Joe Saxton makes the case for including a key facts summary in charity accounts.
Gareth Jones’ article last week expressed concern about the proposal for a ‘key facts’ summary in the latest SORP consultation. But as a member of the SORP committee I’d like to respond, and explain why I believe such a summary would improve charity accounts.
The key facts idea is not some Charity Commission conspiracy, nor is it likely to produce dubious conclusions based on strange ratios.
I know that it isn’t a Charity Commission plot with a fair degree of certainty because I joined the SORP committee two years ago with the explicit agenda of getting a key facts section in the annual reports & accounts. I have seen little interest in the idea from the Commission.
Another reason I can state with a fair degree of certainty that the Commission are not able to seamlessly foist their ratios on charities, is that they don’t run the SORP committee.
The charity SORP committee is a rare example of four regulatory jurisdictions working together: OSCR, Charity Commission Northern Ireland, Charity Regulatory Authority in the Republic of Ireland and the Charity Commission for England and Wales. The Committee Secretariat is run by CIPFA and the Committee is jointly chaired by OSCR and the Charity Commission. So the Commission is but one of four jurisdictions and of the 25 or so on the Committee they have but one voice.
No decisions on what would be in the key facts
Finally, what would actually be in key facts has not yet been decided. If the concept is agreed as a result of the consultation then I imagine it will need a working party to explore exactly what might go in the ‘key facts’ section.
So why am I so keen on a key facts section as to sit through SORP committee meetings?
The reason is simple. Reports and accounts have become so long and so complicated that they are impossible for the average lay person to understand. If charities are for the public benefit, then the reports and accounts that make them accountable, should be of benefit to the public.
At nfpSynergy we carried out some research last year on the length of report and accounts and typically they were 50-60 pages long. Combine that with the fact that they are usually a pdf hidden deep on a charity’s website, and it means they are all but unavailable to the average donor. So guess what donors will do, if they do anything, probably go and look at the Charity Commission website.
We can’t pretend that accounts as they stand make the data donors crave, accessible. Inaccessibility aside, many charities produce an annual review now rather than a report which allows them to say whatever they like, tossing the rigour of SORP aside. For example we found a major charity that doesn’t include fundraising in the bar chart for how we spend your money.
Our research shows again and again that the public want to know how their money is spent. They want to know what charity CEOs earn. They want to know what goes on fundraising and what goes on charitable activities. Yes some donors will decide not to give to a charity if they know these figures. But I don’t believe the solution to this is to keep donors in the dark about how their donations are spent. I believe the solution is to make the figures crystal clear and explain, explain, explain why charities do what they do.
So a key facts section would be short (2 pages) and a contain mix of predefined data (eg total income, fundraising income, fundraising expenditure, reserves, staff numbers, etc). Indeed I thought the old Charity Commission website had much of the relevant info – though I would add the band in which the top salary was placed. In addition to this charities would add other nuggets of info about their impact and achievements and that would be up to them.
Stop putting misleading data in annual reviews
The key facts section would be a kind of executive summary for the report and accounts as a whole, and the recommendation would be that charities repeat the data on their website as well as in their annual reports. As I say the final form would come about after a set of more specific recommendations. What I hope is that a key facts section would stop charities tossing SORP aside and putting what data they like in an annual review.
The challenge for the sector is this: how do we help donors and the public understand charities and the way they work, how do we help the public understand that charities need to spend money to raise money, how do we make the wealth of information in reports and accounts more accessible. I agree with Gareth ‘the public is driven by a misconception about the most effective way for charities to operate’.
I just cannot agree that the solution is to make the information they crave as hard to find as possible. It’s that kind of attitude, ‘they won’t understand so don’t tell them too much’, that created so many of the problems we have had in fundraising. I believe the solution is to make key data easy to find and to improve our ability to explain the way that modern charities work. The ‘key facts’ idea is but one small way to make that happen.
Joe Saxton is the founder of nfpSynergy