A snapshot survey of charity reports by the Charity Commission shows a decline in the proportion that meet the regulator’s benchmark.
The Charity Commission has said it is “seriously concerned” about a decline in the quality of charity accounts.
The regulator has also called for a “step change” in trustees’ attitudes to public benefit reporting after discovering nearly half of all charities fail to explain what they do or the impact their work has.
The commission spoke out after publishing two documents today that are critical of the standard of reporting.
The first document, called Public Reporting by Charities in their Trustees’ Annual Report and Accounts, reveals that 70 per cent of trustees’ annual reports and accounts met the commission’s benchmark – down from 74 per cent the previous year and 77 per cent the year before that.
The figure had previously risen sharply from 54 per cent to 77 per cent in the previous two years.
Although this is one percentage point better than last year, the commission said it remained disappointing.
The reports are based on the results of a survey conducted by the commission in May from a random sample of 105 charity accounts, which cover the accounting years ending during the 12 months to 31 December 2016.
All the charities reported annual incomes of more than £25,000.
Nigel Davies, head of accountancy services at the commission, said in a statement: “The public want and deserve to know how charities spend their money so this deterioration in the quality of accounts is of serious concern.
“The trustees’ annual report and accounts are a key way to build confidence among supporters, so many charities are clearly missing an opportunity.
“We also need to see a step change in trustees’ attitudes to public benefit reporting. Charities must be clearer about who they help and what difference they are making.”
The regulator used research it conducted this year on trust in charities as the benchmark for the survey.
The research found that “ensuring a reasonable proportion of donations make it to the end cause” and “making a positive difference to the cause they work for” were the most important factors driving public trust and confidence in charities.
The commission therefore assessed the reports and accounts on the extent to which they achieved this, for example by checking how thoroughly they analysed expenditure.
It said in a statement that the main reasons accounts failed to achieve the benchmark were a failure to show evidence that the figures had been subject to independent scrutiny by an auditor or independent examiner and/or not providing meaningful information about their charity’s purposes or what they did to achieve them.
A commission spokeswoman said: “An inadequate trustees’ annual report, independent scrutiny report or accounts undermines how much confidence the reader can have in the trustees’ stewardship of funds.”
The statement said the commission had provided guidance to trustees of charities that did not meet its expectations.
Asked if it was taking further action against any charities, the commission spokeswoman said: “Regulatory concerns identified through this process have been referred to our risk assessment unit for assessment.”