Improving the quality of charity accounts

In the Spring 2023 edition of Charity News, we reported that OSCR had performed a review of the quality of charity accounts submitted to them. One of the main issues they noted was a failure to include an accompanying trustees’ report that complied with relevant requirements.

This has now been followed up with some guidance issued by OSCR on how to prepare a good trustees’ annual report. Much of this merely signposts existing guidance, but they have set out some of the benefits that a good quality report can bring. The guidance highlights that by demonstrating public accountability and transparency a charity can indicate that good standards of governance are being applied which provides greater assurance to stakeholders and ultimately can encourage funders to support the charity.

Separately, OSCR has also provided new guidance on the need for charity accounts to include comparative information and highlighted some of the common disclosure areas that accounts often omit, which include key disclosures related to trustee remuneration and other related party transactions.

It’s not just in Scotland that issues have been found with charities failing to properly meet their reporting obligations. In May 2023 the CCEW published details of ‘double defaulters’, charities that have failed to submit their annual return and accounts for two or more years in the last five years and had previously been given final warnings to comply by a specified date but had failed to do so, resulting in CCEW commencing an inquiry process into them.

Most of the time this inquiry process results in charities getting their reporting obligations up to date, but in 15 cases it revealed that the charities were not operating or had ceased to exist and were removed from the Register, and in a further 6 cases serious regulatory concerns were identified and separate inquiry proceedings were open to review how those charities operated.

Charities need to be aware that regulators do make use of the annual reports filed with them, or the lack of such reports, in carrying out their oversight of the sector and thus it pays for charities to ensure that they are compliant with their annual obligations and meet all filing deadlines.

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