Electronic filing of charity accounts should not become mandatory, and risks being “an onerous issue of compliance”, charities have said in response to Charity Commission proposals.
In October the Financial Reporting Council (FRC) and the Charity Commission announced charities would be allowed to file electronically on a voluntary basis, saying this will reduce administration for many.
However, numerous respondents to a Commission consultation on the subject have expressed concerns. One of these was Cancer Research UK, which said: “It would be of concern should this be the first stage of a journey that would lead to it being mandatory in the future”.
CRUK said there was not a strong appetite for electronic filing in the sector, that exemptions for smaller charities would be essential, and that feedback on the proposed system should be proactively sought from smaller and medium-sized charities.
It was joined by numerous representatives of small charities, who said they did not understand the consultation and would not have the expertise to file electronically.
Admin overheads 'already disproportionate'
Concern was also expressed by the Chartered Institute of Management Accountants, which warned that administration overheads for charity governance are already disproportionate, and that the Commission should be seeking to reduce them, not increasing them.
It also said that charity accounts are not as compatible with electronic tagging systems as those of profit-making companies are.
“The reason is that the charity format is not fixed, as it is for limited companies,” it said.
“Activities and funds mixes are dependent on circumstances and varying regulatory treatments which would make centralised requirements difficult to fulfil. The tagging is therefore likely to be a barrier to smaller voluntary groups.”
Tool for story-telling
Other respondents were more positive about the plans. The Charity Finance Group said the change will enable charities to “tell their stories better” by linking information within their accounts.
It added that electronic filing would help the Charity Commission identify charities that are at risk, and would give analysts better data on the charity sector's finances.
Meanwhile, NCVO said it is in favour of a move to digital accounting, and that a successful implementation of this initiative could alleviate fears of an increased administration burden.
The accountancy firm Grant Thornton said it is supportive of the plans, but that they must remain voluntary and templates should be provided to help smaller charities.
