Are Charities Meeting Their Public Benefit Requirements?

Over the past few months, I have been paying particularly close attention to charities and their attitudes to accounting and reporting. With updates to guidance’s and increased support to the sector, it was disappointing to see yet another press release from the Commission on the number of organisations still failing to properly comply And meet the needs of the public.

So what has gone wrong?

On 21 April 2017, two accounts monitoring reports were released by the Commission; “Telling your story well: Public Benefit Reporting for Charities” and “Do Charity Annual Report and Accounts Meet the Reader’s Needs”, both of which outline key issues pertaining to the charity sector.

Charities have an obligation to fulfil their public benefit, which includes outlining what the organisation aims to achieve and its reasons for set up. However, a sample of 107 charity annual reports showed that only 46% (1% higher than last year) had manged to effectively communicate a clear understanding of the public benefit reporting requirement. Furthermore, only 58% had actually included a public benefit statement.

The reason why many of the annual reports failed was because:

• They included a public benefit statement but lacked information on how or the activities the public benefit from him
• The benefit was included in the audit but a public benefit statement was?
• It failed to include either a reason for why they are meeting the need or a public benefit statement

In addition, the accounts monitoring review also expressed concerns for charities who failed to meet the basic user needs of the public. Although 75% (2% less than last year) of accounts were created to a satisfactory standard, 25% of accounts lacked consistency or transparency. The Commission reported problems with:

• Lack of consistency
• Imbalance or incomplete accounts
• Failure to conduct a thorough audit or proper independent examination
• Annual report did not include the objectives and activities of the charity
• Independent scrutiny report was missing

Not meeting your public benefit requirements or failing to disclose your activities is not only against the law and a breach of the terms in your governing document, but it also makes it harder to gain the public’s trust – an issue that the sector has been continuously battling with over the past few years.  Therefore, submitting your accounts on time and to an above satisfactory standard should always be a priority. It is important that your charity is aware of the current audit thresholds:

• Income under £10,000: you do not need to file a set of accounts or an annual return; however, you will need to provide the Charity Commission with proof of your annual income and expenditure. The easiest way that this can be done is via an annual return form.
• Income between £10,001 and £25,000: if your charity meets this criterion, you will need to file an annual return.­

• Income over £25,001: you will need to submit an annual return and a set of annual accounts. An independent examiners report, audit report and a Trustee’s Annual Report must also be submitted alongside the accounts and return. It is important to also include a public benefit statement in order to ensure that you are meeting the audit requirements.

Raffingers offer specialist charity and not-for-profit specialist advice and deliver audit and assurance services to the sector. To discuss your personal case further, contact me directly at suda.ratnam@raffingers.co.uk.