Improved transparency vital to protect funding, says report

Tax advisory firm Grant Thornton, revieiwing the financial statements of the top 100 charities by income, says the most commonly cited risk is loss of funding

Report published today
Report published today

Charities must take greater steps to improve their transparency through reporting if they want to tackle key concerns such as loss of funding, according to a new report.

The tax advisory firm Grant Thornton reviewed the annual financial statements of the 100 charities with the largest income in England and Wales for its report Transmitting Trust Through Good Governance and found the most commonly cited risk was loss of funding, reported by 50 per cent of the charities.

But the report, published today, says there has been a decline in the number of charities reporting concerns about the risk posed by the state of the economy overall, with 14 per cent saying it was a key risk for their charity, down from 58 per cent in 2013.

Carol Rudge, partner and head of not for profit at Grant Thornton, said in a statement accompanying the report: "Charities are facing a loss of trust, worsened by the recent headlines around Olive Cooke and the demise of Kids Company. This could have a significant impact on charities’ abilities to raise funds, and our report found this was the most commonly cited risk."

She said this made it crucial for charities to be able to demonstrate transparency in order to rebuild trust with donors, employees, the public and wider stakeholders.

The report found 23 of the charities examined offered no information on recruitment or appointment of trustees in their annual reports and only 17 gave more detail about trustees’ skills than the bare minimum required by law.

Rudge said the report found "some encouraging signs" of charities trying to communicate more transparently through their annual reports, but more progress could always be made.

"With conversations and consultations turning to whether the sector should move to an opt-in model for fundraising, charities must be transparent and clear on their governance measures," she said, pointing out some commentators had warned charities could lose up to 70 per cent of their funding if opt-in fundraising became mandatory.

"If charities can’t provide robust and reliable information on those areas scrutinised by the media, public and regulators, they could find it difficult to keep funding and contracts," she said.

"Charities must demonstrate that they are in control and focused on getting the best value from external funds."

The report says that 16 of the charities had published separate impact reports in the past 12 months, but the quantity and quality of impact reporting and the importance attached to it among the 100 charities examined varied hugely.

Almost two-thirds of the charities disclosed that they had a diversity policy for board recruitment, with 30 per cent of the top 100 including a good or detailed policy, up from 20 per cent in 2015, the report says.

It reveals taht the proportion of female trustees rose from 28 per cent last year to 33 per cent this year. Only two boards had no female members and women made up at least half the board on 15 boards – up from nine last year.

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