Charities are “not doing enough” to demonstrate their public benefit, or explain how they spend their money, according to the Charity Commission.
The regulator carried out a “proactive scrutiny” of charity accounts and trustees’ annual reports and assessed these against public expectations and public benefit reporting requirements.
It found that just 70% of trustees’ annual reports and accounts in the ‘Public Reporting Review’ met the its benchmark of user requirements, compared with 74% the previous year. This is the third consecutive year that a fall in quality has been reported.
The quality benchmark was based on recent research into trust in charities which found that “ensuring a reasonable proportion of donations make it to the end cause” and “making a positive difference to the cause they work for” were the most important factors driving public trust and confidence in charities.
The commission said the main reason why submissions did not meet the benchmark was due to failure to evidence that their accounts had been subject to “independent scrutiny by an auditor or independent examiner, as required by law”, and/ or “not providing meaningful information about their charity’s purposes or the activities carried out to achieve those purposes”.
The review also found 52% of trustees’ annual reports met the public benefit reporting requirements. Although this was a 1% increase on last year the commission said that trustees are still “falling short” on the requirements to explain activities undertaken by the charity to further its purposes for the public benefit, and to provide a “public benefit statement”.
Nigel Davies, head of accountancy services at the Charity Commission said: “The public want and deserve to know how charities spend their money so this deterioration in the quality of accounts is of serious concern. The trustees’ annual report and accounts are a key way to build confidence among supporters, so many charities are clearly missing an opportunity.
“I would urge those charities that find reporting difficult to take advantage of the pro-forma reports and accounts available on our website.We also need to see a step-change in trustees’ attitudes to public benefit reporting. It is disappointing that nearly half of charities fail to explain the activities they undertake and the impact they have. We want to see charity thrive, so charities must be clearer about who they help and what difference they are making.”