Never more in demand but still not properly valued, charities need to provide better information to allow proper measurement of their work.
Speaking on 23 November during Civil Society Media’s Charity Finance Week 2020 Andy Haldane, chief economist of the Bank of England, suggested the social sector’s contribution is often “underestimated and overshadowed... relative to the public and the private sectors. These sectors tend to be fairly well defined, indeed fairly well measured, whereas the amorphous mass of civil society is typically neither.”
As a result, civil society too often “has been the invisible residual” as it is largely “out of statistical sight and out of policymakers’ minds.” He added that large parts of the sector remain untouched by impact measurement and said this leaves their “true societal contribution unquantified and in many cases not fully understood.”
Haldane estimates the social sector in the UK may contribute around £200bn annually in social value each year: around 10% of GDP. But reported accounts will say the measured contribution of the social sector is around one tenth of that amount: only 1% of GDP.
What can charities do better to convey their worth?
Charities need to tell their stories better and explain the positive difference they make. There is one opportunity that every registered charity has to do this each year and it’s coming around now for charities with a 31 March year end.
Trustees will be focusing on whether their charity will remain a going concern for at least 12 months from the date of signing off its annual accounts. As well as compiling those accounts, they will have to produce their annual report detailing the work their charity did in the financial year ending with the onset of COVID-19 (and considering the impact they consider the pandemic will continue to have).
How well organisations communicate the value of what they have done may dictate whether they get to report on the next one.
After our second national lockdown had begun the Charity Commission wrote a blog: “Why should trustees explain the difference that their charity makes?” This reported that it had reviewed 102 trustees’ annual reports filed for the 2017 financial year and found many of them wanting.
Only four out of 10 reports met the legal requirement to report on public benefit. Fewer than one in 10 went beyond this to make explaining the impact of their work an important part of their report.
Out of 102 charities only six had focused on the difference they had made to the lives of the people they were set up to help. Only one other charity had focused on its impact on wider society.
So, what should charity trustees bear in mind when finalising their annual report to better communicate their work to funders, government, donors, service users, the public and the media?
The application of common sense and of the Charities Statement of Recommended Practice (SORP) should help. SORP provides recommendations and requirements setting out how to prepare ‘true and fair’ accounts in accordance with UK accounting standards, in particular providing a framework for a charity to outline its purpose, the strategy it has devised, the activities it has pursued to implement that strategy and what it has achieved as a result. That framework includes the following tips for more effective presentation of a charity’s accounts:
Explain your public benefit
Charity trustees must have due regard to the Commission’s public benefit guidance, because pubic benefit is integral to any charitable purpose. Many years ago, a closed order of nuns was deemed ‘not charitable’ because the public benefit of its prayer was not capable of proof. But how many charity trustees are familiar with that guidance and if put on the spot how many could immediately provide a clear explanation of the public benefit delivered by their organisation?
Show your impact
Although trustees must explain what their charity has done, presently the SORP does not require charities to communicate the impact they have delivered - but isn’t that what all should be doing to show the positive difference they are making?
Are you using case studies and gathering and presenting data in visual form - whether infographics or pie charts or graphs - not only in your annual report but also on your website (and then through social media)? Of course, this has to be underpinned by having first put in place compliant systems to gather and use the data needed to evidence your impact.
Compare outcomes/ impact with your previous year’s work
Are you measuring your outcomes and impact against your previous year’s performance, charting your journey, reflecting and changing tack as necessary along the way and providing a benchmark for next year’s performance?
The SORP requires charities to tell their story in a balanced manner, acknowledging significant failures as well as successes. In the context of serious incident reporting the Charity Commission readily acknowledges that things go wrong in charities from time to time and that what is more important is how a charity reacts to and deals with failure. Being honest engenders trust.
Trustees’ annual reports are very long and seem to be getting longer. How about consciously trying to shorten your report year on year, putting any extraneous matter towards the end? No one is pretending that is easy - Mark Twain famously said that he didn’t have time to write a short letter, so he wrote a longer one - but it might be worthwhile.
Are all trustees involved in the preparation of your report or at least given the opportunity to comment on it before it is finalised? It is one thing to approve a final draft prepared by others and another to be expected to make a meaningful contribution, forcing you to think about what your organisation does, why it does it and how it could do it even better.
Implement the charity governance code
Properly considering these key questions will force your trustees to practice the good principles set out in the Charity Governance Code - such as “organisational purpose”, “leadership” and “board effectiveness” - and having done so they can legitimately confirm in the report that such practice is embedded in your operation.
Do your charity justice
A respected commentator recently noted that the charity sector has a problem with branding. Charities are doing amazing work yet much of this goes virtually unnoticed by the media, by politicians, and the public as a whole. There is a lack of understanding and to address it requires a long process requiring consistency, clarity and coordinated communications over time.
But time is one thing in short supply for charities at the moment. They need to do all that is within their control, do justice to their work by ensuring they have a clear idea of what they are there to do, how they are achieving their goals and what difference their work is making.
The trustees’ annual report is one of the best opportunities available to charities to do that but the concluding question of the Charity Commission blog is probably the most pertinent: “why would you invest your own time and money in a charity unless you were sure it was making a difference?”