Towards Charity Accountability: Narrowing the gap between provision and needs?

Abstract

Although charities currently play a rich and varied role in modern society, their continued success is dependent upon the public's trust. With respect to charity accountability, two key questions emerge: to whom is a charity accountable; and what form should that account take? Despite the widespread acceptance that charities should discharge accountability, there is limited knowledge of the relative importance of different stakeholder groups and whether the information currently being disclosed meets their needs. Using extensive document analysis and a survey of stakeholders, this research explores these issues in the context of the top 100 UK fundraising charities. Furthermore, it compares the results with much earlier research to identify changes over time.Vol. 15, No. , -, http://dx.

Transparency in Reporting on Charities’ Efficiency

“…Where ratios were provided, the authors commented that understanding of these figures was hindered by charities' failure to give explanations or comparatives. Connolly and Hyndman (2013), using a different methodology and wider definitions, identified that rates of disclosure of efficiency measures were higher than previous studies (although still very modest), with fewer than 25 per cent of charities disclosing an efficiency measure or conversion ratio in either their TAR or Annual Review [endnote 5]. These previous studies focussed on the extent of reporting, largely ignoring the manner of reporting (which is explored in this study).…”

“…Based on a strict definition, support costs and governance costs are quite different from administration costs; however, it is possible that many readers of reports would not be aware of that difference. Combining the proportions of charities disclosing administration, support and governance ratios (as was done by Connolly and Hyndman, 2013), a slightly greater proportion of charities are reporting these than in any previous study (including Connolly and Hyndman, 2013). The governance cost ratio was much more often disclosed than a support cost or administration cost ratio.…”

“…For large charities in the UK, these are subject to the SORP, Companies Act requirements (for charities registered as companies) and review (but not audit) by the external auditor. Annual Reviews for the same period were also included as previous research (Charity Commission, 2004;Connolly and Hyndman, 2013) indicated that charities often provide additional performance information in these documents. Searches for relevant information were carried out on the charities' websites, a frequently-used channel of communication not analysed in previous studies.…”

“…For example, if funders are unsure about how charities are likely to spend money provided (perhaps lacking information on past efficiency and effectiveness), then the supply of contributed funds may decrease (Parsons, 2007) [endnote 2]. In addition, where charities are not transparent in reporting on efficiency, inefficiency or poor performance may be more likely (Edwards and Hulme, 1995) and the charitable sector may find it difficult to refute accusations of poor management or inefficiency (Connolly and Hyndman, 2013). Given these arguments, a range of efficiency measures and conversion ratios should not only be disclosed, but for transparency should also be made accessible to and assessable by stakeholders (reflecting O'Neill, 2006).…”

“…Ipsos MORI (2014) found that 96 per cent of surveyed members of the public agreed/strongly agreed that charities should provide the public with information on how they spend their money. While the public may have difficulty in engaging with complex general purpose financial statements (Jones, 1992;Howiesen, 2013;Connolly, Hyndman and McConville, 2014), previous studies have long argued that such disclosures (through appropriate channels) are highly valued by the users of charity reports, including funders, the public, regulators and beneficiaries (Hyndman, 1990;Connolly and Hyndman, 2013). Moreover, when reported, efficiency measures and conversion ratios can impact on decisions taken by external stakeholders with regard to charities (Tinkelman and Donabedian, 2007) and on internal performance improvement and decision making by managers (Eden and Hyndman, 1999).…”