Charities must use annual reports to communicate better, regulator warns

Charities must use their annual reports and accounts to communicate with the public better and gain public trust through transparency, the Charity Commission has warned.

The regulator today published the results of its latest monitoring reviews of charity trustees’ annual reports and accounts, which revealed “too many” charities are still falling short in this area.

The Commission scrutinised a random sample of 106 charity trustees’ annual reports and accounts, assessing how charities are meeting the public benefit reporting standards, and whether the accounts meet readers’ needs, including a separate sample of “small charities”.

However almost half (49 per cent) of charities failed to demonstrate a clear understanding of the public benefit reporting requirement, despite there being a small improvement on last year.

The regulator found the most common reason for inadequate reporting was that the trustees’ annual report did not explain the charitable activities the charity had carried out.

However, it said the majority of annual reports included key aspects of public benefit reporting, with 71 per cent explaining who benefited from the charity’s activities and 62 per cent including a public benefit statement.

Some trustees had expanded their statement to explain why they believed their charity’s activities provided public benefit, whilst others discussed the difference that they had made, particularly to beneficiaries.

Overall, the Commission’s review found that 51 per cent of the charities reviewed demonstrated a clear understanding of the public benefit reporting requirement – a 5 per cent improvement from last year’s result.

It also found that 64 per cent of the charities provided trustees’ annual reports and accounts of acceptable quality, meeting the regulator’s basic benchmark, while 74 per cent of charities with incomes over £25,000 met the basic benchmark.

The Commission said it has provided regulatory guidance to 89 charities included in the reviews in order to help the trustees improve the quality of future trustees’ annual reports and accounts.

Commenting on the report, Charity Commission head of accountancy services, Nigel Davies said: “Our research into trust and confidence in charities shows that the public no longer give charities the benefit of the doubt; they want evidence that charities make a difference when using their money. Public reporting is an opportunity for charities to tell their story and explain to the public what they do and how they use charitable funds.

“Producing a trustees’ annual report and accounts is not an administrative box-ticking exercise. It is a chance to show how your charity is making an impact and how you are delivering on your core purpose.

“Today’s results show that too many charities are still not meeting very basic standards when it comes to making key information available to the public. I am encouraged to see that an increasing number of trustees recognise the value of public benefit reporting, but there is clearly more work to be done across the sector.”

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