5 February 2019
The Charity Commission has raised serious concerns about the quality of financial reporting within the sector.
The regulator published the findings of two reviews at the end of 2018, looking at whether charity annual accounts and reports ‘met the basic requirements of the users of the accounts’, and specifically whether charities were properly complying with the public benefit reporting requirements. In both cases, the Commission concluded that there is significant room for improvement.
Trustees' Annual Report and Accounts
In Public Reporting by Charities in their Trustees' Annual Report and Accounts, the Charity Commission found that 70% of trustees’ annual reports and accounts tested met their benchmark level – down from 74% the previous year, and 77% the year before that.
It should be noted that the benchmark was not set particularly high. The Commission was not looking for ‘technical compliance with the Statement of Recommended Practice (SORP) or other reporting requirements in the review. Rather, they just wanted to see that the accounts had been prepared on an appropriate basis, were complete and had been subject to the necessary level of independent scrutiny, and that the Trustees’ report contained meaningful information about their charity’s purposes and the activities carried out to achieve those purposes.
Public Benefit Reporting
The other publication, Public Benefit Reporting by Charities, concluded that just 52% of annual reports met the public benefit reporting requirements; marginally up on the 51% from the prior year.
Although the majority of Trustees’ reports reviewed were found to contain either a ‘public benefit statement’ or some explanation of how the charity furthers it purposes for the public benefit, almost half of charities again fell short on providing an appropriate level of information. This has led to the Commission calling for a ‘step change’ in trustees’ attitude to public benefit reporting, and for charities to use their annual reports to clearly explain who they help, and the difference that they make.
The reports were based on a random sample of charity accounts, with an annual income of £25,000, taken from the register of charities in May 2018. 105 sets of accounts were reviewed, for accounting years ending during the 12 months to 31 December 2016.
How we can help
At UHY we are focussed on helping our charity clients meet their financial reporting and regulatory responsibilities, and so prepare annual accounts and reports which will comfortably meet the standards required by the Charity Commission. However, beyond this, we also understand that the financial statements represent a key way for charities to communicate with their various stakeholders – be it funders, service users, volunteers or regulators, and welcome the opportunity to assist trustees ‘tell the story’ of their charities in a relevant and engaging way.
If you have any questions or would like assistance with your charity’s financial reporting, please contact your local UHY charity adviser. Alternatively, if you would like to read more charity-focused blogs please click here.
