To mark Charity Finance Week, Civil Society Media has published a podcast where we speak with Helena Wilkinson, partner and head of not-for-profit at Price Bailey, about the quality of charity reporting.
In this episode, Helena Wilkinson reflects on nine years of reviewing reporting at the UK’s largest charities. She discusses why she started this research, what has changed over the years and what the future might hold.
You can listen to the interview now below or on Spotify, Apple Podcasts, Amazon Music, and Pocket Casts, where you can find our other podcast episodes.
AI generated transcript
Tristan Blythe:
Hi and welcome to this Civil Society podcast, which marks Charity Finance week, our annual week of events and online content focused on the world of Charity Finance, culminating in the Charity Finance Summit. In this episode, I'm joined by Helena Wilkinson, who is a partner and head of not for profit, the accountancy firm price Bailey as a charity expert. She writes for national and charity Paris, and regularly presents at Charity events. She is also the trainer for civil society media's best practice reporting course, and for the past nine years, has carried out research on the standard of reporting at the UK to the largest charities, the findings of which appear every October in Charity Finance Magazine, and which we discuss in detail.
TB:
Hi, Helena.
Helena Wilkinson:
Hi.
TB:
Now every year you read and review the accounts of the charities in either the Charity Finance 100 index, or those ranked 101 to 200 in the Charity Finance 250 index, I should probably explain that these indexes reveal the UK's largest charities based upon average three-year income, and are updated each spring. Now we've just published ninth year as this research, which would also be your final year carrying it out, because you're retiring in March next year, we're going to continue with that research, but it seems a good time to sit down with you and have a chat about the research and the past nine years of findings. So perhaps good place to start is by looking back almost a decade when you first carried out the research. Let's start by saying, you know what made you start doing it?
HW:
Well, I was involved in the charity sector prior to there even being a charity SORP, and everyone used to draft their accounts in any format that they liked, without really any guidance on what should be included. And the first charity SORP really gave an idea of what the content of a charities report should include, and it was all about making charities more accountable. And then the second iteration of that SORP really started to put a lot more detail around the content and this idea of telling your story, and that's where it started to flow from. And I guess that's when I started to take notice of when I'm reading these charity accounts, what's in those accounts and how well were they telling that story? Because there was many charities that were failing to really explain the requirements and expectations of that charity sought, and a lot were meaningless because they had no context, and they were just loads of achievements listed without really putting them into any sort of order or explanation. So for me, it was about those reports giving a really good understanding of why those charities knew they were doing the right course of action with the limited resources that they had available. And I also wanted to highlight to a reader what it felt like to read these accounts. I sometimes struggled as an auditor to get through 30 to 80 pages of meaningless narrative, and I had to read it all, and it wasn't a pleasure, I can say, and it was really hard going. So I thought it was really important to feed back to the sector. The first report that I did, about 20% of charities gave any detail about their strategy and their successes, and it was very minimal. And I felt that that just demonstrated what I've just been highlighting, and the fact that three quarters of them just gave this list of meaningless achievements by the third report, nearly half were now actually reporting against their strategy and measures of success, and I could see that they were taking note, and it was therefore worthwhile me spending my summer job of reading 100 sets of accounts.
TB:
Yeah, I mean, yeah, it’s nice to see that. You know that effect taking place. And I mean, if we come right up to date, we've just published the latest finding, which looks at the 101 to 200 in 250 index. Could you summarize what you found and how pleased you were as that progress continue to date?
