The Charities SORP (FRS 102) and Charity Commission guidance outline the key areas that small and larger charities need to cover in their annual report, but charities may wonder whether the extra effort of going beyond compliance would pay dividends in the long term.
Is it worth it?
What would the additional cost and effort be to turn your Annual Report from compliant to compelling?
Laura-Louise Fairley, Senior Accountability Manager at Save the Children UK, recently presented a thought-provoking webinar for us where she explained how her charity manages the preparation of the Trustees’ Annual Report. She crunched the numbers and found that Save the Children UK would still spend about 80 percent of the current cost if the charity’s comprehensive and award-winning Trustees’ Annual Report was stripped back to be merely compliant. Telling the story compellingly can be a great investment if it helps the charity attract more funding and strengthens the trust and commitment of its key stakeholders, and the additional cost and effort may be minimal.
Finding the transparency ‘sweet spot’
Fairley explained why transparency isn’t something to be feared. The Trustees’ Annual Report and the charity’s website are key accountability products for Save the Children UK and tackle contentious areas such as executive pay head-on. The charity’s annual report and website disclose the exact pay and full-time equivalent annual salaries of the CEO and all executive directors. This allows Save the Children UK to explain the remuneration policies, the key responsibilities of executive staff and to pre-empt questions and avoid misunderstandings. Save the Children have also recently published an Ethnicity Data & Pay Gap Report which committed the charity to narrow the current ethnicity pay gap and to tackle institutional racism within the organisation and sector.
The charity’s disclosures on safeguarding also exceed regulatory requirements, with a summary of safeguarding incidents and explanation of how the charity is actively managing the risks in this area. According to Fairley, the charity found that the more information they made available, the less ambiguity there was. Save the Children trusted its audience to judge it fairly and this increased trust from key stakeholders. However, Fairley highlighted the need to work closely with key stakeholders across the organisation to ensure that there is consensus and that potential risks arising from increased transparency are managed.
Where to focus your efforts?
The Trustees’ Annual Report can be read by a wide variety of stakeholders as it is freely available on the Charity Commission’s website, but it is useful to have a key audience in mind. This will vary from charity to charity but is likely to include the existing and potential funders and supporters of the charity. It may therefore be helpful to address their key concerns and interests in the Annual Report: Is the charity achieving the impact it sets out to achieve? How do the trustees ensure that their decisions maximise positive impact and mitigate risks? Does the charity use its resources efficiently? Are the charity’s values reflected in the way it operates? Is the charity’s business model financially viable?
Below are some of my take-aways from the webinar:
- Get feedback from your audience: Find out who reads your charity’s annual report and what your funders, donors, project participants and staff think about it. Is the information easy to understand and well presented? What could be improved?
- Learn from others: Look at the annual reports of other charities, especially those who have won praise for their transparent reporting, such as Save the Children UK. PwC’s Building Public Trust Awards highlight examples of best practice in charity reports and are a good starting point for inspiration.
- Online resources: Find guidance on infographics on the Information is Beautiful website to make your reports visually compelling, learn from others such as LinkedIn resources and bond to help you make the language more equitable, and use tools such as Team Gantt to plan the annual report from start to finish
- Verify your report: Aim to verify all the information presented in the annual report. If the report on outcomes and impact received as much scrutiny as the financial information, would your charity’s annual report need to change?
- Coordination: A strong project manager with a clear understanding of the charity’s vision, strategy and governance structure is best placed to coordinate the preparation of the trustees’ annual report. However, they also need the backing of an executive director as well as good networking skills to coordinate the contributions to the report from all the teams involved.
If you haven’t seen the webinar 'Beyond Compliance: why your Annual Report matters and how to build it with care', you can still view it on demand here.
You can find the Charity Commission's guidance on preparing a charity trustees' annual report here.