Too many small charities are 'unaware of their reporting obligations', Commission research finds

12 Apr 2016 News

Less than half of small charities are able to provide adequate annual reports and accounts on request, according to research by the charity regulator.

Charity Commission

Less than half of small charities are able to provide adequate annual reports and accounts on request, according to research by the charity regulator.

And many large charities are still filing accounts with "major flaws".

The research reveals that many small charities do not appear aware of their reporting obligations. One in five sent another report in place on their annual report and accounts, one in six small charities failed to send over any form of report at all, and “several small charities” only sent their annual report and accounts after the Commission provided further explanation of the requirements to them.

Nigel Davies, head of accountancy services and the Commission said “the quality of small charity accounts is not as good as we would like”.

“All charities must by law prepare an annual report and accounts and make them publicly available. Accurate, good quality accounts is the minimum that we expect,” he said.

Davies urged charities to use the regulator’s accounts template – a method that the Commission revealed produced an improvement of 71 per cent to the standard of accounts submitted.

“There is one easy way to improve the quality of your accounts and report: use our templates,” said Davies. “The charities that do use our templates produce accounts of much better quality,” he said.

“The annual report and accounts is an opportunity for trustees to demonstrate that they have managed resources effectively and are meeting its objectives. Trustees need to tell their charity’s story well to maintain donor and public confidence. Our reports paint a picture that shows that the quality is not always as it should be and we will be working with the sector to raise awareness over the coming year.”

The regulator’s report said it was “disappointed that the results suggest that the quality of small charity accounting is not improving over time.”

The research was conducted using a random sample of 108 small charities with an income of less than £25,000 who received a request for a set of the previous year’s accounts. Small charities account for only 1 per cent of the sector’s income but represent more than 60 per cent of the charities on the register.

The research shows that the accounts of larger charities with an income of over £25,000 are improving – with over three-quarters of charities producing sets of accounts that meet a minimum basic standard, according to the regulator.

"Charities continue to file sets of accounts with the commission with major flaws, such as a chairperson’s statement instead of an annual report, an accountant’s report instead of an independent examiner’s report, or accounts that don’t balance," the Commission said.

"They also file annual reports that look well-presented but are not transparent about what the charity does, or about how the trustees are dealing with financial risks shown in the accounts." 

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