Don Bawtree: Public benefit reporting falls short

Only 35 per cent of charities met the reporting requirements in their most recent accounts, writes our finance expert

Don Bawtree
Don Bawtree

A new Charity Commission study has suggested that only 35 per cent of charities properly met the public benefit reporting requirements in their most recent accounts, for financial years ending in 2012/13.

This is a slight improvement on the 27 per cent for the same charities in the previous year, but still seems lamentable when one might think the sector in general would pride itself on quality governance and high levels of transparency. It seems that larger charities – those over the income threshold at which their accounts must by law be audited – are generally better at this than smaller organisations.

This might give pause for thought after that threshold was doubled to £1m. It would also be a good reason for refreshing the directions issued to independent examiners – who undertake a less stringent sort of "mini-audit" for smaller charities – to give this topic more attention when looking at accounts. The refreshed 2015 Sorp accounting standards emphasise the need for fuller reporting on public benefit and impact. As with many aspects of the new Sorp, this will not create additional work for well-run charities, but the commission's findings suggest that there is still work to do for most organisations.

Rates review

The Chancellor's final Budget included the expected review of business rates in England. Central government allows charities and community amateur sports clubs to apply for a relief of up to 80 per cent, and local councils may provide additional discretionary relief on the remaining 20 per cent.

However, it seems increasingly common for the rating authorities to try to withdraw these reliefs, so charities might wish to get involved with the consultation. There are two topics to watch. First, the consultation will look at how rates are calculated – asking, for instance, whether a large company or charity with a small property footprint should be assessed on the same basis as a smaller one with a larger estate. Clearly, any change could still affect charities.

Second, the very last consultation question relates to the charitable exemption, which represents the largest single rate relief across all sectors, at £1.44bn. This is sure to attract the attention of respondents. Although it is the government's stated intention not to increase business rates for those most deserving of relief, charities might be well advised to make sure their voices are heard clearly in the discussion. The deadline for responses to this consultation is 12 June.

Fraud and security

Two recent cyber stories might be of interest. First, the financial services industry initiative Financial Fraud Action reported that losses from online banking fraud rose by 48 per cent in 2014 when compared with 2013, as consumers conducted more of their financial affairs on the internet. This rise in fraud is due to the increased use of computer malware and to con artists tricking consumers out of personal details; and now fraudsters are targeting firms in order to steal bigger amounts. FFA reminds people to ensure that they install the latest anti-virus software.

And a survey of 800 internal auditors, conducted by the consultancy Protiviti, has found that organisations whose boards are highly engaged with security risks are more likely to meet cyber security and data privacy standards, although meeting these standards is still a concern generally. Most charity boards, when conducting skills reviews, consider some sort of IT skills as desirable, but rarely are they seen as essential to the board. Such findings are a reminder to charities that this is an area of risk that needs active management.

Don Bawtree is lead partner for charities at accountants BDO LLP

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