Five tips for tip top accounts

Just before purdah started this week the Charity Commission released the results of some research it had done into the quality of charity accounts. They’d taken a random sample of around 200 accounts and checked them against various criteria. The headline finding was that around one-third of accounts in 2012/13 weren’t of acceptable quality – falling down on criteria such as not including a reserves policy or submitting them late (there’s lots more detail in the report).

I don’t know whether this is a boast or a confession, but I think I’ve looked at more charity accounts that most people. Accounts are the key source of data for NCVO’s Almanac, and our sample of 10,000 accounts requires a lot of cleaning and careful examination to get it into shape. Drawing on this experience as a user of accounts and the results of the Commission’s research I’ve put together some tips for constructing a great set of accounts.

(Disclaimer – bear in mind I’m not an accountant, and your first port of call for accounts advice should be the Charity Commission.)

#1: Get the basics right

A surprising amount of accounts don’t add up – the Charity Commission research found that 10% of accounts didn’t meet a “basic integrity standard” and it’s certainly my experience that there are accounts where the numbers don’t add up or there are basic typos and other mistakes.

Make sure you’ve submitted the right document to the Charity Commission, make sure it’s in a legible format (not a scanned copy for example) and there aren’t any pages missing. I’ve seen accounts that are just photocopied bank statements or illegible printouts of excel spreadsheets.

Accounts aren’t just an obscure piece of bureaucracy – there’s a good chance that potential donors, funders and beneficiaries will use them to find out about your organisation, and you’ll want to make sure they leave with a good impression.

#2: Be clear

Assume that the person reading your accounts doesn’t have any knowledge of your organisation – do your accounts help them understand where your income comes from or how your activities help your beneficiaries?

Try to avoid jargon when describing your activities, and avoid acronyms and strange abbreviations. If it’s a complex funding arrangement then use the notes to the accounts to tell us more about it – that’s what they’re there for.

#3: Be open

It’s tempting to use your accounts as a platform to show how perfect your charity is. But while you should be using them to highlight your successes, I think a good set of accounts doesn’t hide from the less-than-good too.

Again, from the perspective of a potential donor, funder or beneficiary, an honest assessment of your organisation’s activities will give these audiences more confidence in your organisation. Tell them what went wrong, and what you’ve learnt from the experience.

Something that the Charity Commission research highlighted was based on a series of “financial risk indicators”. They looked for these indicators in the accounts, but more importantly also looked to see if there was an explanation for them. The good news is that the majority of accounts did explain these risks, but there were still gaps – 2 of the 7 charities in the sample with pension scheme deficits didn’t explain them, for example.

#4: Be creative

Accounts have standards that they have to comply with – the Charity SORP and other guidance for receipts and payments accounts (find guidance appropriate to your organisation). These provide a set of things you must include and standards you must adhere to (and creativity definitely shouldn’t extend to the accounting!) – but there is flexibility about how you present the information.

Think about ways of making your accounts come alive. Can you illustrate them with stories, pictures and case studies? What about charts or tables to give meaning to the financial data?Think about how your beneficiaries will need the information presented – for example Mencap have previously produced “easy read” versions of its annual report [pdf].

What about online accounts rather than just PDFs? (though you’ll still have to submit a PDF to the Charity Commission). These accounts (which won an award at the ICAEW Accounts Awards) are a great example of this.

#5: Focus on impact

Lots of trustee’s annual reports give a very nice (and sometimes very long) description of the mission, aims and activities of the charity. This is good. Even better is where they tell us about the impact they achieved with the resources the main body of the accounts then go on to describe. Showing how this money made a difference doesn’t need complicated SROI calculations: stories will do. Inspiring Impact can help too.