Large charities should be subject to a separate governance standard to improve transparency and create a 'gold standard' of annual reports, according a report from accountancy firm Grant Thornton.
Grant Thornton produces an annual review of charity governance. In the latest edition, entitled Charity Governance Review 2015: Navigating a changing world, the firm argues that all charities are subject to very similar rules to smaller ones.
It says there are two main pieces of guidance - the Charity Commission’s Hallmarks of an effective charity and the voluntary code Good Governance – a code for the charity sector. However it said because both pieces of guidance are aimed at the whole sector “very similar guidance is being used by all types of charities, from complex multinationals to local groups”.
The report suggests that guidance should be “appropriate to the scale, complexity and level of public interest in a charity” and that larger charities could benefit from having “bespoke code of corporate governance”.
“This would also enable the setting of a ‘gold standard’ for reporting by large charities, helping to ensure transparency with stakeholders and the wider public. This may also help to further address those areas, such as remuneration where there are increasing levels of public interest, ” it said.
Grant Thornton’s report is based on analysis carried out in summer 2014 of the annual accounts of the top 100 charities by income in England, Scotland and Wales, excluding universities. The financial statements reviewed cover the period between 31 January 2012 and 31 March 2014.
Carol Rudge, head of not for profit, at Grant Thornton, wrote in the foreword to the report: “In some areas we found much greater transparency within the reports published by large corporates than by charities.”
She highlighted the inclusion of key performance indicators which are used by the vast majority of FTSE 350 companies but by just 23 per cent of charities. According to the report: “Disclosure of key performance indicators provides the framework for a charity’s view of its performance, and con provide essential context of the non-financial indicators used by trustees.”
Grant Thornton also found that 59 charities mentioned the use of volunteers in their annual reports and advised charities that they should do more to explain the contribution of volunteers to their organisation, in financial terms where possible.
Use of social media
The report notes that there has only been a small increase in the number of large charities that ware active on Twitter, Facebook and LinkedIn, from 74 in 2014 to 76 this year.
But the average number of followers increased from 78,000 to 94,000.
It also found that the number of chief executives engaged on Twitter has grown from 29 to 37, and the most popular chief executive has 11,000 followers.
Diversity
The number of charities with a female chair fell from 22 in 2014 to 14 this year although in this area the charity sector is ahead of the private sector, with just 3.6 per cent of FTSE 350 companies having a female chair.
