02/03/10

By Andrew Holt

Charities should be encouraged to consider publishing expenses of individual trustees and senior managers but disclosure should not be mandatory, according to a report by an independent expert group.

The group, set up by the National Council for Voluntary Organisations and the Charity Finance Directors' Group in the wake of the MPs' expenses scandal, acknowledged disclosing charity expenses was "desirable" but concluded there was not "sufficient evidence" for a "wholesale expansion" of public reporting.

Published this week, the report concludes an inquiry into the issue.

It states that although there was no evidence of any structural problems with the handling of expenses in the sector, there was some evidence that guidance was not always followed.

The group has recommended that all trustees should pay due attention to the control of expenses as part of good governance and internal control measures.

The report states there is insufficient evidence that publishing expenses would increase public understanding and confidence in charities for three main reasons:

One, there is little evidence of any widespread public concern. This combined with practical difficulties in meaningfully interpreting and comparing amounts could result in the disclosure of expenses damaging rather than improving the reputation of the sector.

Two, the role of trustees in managing and scrutinising expenses payments is only a small part of their job to ensure sound financial management. Publishing expenses alone is unlikely to lead to greater accountability in this area.

Three, standardising expenses would be difficult as would enforcing any requirement. Compliance could cost charities money and distract them from their core work without proportionate benefits in terms of raised public confidence.

Lindsay Driscoll, chair of the Independent Expert Group on Expenses, said: "We want the sector to be open and transparent and we would encourage all trustees to consider publishing expenses, so long as it is done in a meaningful way. But we did not find enough evidence to make it a legal requirement for charities to disclose this kind of information.

"Disclosure of expenses is only part of the issue and we have made several recommendations to tighten up on the management of expenses as part of basic good governance and internal control."

In addition to reiterating existing practice requirements, the report makes a number of recommendations to charities, including that they should consider whether to disclose expenses.

It also states all charities should have an expenses policy in place and that claiming expenses should be encouraged to promote diversity and avoid putting people off volunteering for financial reasons.

Further recommendations are made for sector bodies, such as NCVO and CFDG, which are asked to develop model expenses policies.

The Charity Commission is asked to review the level of compliance by trustees with SORP (Statement of Recommended Practice) accounting requirements in disclosing trustee expenses by charities as well as reviewing its guidance on the issue.

The report and recommendations are based on research and interviews by the group as well as consultation responses from 625 organisations.