The UK's charity sector comprises over 200,000[1] organisations working in many areas and for many purposes.All are unique in their own way and many have to 'up their competitive game' in order to attract the attention of donors and grant awarding bodies. How a charity tells its own story can be extremely helpful in raising awareness, as well as funds, to support the charitable activities that it undertakes. The charity’s Annual Report affords a great opportunity to do so.
Charity legislation is devolved in the UK, meaning each of the home nations (England & Wales, Scotland and Northern Ireland) have separate charity laws governing the preparation of charity financial statements and the audit of such. However, all three sets of law require charities to prepare their financial statements under the "Statement of Recommended Practice: Accounting and Reporting by Charities" (or, "the SORP") where their income in any financial year is above £250,000. Those who fall outside that threshold requirement may choose to voluntarily adopt the SORP.
The SORP has been designed to improve the quality of financial reporting by charities, as well as enhancing the transparency, understandability and quality of information presented in the charity’s financial statements. As a result, the SORP requires more comprehensive and detailed disclosures than the charity may have previously reported.
Financial statements produced under the SORP will contain a narrative report, referred to as the Trustees' Annual Report. The primary purpose of this Report is to ensure that the charity is publicly accountable to its stakeholders for the stewardship and management of the funds it holds.
It can be easy for Trustees to dismiss the preparation of this report as a laborious exercise purely to meet the various legislative and financial reporting framework requirements, however, this was certainly not the intention of the SORP writers.
The Trustees' Annual Report is a chance for the Trustees to "tell the story" of their charity - celebrating their achievements and demonstrating the difference that the charity is making among its beneficiaries. The Report is a perhaps unique opportunity to reach both the charity's existing supporters and the wider general public and provides a platform to highlight the good work that is being carried out.
A strong Report also ensures that the charity can demonstrate its governance arrangements and allow the organisation to be publicly accountable to its stakeholders for the funds it receives and the activities and expenditures it carries out. The full picture cannot always be easily obtained from the financial information and so the Report is key in addressing the more qualitative, non-financial results of the charity - the impact it has made, the objectives it has for the future and its overall strategy and aims.
The Report does not need to be lengthy, nor does it have to be purely narrative. Photographs, quotations from service users and bold design can all be used to develop an attractive and informative document.
The responsibility for the Report ultimately lies with the charity's Trustees. Many are now starting to think about the annual financial statements of their charity and as well as focusing on the numbers, trustees should see their annual report as an opportunity to tell the charity's story to the world.
[1] Based on figures obtained from the websites of the Charity Commission of England & Wales, Charity Commission for Northern Ireland and the Scottish Charity Regulator at 27 June 2022.
