Can your charity stand up to scrutiny?

  • New rules are obliging charities in Scotland to open up their accounts to public scrutiny
  • While this presents a challenge, it is also an opportunity for charities to demonstrate good governance
  • We look at what this increased scrutiny could mean for your organisation

Charities’ governance and fundraising practices are under intense and ever-increasing scrutiny.

You should see these new accounting requirements as an opportunity to promote public confidence in your organisation,” Anne Norrie, Regional Manager, Scotland, Zurich Municipal

The reaction to the death of poppy seller Olive Cooke – who had received hundreds of letters from charities seeking donations in the year before her death – and the demise of the children’s charity Kids Company, show how public opinion is quick to pick up on any evidence of perceived malpractice or poor governance in the voluntary sector.

In a letter to charities across Scotland earlier this year, Theresa Shearer, the chair of the Scottish Fundraising Working Group, noted that “widely publicised examples of malpractice have started to chip away at public trust of charities and driven the media to seek out more headlines about charity leaders’ pay and financial mismanagement.”

In a move aimed at encouraging greater transparency and increased public confidence in the way charities are run, the Office of the Scottish Charity Regulator (OSCR) has begun publishing the accounts of charities with an annual income of more than £25,000.

New reporting format for charities in Scotland

The reporting format charities use to supply their annual accounts has also changed, with new questions focussing on governance and finance, which is designed to make a charity’s purpose and functions more easily understood by the public.

Anne Norrie, Regional Manager, Scotland, Zurich Municipal, says charities should view the new requirements as both a challenge and an opportunity.

She says: “Charities are already very stretched in terms of their resources, so adding another layer of admin could be seen as a burden.

“However, once the right framework is in place, you should see these new accounting requirements as an opportunity to promote public confidence in your organisation. It demonstrates you have robust governance and that you are making effective use of public money, which could make it easier to attract future grant funding.”

This is a view shared by the OSCR itself. Its chief executive, David Robb, says: “Transparency is absolutely crucial. We think charities do themselves a favour by describing the impact they have made. Their supporters want to know that their donations are getting through to the cause and having a real impact.”

How charities can ensure they can cope with extra scrutiny

One of the biggest risks of increased transparency is that any weaknesses in your governance are likely to be laid bare when your accounts are exposed to public scrutiny.

In order to mitigate these risks, you should ensure:

  • You fully understand the new reporting requirements and how to prepare your accounts accordingly
  • You invest sufficient time and resources to get the reporting framework right first time
  • You keep and regularly maintain a risk register

Norrie says: “Your risk register should list all your key risks, and rank them as either a high, medium or low risk.

“Whether your biggest risk is suddenly losing key staff, or losing a regular source of funding, you need to ensure you are actively managing these key risks, and that your risk register is reviewed and updated regularly.”

How we can help

We have consultants who can help you manage a wide range of risks, from financial matters, to health and safety issues, to the challenges of contract management with third-party suppliers.

Norrie says: “Managing risks is just as important as having a robust insurance programme in place, and we are there to support you in terms of risk management.”

You can also find out more in our previous News and Views article – 3 steps to good charity governance.