Most charities are failing to fully meet the requirement to report on their public benefit, according to new research by the regulator, and most small charities struggle to produce annual accounts of acceptable quality.

The Charity Commission analysed around 220 sets of charities’ accounts, split between the March 2012 and 2013 financial years. It found that only 27 per cent of accounts in the 2012 sample and only 35 per cent of those in the 2013 sample fully met the legal requirement to report on the charity’s public benefit.

Since 2008 charities have been required to formally report on their public benefit. At a minimum, trustee annual reports must include a report of the activities undertaken to further charitable purposes for public benefit, and a statement on whether trustees have had due regard to the commission’s guidance on public benefit.

In a separate report the commission used the same sample to analyse the overall quality of trustees’ annual reports and accounts, to assess how useful they are for users and how closely they comply with legal requirements.

The regulator determined that 68 per cent of the accounts in the 2013 sample and 54 per cent of the accounts in the 2012 sample were of acceptable quality. The most common reason charities failed to meet the minimum acceptable quality standard was that their trustees’ annual reports were inadequate.

The accounts of 89 per cent of charities with incomes of over £500,000 were of acceptable quality, but this fell to 53 per cent for charities with incomes of under £250,000.

Charity Commission chief executive Paula Sussex said knowing what charities do and achieve with their resources matters to people.

It is crucial that trustees take their reporting requirements seriously, Sussex said, which goes beyond simply getting the figures right.

“It’s about using the opportunity to explain their charities’ impact, to tell their story in a way that its supporters and beneficiaries understand.”

The reports form part of a wider programme of pro-active accounts monitoring reviews by the commission. Previous areas of focus have included charities with pension deficits, charities with net current liabilities and charities whose permanent endowments have reduced.

Access the reports here.

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