements. 66% (prior year – 62%) included a public benefit statement and 66% (prior year – 71%) explained the activities undertaken. To improve the “pass rates”, trustees should expand the public benefit statement to explain why the charity’s activities provided public benefit, explain who had benefitted as well as explaining the impact of what the charity had done.

The quality benchmark was based on the Commission’s report “Trust in Charities, 2018” published in July 2018. This report shows that for 37% of the public the most important quality is that they can be assured that a reasonable proportion of donations make it to the end cause, whilst the most important quality that a further 36% wish to see is that the charity is making a positive difference to the supported cause.

Conclusion

Public confidence in charities has fallen in recent years for various reasons. An easy win for trustees is to ensure their accounts and annual report at least meet the reporting requirements. Prospective donors can then obtain the information they need from the published accounts.

We are able to assist all of our charity clients in these areas to ensure that minimum reporting requirements are met or, more often, exceeded.

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