A new report from the Charity Commission (published on 19 August 2015) found that a large number of charities are under-reporting charitable expenditure, failing to submit accurate records in both their annual accounts and annual reports.

The report, which examined 188 charities which met certain criteria and had annual accounts which suggested that expenditure on charitable activities was less than 10%, found that charities were making basic errors in annual reporting.

The report highlighted that:

  • 57% were able to provide reasonable explanations for the low expenditure against income for the year in question.
  • 43% had made errors in their annual returns of their trustees’ annual report and accounts for the year in question.

Michelle Russell, Director of Investigations, Monitoring and Enforcement at the Charity Commission, said: “…we are concerned that so many charities are making basic errors in their annual reporting. Aside from being a regulatory concern and undermining public trust in charities and the information they provide about their work and finances, it is likely to impact on how they are perceived by donors and potential supporters.”

Trustees have ultimate responsibility

Richard Burkimsher, Charity Partner at Hawsons, said: “I would echo those comments made by Michelle; charities must ensure they are financially transparent, particularly in light of the ongoing Kids Company case.”

“Trustees have ultimate responsibility to report on the charity’s finances and activities correctly. The regulator has also now confirmed it will step-up its work to promote guidance in these areas through various awareness campaigns. This is of course welcome news.”

More from our charity experts

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Richard Burkimsher Partner

Richard Burkimsher provides advice and consultancy services to a growing portfolio of family owned businesses and also works with a number of international groups and charities, and is experienced in dealing with acquisitions and mergers. For more information, please contact Richard on [email protected] or 01604 645 600.[/author_info]