'Fundamental change' in charity reporting requirements needed, says report

08 Mar 2018 News

A report by a former committee member of the charity reporting standards body calls for “fundamental change” in how charities present information to the public.

Joe Saxton, founder of consultancy nfpSynergy, sat on the Statement of Recommended Practice (SORP) committee for three years before resigning last autumn.

During his time on the committee, Saxton frequently called for the introduction of a “key facts” section in charities’ accounts to make them more accessible to the public, but this has not come to fruition.

In a report published today, SORPed out, Saxton says charity accounts need to be “more transparent and accessible so that donors and the public can easily find out the information they are after”.

Saxton’s other proposals include:

  • Charities should only be required to submit information to the Commission once a year instead of the current system where they are required to produce their annual accounts and an annual return.
  • Bringing all other reporting of charities’ financial figures within SORP requirements, such as website summaries and reports to donors.
  • A requirement for charities to produce figures for percentage of income spent on fundraising, percentage going to the cause and salaries of highest paid employees alongside financial data. This is intended to “illuminate areas of public spending concerns”.
  • Create a new financial reporting board for charities, modelled on the Fundraising Regulator and incorporating the SORP committee, to “make sure that charity financial reporting is transparent, accessible and fit for the purpose of reassuring the public and other donors that their donations are well spent”.

More diversity on committee

In an accompanying blog post, Saxton writes: “Our approach to the financial reporting of UK charities is a mess, and our new report says it’s time for fundamental change.

“The heart of the problem is that while SORP says its primary stakeholders are the public and donors, its mechanisms have been captured by charity finance professionals.

“The SORP committee only has two people on it who aren’t finance professionals or representing finance professionals. The processes are deeply technical and filled with jargon. There are no donors or members of the public on the committee.”

Saxton draws a link between the current inaction over improving reporting standards and the self-regulation of the fundraising sector before the Olive Cooke scandal.

He also mentions the Oxfam scandal, saying a “media firestorm” was required to force a boost in safeguarding standards.

“We have the opportunity to take action before the firestorm, to make charity finances more transparent,” he says.

Charity Commission response

Sarah Atkinson, director of policy, planning and communication at the Charity Commission, said Saxton had made a valued contribution to the SORP committee’s work and said his desire for transparency is shared by the UK’s four charity regulators.

She said “more needs to be done” to make the numbers reported in accounts more accessible and said “this is why the SORP emphasises the importance of linking the accounts with the trustees’ annual report”.

However, Atkinson appeared to take a different stance to Saxton on bringing other publications of charities’ financial data under SORP’s scope.

She said: “How charities choose to report outside of the statutory report and accounts is a matter for trustees and the author raises some ethical concerns citing selective or misleading reporting.

“We agree the sector should live its values and behave ethically and the SORP emphasises the importance of balanced and accurate reporting. However, there would be challenges in regulating all communication that contains financial information issued by charities.

“We agree that delivering reporting that best meets the needs of donors, funders and the public is crucial and we will reflect on the recommendations in nfpSynergy’s report together with our charity regulatory partners and the Financial Reporting Council as we develop the next SORP.”

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