FINANCE NEWS: Reports need more outcomes, advises DSC

Mathew Little

Charity annual reports should no longer be influenced by company accounting practice, according to the Directory of Social Change.

In response to the Charity Commission's publication of new guidance last week on more effective reporting for charities, Luke FitzHerbert, researcher at the Directory of Social Change, said: "Reports should concentrate on the activities of charities rather than primarily on their finances."

The new guidance is intended to help trustees use the Statement of Recommended Practice to explain their charity's objectives and whether they have achieved them.

But the Directory of Social Change still believes that too much emphasis is placed on finance rather than outcomes in charity reporting.

"There are two kinds of annual report," said FitzHerbert. "Commercial ones are inherently a gloss on financial results, as these are the results of the year's work. Companies exist to make money for their shareholders and, as a consequence, all experience and guidance goes towards explaining financial results.

"For public institutions, whether they make a surplus or deficit, the report is not an outcome of its work, which is, for example, dead or recovered patients. The two kinds of report are different in kind and charities should be firmly in the second camp."

The Directory of Social Change argues that charities should follow the practice of public sector bodies, such as schools or hospitals, which are directed by the Government to report annually on their performance.

The training and advocacy body also wants the commission to compel all charities to produce a specific document called the 'annual report and accounts'.

According to FitzHerbert, only 32 per cent of charities use the conventional 'annual report and accounts' title. "Otherwise there is every variation on reports by directors, councils, committees and of financial statements, financial reports and just untitled sheets of paper," he said.

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