UK Charity Commission Warns of Incorrect Financial Reporting
Tuesday, 27th November 2018 at 8:37 am
Most large charities in the UK are incorrectly reporting their financial information because of a lack of understanding, the Charity Commission has warned.
A review by the commission found less than a quarter of larger charities had accurately reported the level of financial reserves they held in their trustees’ annual report.
The commission said this suggested UK charities had an incomplete understanding of reserves – a part of a charity’s unrestricted funds that was freely available to spend on any of the organisation’s purposes.
Almost all of the 106 charities reviewed with an income over £500,000 (A$880,000) included at least a reference to their reserves policy in their annual report, but less than a quarter gave the right amount.
A third of charities failed to include a reserves figure at all.
Sarah Atkinson, the commission’s director of policy, planning and communications, said the public expected charities to manage funds in a way that maximises their benefit to society.
“Reporting financial information accurately is an essential part of this responsibility, so it’s concerning that so few larger charities appear to fully understand what reserves are or how to disclose them correctly,” Atkinson said.
“We would also expect auditors and independent examiners to report any concerns they have about the reserves held by charities.”
All registered UK charities must explain their reserves policy in their trustees’ annual report, and should state their level of reserves and why this level was held.
The commission said a good reserves policy would give confidence to the public that the charity’s finances were properly managed and would also indicate future funding needs.
Atkinson said the commission had guidance for trustees designed to equip them with the tools needed to improve reporting in this area.
“All charities should ensure they are up to speed with this, so they can reach their potential by planning effectively for their financial future,” she said.