Are charities transparent enough?

By Russell Rich

The Centre for Policy Studies think tank has called charities into question in its recent report, Transparency begins at home: Why charities must state who funds them.  50 of the biggest charities had their accounts reproduced and the report calls for them to declare that while they earn £3.1bn from publicly-funded sources, the actual figure they bring in could be more than double that, up to £6.5bn.

The report calls for the Charity Commission to encourage larger charities to reveal exactly how much of their funding comes from government sources, with specific numbers against central, local and other administrative agencies.

The 11-page report calls for visibility so that taxpayers can see exactly where the charities’ money is coming from. As numbers are crunched and more public money is like quicksilver, the pressure could soon be on for public funds to remain public.

It also calls into question the sustainability of large charities if they are receiving an income, however substantial, from a government body. In light of the financial pressures post-crash, it is important to know how robust a charity’s finances really are. Additionally, there is also the double-edged sword of being funded by a government body: 

"Once a private charity has undertaken services for a long time while dependent upon receiving public funds, the line between the public and private sectors begins to blur," says the report. "It blurs in two ways. At some point, does the organisation cease to be a private body? More fundamentally, does it cease to be a charity?"

The Charity Commission’s Statement of Recommended Practice (SORP) gives directions on exactly how charities should prepare their accounts.  However, the calls for more transparency and greater disclosure in accounts are likely to continue. 

If you’re looking for specialist charity accountants with experience of working with not for profit organisations of many sizes, we're here to help. Based in London EC4, our charity team is always on hand to offer practical financial advice and to answer any questions you may have on matters such as charity accounts, charity audits or charity tax . Please do get in touch with any questions.

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