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CPS Author William Norton writes about Charity Transparency for 24dash.com

    William Norton writes about charity transparency and his report Transparency Begins at Home.

    To read the original article, please visit the 24dash.com website.

    "How much public money do the largest charities receive?  In a paper for the Centre for Policy Studies (Transparency Begins At Home), I analysed the accounts of the 50 highest-income charities. 

    Apart from honourable exceptions (which I acknowledge), there is widespread failure to quantify public funding.  Despite the annual report mentioning that a charity receives public money, often the accounts merely report aggregate categories of income without specifying sources.

    Disclosed public funding for the Top 50 totals £3.1 billion, or 24% of their income. However, ‘uncertain items’, where public support can be inferred but not quantified, could add as much as £3.4 billion to this, an aggregate of 49% of incoming resources.

    Why does this matter?  Obviously, voters have a right to know where their money has gone.  But it is also important for the financial health of the sector itself. Austerity in one form or another will continue for the foreseeable future.  If major charities are heavily dependent on political decisions for their income, then that fact needs to be widely appreciated for a fully-informed public debate.

    The rules have changed for accounting periods beginning on or after 1 January 2015.  A new Statement of Recommended Practice (‘the New SORP’) now applies to the accounts of large charities, i.e. those meeting two out of three criteria (gross income of £6.5m or more; gross assets of £3.26m or more; more than 50 employees). 

    The New SORP tightens the reporting of income, requiring a closer review of the terms on which any funding is received.  By itself, however, this merely shifts uncertainty from one part of the financial statements to another.

    The Charity Commission should require large charities to specify the amounts they receive from each government department; each quango and agency; and from all local authorities.  Such bodies work to different political cycles, so they give rise to different accountability needs – and different funding risks for charities. 

    Disclosure would apply to direct funding only. Thus, a large social landlord would not have to calculate welfare benefits received by its tenants, but it would have to identify receipts under contracts with councils.

    Out of over 164,000 registered charities, only around 1,000 would qualify as ‘large’.  The New SORP will anyway require these organisations to review the terms of each funding stream.  The additional compliance burden of noting whether these funds have come from a public body, and disclosing total figures, will be minimal.  But the greater transparency is in the interests of taxpayers, potential donors, and thus ultimately of the charities themselves."

    To read the original article, please visit the 24dash.com website.

    Date added: Monday 2nd March 2015