As he takes the helm at Charity Finance, Gareth Jones looks at the opportunities and challenges of being able to file accounts electronically with the Charity Commission.
It is truly an honour to take over from Andrew Hind as editor of this magazine, and attempt to fill his extremely large shoes (metaphorically speaking).
One notable aspect of Andrew’s editorship is the frequency with which you, our charity readers, have contributed articles. I’d very much like this to continue, so if you are working on any excellent projects or have opinions to get off your chest, please don’t hesitate to get in touch.
Opening up to transparency
Probably the biggest story this month has been the continuing scrutiny around the collapse of Kids Company.
However there is another issue which may have more practical implications for charity finance staff: the Charity Commission’s announcement that it is to accept online filing of annual accounts.
This is mostly a positive move. It is inevitable in the modern age that accounts should be filed electronically – indeed our sector is behind the corporate sector in this respect.
And if filing electronically allows for greater public transparency of charities’ financial affairs, then that is also a good thing. As someone who has regularly interrogated charity accounts over the past decade, I can attest that while many charities take their reporting duties seriously, others obscure the facts with a fog of complex terminology, vagueness and minimal disclosure.
However, the change will present challenges. Electronic filing is currently voluntary, but it seems likely that at some stage it will be made compulsory, at least for larger charities. The introduction of iXBRL by Companies House caused some hoo-hah when it was announced back in 2010, and although charities are now using this system reasonably comfortably, there will be challenges in adapting it to the vagaries of the Sorp and getting the sector on board.
The other challenge comes alongside the benefits of transparency. If the Commission’s aim is to release financial data wholesale to the public, then that data will be stripped of the context provided by narrative elements in the annual reports. Superficially alarming pension deficit figures, for example, could become freely available to journalists looking for the next big scandal about “wasted” charity funds, with no explanation of how manageable they are.
Charities must embrace transparency, and electronic filing is a further step towards that. Who knows, perhaps the problems at Kids Company might have been addressed sooner had some enterprising data analyst picked up on the chasm between its level of unrestricted income (78 per cent of cumulative revenue) and its reserves (less than a week’s expenditure). But the switch may also present significant challenges along the way.