HW:
Okay, so yes, the progress is continuing, but it's much slower. The improvement in that next tier down is slower progress than I really would have liked, and part of it is, I think there's a lot more churn in the 101 to 200 level than in the top 100 so there's 15 sets of accounts, for example, that I've never seen before in the last eight years that have come into that category. But there are some charities that have made huge progress. So I can see the reports from the last time. Around in the scores they've got, and they've worked really, really hard to change that and make their reporting much clearer and better, and you can see that then their scores are a lot better this time around, within that two-year period. So that really makes it worthwhile, because it takes a long time to read all these sets of accounts, and there is definitely those that you feel it's really nice to read them, because you can see what they're about. They tell you clearly what they're trying to do and how they know they're doing the right thing. And then there are still several though, so real struggle to get through, and it's hard going. I think from the report this time around nearly half, 49% are now talking about their strategy and measures of success. That's up from 27% from the last time I looked at this category in 2022 so a good improvement, but it doesn't compare that well. When you look at the top 100 where that's 88% are reporting against their strategy and measures of success, so the trends in the right direction, but there's still a progress to be made, and there's some 31% that are just still listing meaningless achievements, which is down from 41% but compared really poorly with the top 100 where it's only 10% so I feel that there's work to be done still, but we're starting to see a lot more voluntary disclosures that are growing in the sector as well, and I can see it's all starting to stem from sort of a governance theme. So 56% are talking about the charity governance code, which is voluntary. 43% are then going into their board effectiveness reviews and what they're doing and how well they're reporting against it. 63% are talking about EDI equality, diversity and inclusion, and 74% reporting about what you would expect, which is climate change and carbon reporting, even though only 55% have to because it's a reporting requirement. So all of these areas are increasingly becoming more common in both sets of the reviews that I'm looking at. The area that for me still is really, really poor is reserves, policies, so only one in 10 have any real meaningful explanation of what their reserves are about, and give any real credence to how they've calculated and broken it down into the various aspects of risk behind their reserves policy. So that's a huge area of improvement that remains across both categories.
TB:
And that's interesting. I think there's voluntary disclosures growing is something that it's interesting to see. It's beyond the core requirements, which is good to see as well. And I think last year, you said in your article that the quality of reporting for the charities in 100 index was the highest that you'd seen. I was just sort of wondering if you could, you've sort of explained a little, but go a bit more into those trends, and what areas have particularly improved, what has been that direction of travel, what's taken us to it this place.
HW:
I always think that the narrative report is about demonstrating good governance of the organization and clearly articulating the charity's purpose, what you're about, what you do and why you do. It shows a robust organization. It shows that you're not afraid to have a report that looks at both failures and successes. So you're not scared to explain when things haven't gone right, and the lessons that you've learned from it as a result and changed perhaps what you do or switched activities off. And that well-crafted report, for me, gives credence to that organization. It builds trust in the reader, and it also means for me that there's an ability to understand the capability of that organization and their ability to deliver on their strategy. And if you look at across the whole piece of those 200 altogether, 137 out of 200 are now reporting on strategy and measuring of that strategy and the success measures. So for me, that's the trend that's been continuing over the last few years, and having been involved in the sector for a really, really long time, I've seen how individual charities that change their reports have an effect on their income in the future, it's really hard to prove one way or another that changing that style of reporting will mean that you grow your income, but I have seen it time and time again. So for one organization, they've never had any contact with that funder or that individual before, and suddenly they've got money coming in from a completely new source that was unknown to them. And it's normally not insignificant either. So for one charity, 10% of their income came from an individual they'd had no contact with whatsoever, and they were doing it for tax purposes, of course, but they chose that charity because of their report. I've seen other organizations where they've grown their legacies, for example, by 50% and you could say that really, they're reporting, but that impact on that organization to have their reserves, unrestricted reserves go from 400,000 to 1.6 million is huge. So whether or not it's the report, for me, it's starting to change the sector. And I think that focus on strategy and really being clear on your measures of success permeates the whole organization. We know that funders, high net worth individuals, grant makers, they will look at statutory accounts, and what they're looking for is good governance, and what they're trying to see is that good governance. So I think that message of, if we have really clear reporting, can influence the finances of our organization is starting to spread in the sector, and I think it's an important arsenal to have excellent accounts.
TB:
Yeah, I think that's a really powerful message, because it's, it shows the real-world effect of this. It's not just academic or exercise or just, you know, the accountancy world wants, there's really impact which the end of the day, that's what charity should be searching for. One thing that there is some concern about, and I think we've spoken about this, and certainly other people in the sector have spoken to me about it, is that over the years, the length of the annual report has been slowly and steadily increasing, and now some of them are quite long documents, a lot of information to wade through. And as you say, more and more disclosures are coming into them, and some have voiced the opinion that they're getting too lot, and some of that information should appear in a different format, whether that's a separate impact report or on the website or or something along those lines. Um, just wondering what you've thought about that, whether you shared that opinion.
