Charities are still let down by poor accounting, says review

Poor basic accounting and reporting are still at the heart of most charity malpractice, according to the Charity Commission's first annual review of the key themes from its compliance work, which is published today.

Hind: a "useful insight" for charities
Hind: a "useful insight" for charities

The Charities Back on Track report reveals that the commission carried out 799 assessments of public concerns over the past year. Cases were opened on 170 of them, and 19 resulted in formal statutory inquiries. It says the regulator's compliance work protected £16m of charitable assets.

An emerging theme, it says, "has been the number of instances where poor basic accounting and reporting practices have caused long-term problems for a charity, as well as resulting in a breach of the law.

"Ensuring charities meet their reporting requirements will be increasingly important as public scrutiny of charities' effectiveness grows."

Keith Hickey, chief executive of the Charity Finance Directors' Group, said accounting had got better since the introduction of the Sorp 2005, but there was still room for improvement.

"The report also looks at the importance of sound financial controls and clear information to good decision making; these are principles the CFDG would wholeheartedly endorse," he said.

The commission has significantly reduced the time taken to resolve cases, according to the report, closing just under three-quarters of formal inquiries within nine months, compared with less than a quarter in 2006/07. However, the figures still fall short of targets and the report admits the commission still needs to improve.

Alerts on key risk factors will, in future, be produced by the commission's new monitoring unit, which is expected to be operating by the end of the year.

Andrew Hind, chief executive of the commission, said: "We hope this report provides charities with a useful insight into how we approach our compliance work and the impact of our regulatory action."

The report contains advice on fundraising, good governance, fighting fraud, tackling terrorism and dealing with internal disputes.

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