Finance: Outlook - What Guidestar means for charities

The new website could lead to an increase in transparency, as Charles Nall reports.

Guidestar is coming - it is being launched over the summer and will augment the Standard Information Return and the revised Sorp. The question is, will this bring about a new age of transparency or a reign of chaotic terror as charities fend off the baying hordes?

First, practicalities. Currently, financial data will be shown from the annual accounts. Non-financial data can be amended by the charity and linked to its website, and there will be space for the charity's own 'executive summary'.

Charities can add full accounts if they don't submit them to the Charity Commission. Clearly, charities' dialogue with other stakeholders will be much more responsive than anticipated.

The later launch means that a later set of annual report and accounts will often be the basis for disclosure, so there is time to fine-tune this. Explanation of the trends that affect your charity and sub-sector will be crucial.

Second, the principles. Transparency isn't new - it's the leap in Guidestar's information accessibility (and especially comparability) that worries charities.

Two underlying issues are often cited. Some say charities have ridden on the back of public goodwill. So, although charities are trusted, there's a gulf between the reality and the public perception of running a charity, with the result that what is normal for charities becomes news. The solution to this is to raise the standards of communication on those realities across the sector. A group of charities is working on this - watch for briefings.

Ultimately, many charities have the implicit aim of making themselves redundant, but have difficulty measuring and reporting on effectiveness.

The result of this is that charities are unconvincing when asked the following questions: what is your track record? Why do you exist? Is your charity investing in performance measurement and management? Strategically, to address beneficiaries' problems effectively should you either partner or focus on fewer essentials, or both? And tactically, are finance, fundraising and operations jointly effective when it comes to answering those challenges?

Have you adopted the balanced scorecard or similar framework?

By increasing its responsiveness to the charities' needs, Guidestar should strengthen the dialogue between charities and their stakeholders. If the sector is well prepared, the resulting enhanced accountability should underpin stakeholders' long-term faith in charities.

The Children's Society's involvement in the pilot has confirmed what we suspected: we need to improve further. However, knowing you have a problem is the start of the solution. Do you?

Charles Nall is corporate services director at the Children's Society

KEY POINTS

- Guidestar will show financial data from charities' annual accounts

- Charities can add full accounts if they don't submit them to the Charity Commission

- Guidestar should strengthen the dialogue between charities and their stakeholders.

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