NEWS IN FOCUS: Where is the information? - Many charities are confused about what exactly their annual reports should contain. Is this due to a lack of guidance?


Your charity receives a telephone call from someone who is interested in finding out more about the organisation. What do you send?

Many charities have a choice of at least a couple of documents to show potential donors, funders or researchers. Some have a trustees' report and accounts, which may be a weighty, tedious document, compiled by the financial team and containing page upon page of complicated figures.

They might complement this with an annual review - a glossy booklet produced by the marketing department demonstrating shining examples of the charity's work. Maybe there is something called the annual report and accounts, which is mostly the glossy bits, but with a few pie charts stuck on the back page summarising the finances.

Charities are, of course, entitled to communicate using whatever method they see fit. However, there is a statutory requirement for all charities to produce a document called the annual report and accounts, and the Charity Commission has guidance that governs what this should contain.

The plethora of similarly titled documents has led to confusion among some charities. Luke FitzHerbert, senior researcher at the Directory of Social Change, came across this difficulty when he was compiling his book The Major Charities. His research team contacted 165 of the top fundraising charities and asked them to send their annual reports and accounts. Fifty one (around 30 per cent) either did not have a document of that name or had one that bore the name but turned out to be something else.

Ian Allsop, who compiles the Charity Finance Charity 250 Index using the accounts and reports of charities, shares FitzHerbert's frustration.

"The main problem I have is being sent the annual review even though I do stress that I want the full statutory accounts and full annual report,

he says.

This isn't simply a problem that affects a few researchers. As charity commissioner Julia Unwin puts it: "The annual report and accounts is the single most important tool for communicating with your stakeholders."

If stakeholders have difficulty getting hold of this key document, charities are not fulfiling their requirements to be transparent and accountable.

This problem is compounded by the lack of information within these annual reports and accounts.

The Charity SORP, the accounting standard for charities that was introduced in 1995 and updated in 2000, has vastly improved and standardised the numerical side. But the accompanying narrative section can vary wildly between being a useful summary of the charity's work, performance and financial position, and incomprehensible jargon.

FitzHerbert says the number of charities whose reporting was weak surprised him.

"We have often been disappointed in the quality of charities' reporting of their work,

he says.

"Few set out clearly what they have achieved in relation to what they set out to achieve; even fewer noted their setbacks as well as their successes.

The tone of the material is often promotional to a degree that stretches credibility - such perfection is not usually attainable by human enterprises.

It's very strange that the Commission should allow these hugely important charities to get away with what seems to us pathetically weak reporting in so many cases,

he adds.

FitzHerbert wants the Commission to provide better guidance about the annual report and accounts. "It would be an important and welcome reform if the Commission said: 'Every charity should have an annual report and accounts, using that name and meeting the Commission's requirements. No other document should use that name,'

he says. He also believes that there should be better guidance from the Commission about what the narrative part of the report and accounts should contain. At present the limited advice that the Commission provides is spread across two weighty legal documents and summarised in several leaflets.

Unwin points out that the Commission can and has prosecuted charities that do not submit their annual report and accounts and that researchers can always ask it for a copy of them. She also argues that the introduction of a standard template could lead to charities producing stilted documents of the type more often seen in the corporate sector.

In addition, the diversity of the voluntary sector would make standardisation extremely difficult. Although she admits that poor reporting does exist in a minority of cases, she would prefer to let market forces dictate the required changes. "There is a real danger that reporting could just become a fundraising tool, and that is not good enough,

she says. "But I think charities will be challenged on that by their donors and beneficiaries. The top charities deal in a very competitive environment."

Sir Brian Jenkins, chairman of the Charities Aid Foundation, joins Unwin in favour of more organic development. "I'm not sure that it would be desirable to widen the requirements for charities' annual reports,

he says. "The important thing isn't to force people to give information for information's sake. Experience shows that over time the better charities start giving the information that the people want and then the rules tend to follow best practice."

The issues will be debated this month at a seminar hosted by the Commission and the National Council for Voluntary Organisations (NCVO). Stuart Etherington, chief executive at NCVO, says: "We hope that we can come to some agreement on how to take forward the development of public reporting structures for charities to provide helpful and transparent information to donors and other key stakeholders."

It also anticipated that the Performance and Innovation Unit report on the voluntary sector will comment on the issue.

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