Charities should use annual accounts as communication aid

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Last month, the Charity Commission published the results of its monitoring reviews of charity trustees’ annual reports and accounts.

The findings reveal a slight improvement in the quality of public reporting, but the regulator states that too many charities are still falling short in the standards expected.

Public benefit reporting is an important element of charities annual reports and accounts. It delivers transparency so that the public can better understand exactly what a charity does and how it makes use of the donations that it receives.

The Commission scrutinised a random sample of 106 charity trustees’ annual reports and accounts to assess:

  1. how charities are meeting public benefit reporting standards; and
  2. whether the accounts meet readers’ needs

Trustees have a legal obligation to comply with the Commission’s guidance on public benefit reporting. All registered charities must publish a trustees’ annual report, detailing those activities carried out for the public benefit.

The commission found that 51 per cent of the charities reviewed demonstrated a clear understanding of the reporting requirement – representing a five per cent improvement on last year’s result. Most annual reports also included key aspects of public benefit reporting (also known as impact reporting), such as explaining who benefitted from the charity’s activities and including a public benefit statement.

The Commission went on to examine whether the annual reports and accounts met readers’ needs.

For the sample of charities with incomes over £25,000, the Commission found that 74 per cent of the trustees’ annual reports and accounts reviewed were of acceptable quality, whilst for the sample of small charities 64 per cent of reports and accounts were of acceptable quality, meeting the basic benchmark set by the Commission.

Inadequate reporting was most commonly attributed to trustees’ failure to explain the charitable activities that had been carried out and, for smaller charities, failure to provide one or both of the trustees’ annual report or accounts.

Nigel Davies, Head of Accountancy Services at the Charity Commission for England and Wales said: “Our research into trust and confidence in charities shows that the public no longer give charities the benefit of the doubt; they want evidence that charities make a difference when using their money. Public reporting is an opportunity for charities to tell their story and explain to the public what they do and how they use charitable funds.

“It is a chance to show how your charity is making an impact and how you are delivering on your core purpose.”

“I am encouraged to see that an increasing number of trustees recognise the value of public benefit reporting, but there is clearly more work to be done across the sector.”

Here at George Hay, we know that you understand the importance of filing fully-compliant reports and accounts, on time. Failure to do so indicates poor governance and places doubt in the minds of stakeholders, such as donors, volunteers and grant providers. Our charities team has the knowledge and experience required to assist you with preparing your annual returns. To find out more, please contact us.

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