Transparency is often seen as the essential ingredient for the creation of trust and confidence in an organisation or sector. But are there limits to transparency? And if so, how does it link with concepts such as privacy, commercial sensitivities, the ability to operate and even innovation?
A central principle of accounting in the charity Statement of Recommended Practice is that a charity analyses its spending by activity.
This allows the reader to see what resources were allocated to particular objectives or projects. This gives transparency about the cost of an activity, but might also give a commercial advantage to a rival tendering for a contract to deliver a service currently provided by the charity.
The Sorp does not accept the argument of 'commercial sensitivity' as grounds for the non-disclosure of activities. But it does allow the aggregation of costs relating to the same activity or objective and so limits the likelihood of the costs of any single contract being disclosed.
Sometimes an activity can be controversial and, in rare cases, can even lead to trustees being placed in personal danger, perhaps from extremist groups opposing particular research. Can it be right to publish the names of trustees or a charity's address when to do so might put them in danger? Or is it always appropriate for a grant-maker to disclose the name of an institution that it funds, even when that institution is known to be carrying out contentious but potentially valuable research? Some argue that the requirement to disclose such information can on occasions even stifle the funding of innovative but controversial projects.
The Sorp gives no exemption for the disclosure of the controversial activity, but it does give exemptions to providing trustee details, addresses and the names of institutions funded by grants if this could result in personal danger or severely prejudice the charity's work.
Some might expect the Sorp to require charities to publish the names of their major donors in their accounts. However, not all donors, particularly individual ones, would want the amounts they give to be in the public domain. On this issue, the Sorp balances transparency and privacy by requiring the purpose of material gifts to be disclosed, but not the name of the donor.
In contrast, the Sorp always requires the disclosure of any benefits received by trustees. For the Sorp, the need for transparency always over-rides any perceived right to privacy or confidentiality about payments made to trustees. The Sorp also requires the disclosure of benefits received by those connected with a trustee - for example, a spouse or family member.
However, some say that a distinction should be drawn between benefits received for services as a trustee and any remuneration received by a trustee from a separate employment with the charity. For example, some might support the disclosure of remuneration for being a trustee but object to the disclosure of a salary received by a trustee for acting as, say, a headteacher in parallel to their trustee duties. Others might also question why the employment of a family member of a trustee by a charity needs to be disclosed.
These are just a few examples of how the Sorp deals with certain tensions that can arise when providing information in accounts. The presumption is to always favour the provision of information needed to inform stakeholders' decisions, but in very limited circumstance there are some exceptions to the rule.
Ray Jones is policy accountant at the Charity Commission