Charities that run public services 'should have open-book accounting'

Margaret Hodge MP, chair of the Public Accounts Committee, tells Charity Finance Group annual conference this would help them achieve greater transparency

Margaret Hodge MP
Margaret Hodge MP

Charities with contracts to run public services should operate "open-book" accounting to achieve greater transparency, Margaret Hodge MP, chair of the Public Accounts Committee, told the Charity Finance Group annual conference yesterday.

Organisations with open-book accounting agreements share more financial information than is required by law with the public, business partners or other stakeholders. Hodge said it allowed both the public and government to "follow the pound".

In response to a question from the floor, the Labour MP said she wanted the same of private sector contractors, because providers including Capita, G4S and Atos had agreed to the concept in principle.

Hodge said the Department for Work and Pensions was "probably the worst offender" among those public bodies "hiding behind commercial confidentiality" to avoid transparent contractor arrangements.

Hodge, whose committee published in February a highly critical report on the effectiveness of the Charity Commission, said she was not convinced the organisation had turned itself around.

"I accept there’s a new chair and I accept there’s a new chief executive, but I remain sceptical if this organisation is fit for purpose," she said. "But we’ll give the new lot a chance."

Hodge was on a panel alongside Nick Hurd, the Minister for Civil Society, Lisa Nandy, his Labour shadow, Baroness Barker, a Liberal Democrat peer, and Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations.

Hurd told attendees that "maintaining the integrity of the movement you are part of" was a key issue for the sector. "You’re very trusted by the British public – I’m not; Margaret might be," he said. "But it can’t be taken for granted."

Barker said charities should "explain succinctly the difference they do make and how they measure their progress, and this is at the heart of transparency and trust".

Nandy said another key issue was better commissioning of public services that would stop "forcing charities to compete with large private companies", which she said had had really appalling consequences. Barker, Hurd and Etherington agreed with her on this point.

Transparency and accountability were themes throughout the day, particularly what they actually mean for charities and how to either improve or achieve them.

Opening the conference, Ian Theodoreson, chair of the CFG and chief finance officer at the Church of England, said there was a "disconnect between what we do and what the public, politicians and donors think we do". He said attendees should each consider the responsibility they had for telling the story of how charities actually operate. "I think we have been poor as a sector at explaining how the money flows," he said.

But he said that media attention and increased scrutiny of the sector was a good thing. "The fact that people are challenging us is a positive thing because they want to feel confidence in us," he said. Theodoreson also noted recent data showing that public trust in charities was increasing.

John Graham, deputy director-general and director of finance at the Royal British Legion, said in a separate session that attempts to be more transparent were often redundant, falling on deaf ears because of the strength of public trust in charities. He said: "People know the poppy, but when we try to explain to people what we actually do, they still turn around and say ‘sorry, what do you do?’"

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