More than half of small charities’ annual reports and accounts do not meet minimum basic standards and many are unaware of their reporting obligations, according to the Charity Commission.
In three reports released today examining the quality of annual reports and accounts for small charities with incomes of up to £25,000 and larger charities with annual incomes of more than £25,000, the commission says it found numerous deficiencies in accounting by small charities, with several providing an annual report and accounts only once the commission had informed them of their requirements.
One in five small charities sent some form other than that required by the commission and one in six did not send any form of report at all, the reports say.
But the research, based on a random sample of 108 smaller and 109 larger charity annual reports for the 2013/14 financial year, found an improvement in the accounting practices of larger charities, with more than three-quarters filing accounts in 2013/14 that met minimum standards.
The commission said this was a substantial increase on 2011/12, when a similar exercise showed that more than half of larger charities failed to meet minimum reporting standards.
For 2013/14 accounts, the commission found that approximately 90 per cent of larger charities’ annual reports covered either a charity’s purposes and activities or its reserves policy, with most including both, and 90 per cent of independent scrutiny reports were of the correct type for the charity concerned, the reports say.
The reports show that about 93 per cent of accounts also met basic integrity standards, and all charities required to prepare accruals accounts had successfully done so.
But a statement from the commission said that despite improvements in charities meeting public benefit requirements, up from a quarter in 2011/12 to 40 per cent in 2013/14, improvements were still needed.
It said charities needed to assess how their activities benefited beneficiaries and include a statement that the trustees had taken account of the commission's guidance on public benefit.
Nigel Davies, head of accountancy services at the commission, said: "The quality of small charity accounts is not as good as we would like. But this report points to one easy way to improve the quality of your accounts and report: use our templates. The charities that do use our templates produce accounts of much better quality.
"Our reports paint a picture that shows the quality is not always as it should be, and we will be working with the sector to raise awareness over the coming year."