Transparency about donations to charity

A consultation on charity reporting has been launched to give the public more knowledge about how their donations to charity are spent.

Run by the Charity Finance Directors’ Group (CFDG), the consultation includes a report of bold proposals to improve the quality and consistency of charity annual reports.

The report entitled, Inputs Matter: Improving the Quality of Reporting in the Charity Sector , proposes to tighten the definitions used in charity accounting and to create a more level playing field between charities. The complete document can be found at the bottom of this article.

It contains a number of significant, wide ranging, and controversial recommendations in relation to Support, Management and Administration Costs, Fundraising Costs and the Valuing of Volunteers.

These include:

• That consideration should be given to include a value for volunteer time in the SOFA.
• Management and administration costs should be called 'governance' costs or similar, with the term defined to make it clear what sort of costs should be included, and sufficient detail provided to explain all cost allocations.
• Allocation policies relating to fundraising activity, themselves based on clearer definitions as to what constitutes fundraised income, should be determined in advance of the year-end and be approved by the trustees before they are applied.

CFDG want to find out what their members and other interested parties think of the proposals, and whether they will lead to more meaningful financial ratios. It is also anticipated that the report will contribute to the next annual SORP review.

Opinions

Although there is understandable opposition among charities to the development of this style of reporting, which could viewed as introducing league tables, there is a need for not-for-profit entities to provide comparable financial information.

Charities Minister, Fiona MacTaggart said "The Government is keen to see moves towards greater consistency, clarity and transparency, in reporting by charities. This can highlight the public benefit of charities' work and boost confidence in the sector, especially from funders and donors ".

Under the SORP (Statement of Recommended Practice), financial information is not currently comparable and it is not always easy for stakeholders to understand. However, it is felt that as the sector gets more involved in public service provision, and as it continues to raise money from the public, the demands for comparable financial and outcome information is likely to increase.

CFDG Vice Chairman, Les Jones OBE (Deputy Chief Executive at WWF) explained, "The issue of the use of financial information to compare charities is inevitable and whilst there are many limitations to any such comparison it is clearly going to happen. CFDG are therefore keen to ensure that the financial information provides enough of the right data to assist in this process ”.

Report

Inputs Matter (362Kb)

For further information please contact Les Jones OBE, Deputy Chief Executive of World Wildlife Fund UK and Chairman of the Project on 01483 412201, or Shirley Scott, Chief Executive of CFDG on 020 7793 1400.