Christine Rigby, senior consultant at Bates Wells Braithwaite, questions the regulator's plans to measure campaigning in the annual return.
The current trend towards greater organisational transparency has now unmistakably reached the charity sector. Witness the June report on public trust from the Charity Commission which found that 96 per cent of the public think it important that charities provide information about how they spend their money.
In the wake of NCVO’s recent pay disclosure recommendations, the Charity Commission is now consulting on major additions to the annual return.
But does disclosure of information inevitably mean greater transparency? As presently outlined, the Commission’s proposals risk increasing public misunderstanding rather than attaining more clarity. In the rush to provide the public with more information about charities, we need to pause and be sure the desired information is useful and meaningful.
At the heart of the proposed new annual return is a requirement for charities to state how much they spend on “campaigning” (which has not been defined). Campaigning is a very broad term. It is much broader than the spending on “political and communications work” that the Public Administration Select Committee recommended last year that the Charity Commission require charities to declare.
Campaigning includes political lobbying but also includes awareness raising and information campaigns, and some fundraising and marketing campaigns. A cancer charity which launches a public health campaign encouraging the public to eat five a day is engaging in campaigning just as surely as a charity for asylum seekers lobbying for changes to welfare benefits regulations.
Moreover, many charity mailings and communications encompass both awareness raising and fundraising appeals. Does the Commission really feel that disclosing the costs of all these different types of campaigning will increase trust and confidence? If not, then the proposed question needs to be framed far more carefully.
There are other opaque and potentially confusing requirements in the Commission’s proposals, whose meaning needs to be ironed out. The Commission is asking for disclosure of income from “public service delivery” and “private donations” but these are imprecise terms.
A further significant problem for the sector is that these proposals threaten to add an extra burden of reporting on top of what is already required of them in their published accounts. The two new Sorps published last month do not, for example, ask charities to calculate how much they spend on campaigning or receive from public service delivery. Yet the Commission has welcomed the new Sorps, saying they “clearly lay out the reporting rules to help charities be transparent, meet the high expectations held by the public and uphold the high levels of trust in the sector.” It is hard to see why the proposed changes to the Annual Return are needed if the new Sorp achieves this.
Charities don’t have any problem with picking out figures from their accounts and placing them in the annual return, where they can be more easily seen. What they want to avoid is having to produce entirely new sets of figures, separate from current accounting requirements. The Charity Commission, rather than jostling charities into producing vague figures which are open to misinterpretation, should initiate a project with the sector to work out whether it is possible to come up with meaningful and comparable figures for these sorts of costs. If it is, then charities should be given the time to put in place procedures to capture this new information which, ideally, should be extractable from standard accounting records.
When the regulator announced changes to the annual return in 2013, it said it wanted to strike the right balance between improving transparency and making the task of completing the annual return too burdensome. That approach needs to be revived now.
