Key financial data must be easier for people to find in annual reports

There should be some kind of executive summary that sets out major facts and figures, writes Joe Saxton

Joe Saxton
Joe Saxton

Do you read the annual reports and accounts of the charities to which you give? Few charities want to bear the cost of printing them and posting them to their supporters any more, so most publish them as pdfs, to be read on a charity's website.

We recently got a researcher to analyse the length of more than 50 reports: they were typically between 60 and 80 pages, and the longest was more than 170 pages. No relationship was discovered between the size of a charity and the length of its annual report - some charities just like to go on a bit. In a world of soundbites and social media, their length and style bear all the hallmarks of a bygone era.

There is a deeper problem here than the fact that few but accountants and funders read annual reports. This is that, in the accounts section, there are really important facts and figures about the size and shape of the charity; but these are typically found in the numerous pages of the formal notes section, and are almost unfindable by all but the most determined of donors.

This leaves the charity to do what it wants with the financial results, which is often to present them in the best possible light. At the other end of the spectrum of results presentation is what the True and Fair Foundation did in its recent report. It could probably make the feeding of the 5,000 look like it had a poor cost ratio.

Annual reports must adhere to the Statement of Recommended Practice for charities. The latest Sorp (FRS 102) is 195 pages long and spells out in great detail how charities should present their financial information. Once a charity has Sorped its finances, few mere mortals can see the big picture for the incredible detail.

I sit on the committee that decides what the charity Sorp should include, and we are just at the start of the process where we discuss what changes might be introduced to the next version.

The True and Fair Foundation report highlights a real debate. Should the Sorp make it easier for donors to find out some of the key data about a charity for themselves, rather than relying on the (often dubious) interpretation of others? The worry is that by doing so we will be pandering to those who want to paint charities in a bad light and make their work even easier.

The counter-argument is that, as it stands, we give the public no easy way to find out the key data we know they care about. So it's no wonder that people are interested in analysis such as that from the True and Fair Foundation, because no easy alternative is provided.

Charities exist for the public benefit, so the public (or at least the donors) ought to be able to benefit from the accounts of charities and find out the things they want to know. Is it unreasonable, for example, that somebody should easily be able to find out the percentage of a charity's voluntary income that is spent on raising that income?

This doesn't mean we should trash what we already have, but we ought to have some kind of executive summary in annual reports: two pages that set out the key facts and figures about a charity in a prescribed format. The Charity Commission website provides an admirable template. I think we owe donors that level of simplicity, at the very least.

Joe Saxton is the founder and driver of ideas at the research consultancy nfpSynergy

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