The Charity Commission has today published research showing that almost half of small charities’ accounts are of an “unacceptable quality”.
However, the Commission found a slight year on year increase in the number of “acceptable” accounts presented by these charities, while the percentage for bigger organisations decreased.
A sample of 109 charities with an annual income of less than £25,000 last year found 55 per cent met the Commission’s basic standard, up from 47 per cent the previous year.
The majority of the 49 smaller charities which fell short of the standard did so because they failed to provide either their accounts or annual report, with ten submitting neither. The rest failed because their documents omitted key information.
Larger charities also failing
A similar sample of 107 charities with an annual income of more than £25,000 found 75 per cent submitted acceptable accounts, slightly lower than the 77 per cent it found the previous year.
Only three of these failed to submit their accounts and annual report.
The majority of the 27 charities which failed the test either provided incomplete or unbalanced accounts or filed an annual report that did not cover its objectives or activities.
Of these, 24 have subsequently filed further accounts while the remaining three either no longer generate more than £25,000 a year or have ceased to operate.
Of the 24 that have submitted further accounts, the Commission has told the trustees of three that it requires them to correct and resubmit their latest documents as they still contain serious deficiencies.
Public benefit reporting
In another piece of research published today the Commission found that only 46 per cent of charities with an annual income of more than £25,000 submitted annual reports that “demonstrated a clear understanding of the public benefit reporting requirement”. This is a slight increase on the 45 per cent that passed the test the previous year.
Out of these charities, 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.
See in Charity Finance
Nigel Davies, the Commission’s head of accountancy services, 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.
“We know from wider research how important it is for donors and supporters to know how charities are spending their money. Your report and accounts say a lot about your charity’s attitude to accountability and transparency and so don’t miss out on this opportunity.
“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.”