HW:
Um, so the average length of the report in the 101, to 200 was 37 pages. It's only up one page from the last time, 38 charities had longer reports, and that one being over 100 pages long just in the trustees’ report. In the top 100 that average report is 56 so I agree, reports have steadily been increasing over the last few years, and it is really worrying. And I do think that there needs to be some thought about what's in the content. So for me, when I now pick were the examples of charities to mention in the report, I purposely pick those that are below the average and are demonstrating that you can really highlight all aspects of the reporting requirements without being overly long. And I wonder whether there's enough red pen taken to a set of accounts and the trustees report. You might have people writing different sections, so you might feel it's difficult to then remove whole parts of what they've written, but I think there needs to be somebody that is then responsible for looking at the whole content of the trustees’ report, making sure that they do remove content and it stays on theme. I know when I write articles and I'm given a word limit, it's easy to get well over that word limit, and then it's really hard to pull it back. So it's not easy to cut content. I understand that, but it is about honing that key message and being on track of what is your strategic aims, purpose, and what are your success measures, and focusing on the bigger ticket items, rather than just reams of information that doesn't add to that message. And I've always been really adamant that the charity SORP doesn't help and it requires information in the accounts that is standing data. You'll see the same paragraphs unchanged year on year in sets of charities accounts. And I do wonder whether there's a need to remove that requirement and have that place somewhere else, like maybe the charity Commission's website, especially on things like reference and admin standing data. So I think there are lots of paragraphs that serve little purpose that are included in those accounts, with regards to separate impact reports and annual reports, I'm not really a fan. I've highlighted earlier that high-net-worth individuals and funders look at audited accounts. Do the public, maybe, but I do think that they serve a purpose, for fundraising purposes, but I've always been a fan of ensuring that the annual report and accounts are audited, and they're the Go to Reference around that organization, and if you've drafted the right type of report at the front, it covers that aspect of impact. So there's no need to have those separate documents. And then more about being as you've highlighted general fundraising documents, but then go into bit more detail, specific projects and themes that tie back to that overall strategy. So I think for me, it's about just being aware of why you produce things, what their audience is, and for what purpose, and most are falling away now from impact reports and annual separate annual reports.
TB:
Yeah, I do think that's true, and it'll be interesting to see what the future holds. In that sense, whether the reports continue to get longer as more requirements are added, which is likely, because obviously, at the moment, we're waiting for the new version of the SORP. Been waiting a while, but it's hopefully not too long a wait now. But if you were to sort of with that in mind, gaze into your digital ball and have a look to see what you see coming down the road for charity reporting, what would you see coming? And perhaps most importantly, what would you like to see coming. Okay?
HW:
Well, being on the professional and technical stats strands of the charity SORP there, we were asked to look at various aspects, and one where I wasn't necessarily in agreement with the general theme was reserves policies and the need to have more narrative reporting on reserves policies, and to actually have a calculation of free reserves in the set of statutory accounts. So whether that's on the face of the balance sheets, trustees report or in a note, actually, to have this is our free reserves, and that free reserves calculation would include designated funds, because they are voluntary, they're not a required aspect, and therefore there was then a need to have detailed narrative reporting that supported that free reserves calculation and why it was important. I think they're going to really struggle with that. I'm not convinced the charity SORP will go that far this time around for all charities. But I am expecting, and we're all expecting, I think that there'll be a third tier of charities, that will be for the larger charities that have to have more disclosure, and I do think that this will fall into that aspect. So the reserves policies, for me is an area I expect to change, I'm hoping that they will cut some of the things we talked about out of the charity, SORP and disclosures, but another couple of areas that I focused on in the last couple of years are stakeholder engagement and sustainability. And I mentioned earlier that a trustee's report is all about good governance, and therefore having detailed in a set of accounts how the charity knows that it's doing the right things is important for me, so that engagement with stakeholders, from funders, donors, beneficiaries to staff, and how that influences the mission and the strategic objectives and the delivery of those is an area that has been growing, and many charities are disclosing a lot more information in that area than is required under a section 172 statement, and a lot of charities are disclosing it, even if they don't have to, and it's not required disclosure. I think that demonstrates a real