Large charities should learn from smaller charities’ ‘excellent accounts’

04 Oct 2022 News

Some of the largest charities in England and Wales could learn lessons on transparency from smaller charities, an expert has said.

Helena Wilkinson’s, partner and head of not-for-profit at accountancy firm Price Bailey, annual research into the transparency of annual reports at some the largest charities appears in the October edition of Charity Finance.

This year it covers those organisations ranked 101-200 in the Charity Finance 250 Index, which ranks charities based on their average three-year income.

The research alternates annually between this tier and the charities in the Charity Finance 100 Index.

Disappointing findings

Last year, Wilkinson praised the 100 Index constituents for the transparency of their reporting having “improved immensely since 2019 review”.

However, in this year’s review, she writes that “it was disappointing to see little progress” from the charities in positions 101-200.

“The charities reviewed this year need to take note to improve their reporting or, in fact, copy many smaller charities outside of this tier who produce excellent accounts,” Wilkinson says.

One key element used to measure transparency is whether a charity measuring success against strategy, rather than just publishing a list of achievements.

This year’s research found that just 27% have articulated their strategy and how they measure success against it in detail, up from 23% when this tier was last reviewed in 2020.

This compares with the 56% disclosing this information in the 100 Index review last year.

Cost-of-living crisis

Wilkinson argues the current high levels of inflation mean being transparent and detailed on impact is more important than ever.

“At the time of writing, inflation is over 10%, interest rates have risen with more increases on the cards, and significant utilities cost increases are expected, all leading to a cost-of-living crisis,” she says. “So, it will be more important than ever for charities to be able to demonstrate their impact and their added value to encourage support and donations from funders and the public.”

Increased attention to EDI

The research also found that 50 of the charities under review made reference to compliance to the Charity Governance Code, up from 46 in 2020.

Some 42 charities made reference to commissioned reviews of their governance processes, though not all against the Charity Governance Code.

The 2020 update to the Charity Governance Code’s equality, diversity and inclusion (EDI) appears to have increased attention in this area.

Some 51 charities had an EDI policy or statement in their trustee report, and Wilkinson predicts that all charities will “disclose information on this in the future”.

Charities commit to being carbon neutral

Environmental reporting is another area that Wilkinson expects to see grow in the future.

Of the charities under review, 69 disclose their carbon footprint and “many are considering and committing to being carbon neutral by 2030 or 2050”.

Wilkinson expects for this reporting to “rapidly increase in popularity for virtually all not-for-profit organisations”.

However, she adds that the current audit rules are fall short in this area and need to be updated as a result.

“With the rising level of voluntary disclosure in the charity sector, and increasingly in business, it would be most helpful if this was governed by required standards and conformity to ensure comparability and integrity in the data being disclosed,” she writes.

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