Many large charities are mistakenly understating their charitable expenditure and making “basic errors” in their annual reporting, according to the Charity Commission.
The Commission has said it will now step up efforts to make charities aware of their reporting duties after it found 43 per cent of charities with unusually low expenditures had either made a mistake in their annual report or underreported their expenditure.
As part of its accounts monitoring work, the Commission identified 443 charities where the charitable expenditure was less than 10 per cent of their income.
It selected 188 of those for review, to assess whether there was a reasonable explanation for the low level of charitable expenditure, which in 57 per cent of cases there was.
The report says the main examples of reasonable explanations were the receipt of a large “one-off” income during the year, the accumulation of reserves for a specific purpose, the purchase of assets and the inclusion of trading subsidiaries.
The other 43 per cent had made reporting errors. In no case did the Commission find that low expenditure was down to misconduct.
The commission has insisted these charities resubmit compliant accounts for the years in question.
Michelle Russell, director of investigations at the Charity Commission, said: “We are concerned that so many charities are making basic errors in their annual reporting. Aside from being a regulatory concern and undermining public trust in charities and the information they provide about their work and finances, it is likely to impact on how they are perceived by donors and potential supporters.”
The commission said it was planning to do more work on promoting its guidance to help improve awareness of accurate reporting and compliance.
At Nicklin, we have a specialist team of staff who are experienced and knowledgeable on issues affecting the charity sector. They attend regular training course to ensure they are always up to date with the latest developments. As trustees this source of reference and support can be invaluable.