strong linkage between strategy, delivery, engagement, particularly of beneficiaries and staff, and then on, the effectiveness of that organization. So that's why stakeholder engagement, for me, is an important part of strategy. There's two aspects to that. Is, how do you know you're doing the right things coming through from stakeholder engagement, and the other aspect of how you're going to have the finances to deliver on those, and that comes from sustainability. So when we when you sign a set of charity accounts, you're looking at 12 months from the date of the balance sheet. But I think charity needs to demonstrate sustainability and talk about finances that go well beyond that. Because you need to demonstrate you're going to be around to see projects through to the end. You want to give the reader confidence that you have a way of understanding your sustainability or income risks, your future plans, reserves, will feature as a huge part of that because they're not standalone, and they're part and parcel of that sustainability piece. But it also shows that you've got good governance, because you understand how you are going to raise those finances. Sometimes it might be that you have to actually explain that you're not sure where they're going to come from, and you have to raise those funds every year from scratch, and you're asking the public to donate. But I don't think that's bad disclosure. I think that helps demonstrate that you understand your risks, and it then gives you that holistic overview of the whole organization from its strategy, mission and delivery, and builds on that good governance story.
TB:
Yeah, okay, thank you for that. That's obviously the future of reporting, in your view. But perhaps if we can broaden that out a little bit, as I mentioned, this is part of Charity Finance week, and the theme for the week this year is operating a new era, reflecting the fact we got our first Labor government for many years, there are some signs of optimism in the sector as a result of the positive noises that were made in the run up to the general election about the role of charities in society. And obviously, fundamental change is going to take time. No government can do that overnight, so it's difficult to tell what this new era really holds. But I just thought, what were your general thoughts on the sector in the years ahead? What do you think of future holds for the charity sector at the moment?
HW:
Well, I was always adamant that the pandemic wouldn't give rise to financial hardship for charities. And whilst we were all aware that there were several smaller charities that unfortunately had to close, a lot of charities, including ones that we work with, had their best shares ever, because effectively, the public were able to make donations because they had funds and nothing else to do. They weren't allowed you weren't allowed out. You weren't allowed to go anywhere, you weren't allowed to do anything, and some had to dip into reserves for sure. But effectively, the pandemic, for me, wasn't the crunch point. It was always going to be after that and paying for it, if you like. And I've I think that's starting to show and I think that fundraising is getting harder and harder. So in the latest CAF report, the UK has fallen to be 22nd in the world of the most generous countries in the world, and that's from a position of six in 2014 so you can see a trend where we're just going the wrong way, and it's just highlighting the real challenges that I know the sector sees and faces in raising funds from any source, but particularly the public. And part of that, for me, is seeing the change in the younger generation, so they are more likely to give one offs and give for a cause that catches their attention, but they're not as likely to be those long-term donors that give monthly or yearly and that you recruit, and they're around for the long term. So charities now have to work really hard to raise finances, and it is getting tougher, and that's why I think more we will need to seek out funders and high net worth individuals to help support them. Going forwards, you mentioned the government, I'm struggling to see with them having to fill this huge black hole, how they're going to find money to give to the sector, and I don't see any financial support or concessions coming for the short term, especially when we started to hear the term austerity now starting to feature in their rhetoric. So I think charities are going to be left to their own devices for quite a few years on how they diversify their funds, their income generation, and deal with the increased service pressures. Many are really struggling to deal with that increased service level demands, struggling on recruitment and retention of staff, because there's other jobs that pay more out there now and how they control their spiralling costs. So for me, it's going to be a real tough few years for the sector over the and I just see that the trustees report, for all the reasons I've outlined around good governance, are just part and parcel of helping to convince people to give money.
TB:
Yeah, I think that that's sort of a key theme of this conversation has been that these reports have about practical use if you use them correctly and have the right information in them. So I would encourage people to have a look at your research and what your findings have been, and take away some lessons.
TB:
Thanks for listening. And don't forget to check out all the special content on the Charity Finance week, hub of civilsociety.co.uk, and remember you can like and subscribe as well as listen to all other episodes on all major platforms.
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