CFDG aim to improve charity reporting so public know how their money is being spent

11th November 2003

The Charity Finance Directors' Group (CFDG) has today launched a bold collection of proposals for consultation that they hope will improve the quality and consistency of charity annual reports. In the report, Inputs Matter: Improving the Quality of Reporting in the Charity Sector, CFDG sets out plans to tighten the definitions used in charity accounting and create a more level playing field between charities. Ultimately the goal of the project is to allow the public to have more knowledge of how the money they donate to charity is being spent.

The report, which was funded by the Lloyds TSB Foundation, contains a number of significant, wide ranging, and controversial recommendations in relation to Support, Management and Administration Costs, Fundraising Costs and the Valuing of Volunteers. These include:

· That consideration should be given to include a value for volunteer time in the SOFA.
· Management and administration costs should be called 'governance' costs or similar, with the term defined to make it clear what sort of costs should be included, and sufficient detail provided to explain all cost allocations.
· Allocation policies relating to fundraising activity, themselves based on clearer definitions as to what constitutes fundraised income, should be determined in advance of the year-end and be approved by the trustees before they are applied.

It is hoped these proposals will spark a debate on charity reporting. CFDG now want to find out what their members and other interested parties think of the proposals, and whether they will lead to more meaningful financial ratios. It is also anticipated that the Report will contribute to the next annual SORP review.

The consultation focuses on the inputs into charity accounts, and as such will help charities move on to more accurate output and outcome measures.

Charities Minister, Fiona Mac Taggart said, "Charities at their best report on the outcomes of their work and the impact they have achieved, demonstrating the difference they make to peoples' lives."

"The Government is keen to see moves towards greater consistency, clarity and transparency, in reporting by charities. This can highlight the public benefit of charities' work and boost confidence in the sector, especially from funders and donors".

CFDG Vice Chairman, Les Jones OBE (Deputy Chief Executive at WWF) said, "The issue of the use of financial information to compare charities is inevitable and whilst there are many limitations to any such comparison it is clearly going to happen. CFDG are therefore keen to ensure that the financial information provides enough of the right data to assist in this process. We will not be able to move on to meaningful comparisons until we are sure that we have got right the consistency and acceptance of fundamental principles of accounting for the inputs. This will in turn assist with the all important measurement of outputs, outcomes and impacts."

Charity Commissioner, David Taylor said, "I congratulate CFDG on their initiative in seizing this part of the Strategy Unit agenda, undertaken with commendable speed. The Charity Commission particularly welcomed the opportunity to work with CFDG. As chairman of the SORP Committee, I would like to thank the many people involved for their time and hard work. When the fruits of this research find their way into a revised SORP, future consultation will give CFDG a second bite at the cherry."

For further information on the report interested parties should contact Les Jones OBE, Deputy Chief Executive of World Wildlife Fund UK and Chairman of the Project on 01483 412201, or Shirley Scott, Chief Executive of CFDG on 020 7793 1400.

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