Rui Domingues looks forward to the day when agreed standards will guide impact reporting.

Finance professionals have a reputation for being poor communicators. There is real skill involved in getting technical messages across to others, and two documents have recently been issued which both aim, in different ways, to help us achieve this.

Firstly, as part of the Charities Act 2006 review, the Cabinet Office published a call for evidence on the reporting framework for charities. The scope of this aspect of the overall review seems to concentrate mostly on whether reporting thresholds need to be changed, with little emphasis on the ‘softer’ aspects of reporting that is required in the Trustees’ Annual Report.

The call for evidence does mention impact reporting but, in the absence of any sector-wide consistency in this area, there is a danger that the Cabinet Office’s review may fail to properly cover necessary changes to impact reporting, even though this is an important area in need of development and clarification.

Secondly, New Philanthropy Capital (NPC), and various others, have published the Principles of Good Impact Reporting. This document sets out the key steps that a charity needs to take to develop a robust impact reporting system.

Economics

Recently, and independently of this guide, Friends of the Elderly worked with Pro Bono Economics (an organisation that matches volunteer economists with charities) on establishing the impact of our home-support services. This has been a very useful experience and proved to me the value of engaging with economics professionals to help demonstrate impact, as they have the necessary knowledge and expertise to construct a robust impact assessment. But the work was reactive, responding to a request from the public sector for this information.

If I close my eyes and dream of an ideal situation, the sector would create a coherent set of standards – similar in nature to the accounting standards we’re all familiar with – that would guide charity impact reporting, all set within a proportionate regulatory framework. Perhaps this development would be guided by a new breed of economists specialising in the charity sector, and maybe one day we will all be reading Charity Economics, or going to meetings of the Charity Economists Group.

But back to my two documents. In their own way, each is useful. The NPC document has a focus on impact and outcomes; the thrust of the Cabinet Office’s document appears to be on inputs and outputs. But can they both be right?

The answer is probably that both documents are right – but not exclusively. A donor would want to make sure that the resources they gave – whether time or money – would both make a difference (impact), and be used wisely (inputs/outputs).

Value for money

Taken together, the two documents remind me of the classic ‘value-for-money’ framework (VFM), which draws both the impact and the input/output aspects together. Having previously maligned the VFM concept (while struggling through laborious public sector tender submissions), I am faced with the unpleasant reality that perhaps I was wrong, and there is something in it after all.

So, what does all this mean for me, as a finance leader in my organisation? Until impact reporting is covered more seriously by a regulatory or standardsbased framework, it will be hard to justify dedicating resources to working up meaningful, consistent impact information.

I am not in favour of increasing our regulatory burden, but we should be proving our impact; showing how we make a difference.

With the scarcity of resources we all face, I will have to focus on the input and output side of things. But this won’t stop me wanting to do my bit in helping to show how we deliver impact at Friends of the Elderly.

Perhaps I need to look at VFM again. Perhaps there is space for a version of this model, tailored to the charity sector, around which finance professionals could design reporting structures. Because, if adopted properly, this framework could help reveal the impact we make and why we can be trusted with donors’ valuable resources.

Rui Domingues is finance director at Friends of the Elderly