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Small charities want smaller guidance, peer review project finds

Charities that took part in the ICAEW’s pilot peer review programme have requested that the Charity Commission change its ‘one-size-fits-all’ approach to guidance and instead tailor its guidance to different sizes and types of charities.

Nick Brooks, chair of the Charity and Voluntary Sector Group at the ICAEW, who also led the review panel, said that “many charities commented on the need for proportionality of guidance in relation to the size of charity”.

He said: “The volume of information is large and the smaller charities wanted to focus on key areas relative to their size as opposed to the complete panoply of requirements.”

The comments were drawn from 25 charities with income of less than £5m, who volunteered to have their financial controls scrutinised by accountants who are members of ICAEW (the Institute of Chartered Accountants in England and Wales).  The accountants volunteered their time too.

As well as identifying trends and themes, reviewers rated the charities’ performance in five areas of governance: strategy and planning; risk awareness and management; internal financial controls; fraud and financial abuse management, and information and communications.

The aggregated results indicated that 42 per cent of participants were strong in these areas; 46 per cent had some gaps and 12 per cent had significant gaps.

They were best at strategy and planning and information and communications, but fell short at managing fraud and financial abuse. In this area just 28 per cent had strong controls, and a large majority had no or very limited anti-money-laundering policies. Few had Bribery Act policies and few had policies around fraud and the reporting of fraud.

Risk awareness and management also scored low – just 32 per cent had strong controls.

Brooks added that funding was a real concern highlighted by charities in all income bands.  Yet, “there was very little comment from the charities on merger, collaborations or shared services, although the reviewers felt that this should be the way forward for many charities with funding issues”.

He also pinpointed the difficulties that charities can have attracting new trustees, and particularly those with the skills to understand financial reports.

“On a number of occasions there were comments about the lack or poor communication between the trustees and the senior management team and the reviewers generally believed that there was a tendency for charities to underfund the finance function of their charities both in terms of resources and people both at the board and the senior management level.”

Charity Commission yet to formally respond

The Charity Commission said it was currently compiling a response to the ICAEW report, “which will cover our approach to ensuring small charities continue to have access to our online resources”. It hopes to publish this in the autumn.

The regulator also said it is already working with sector umbrella bodies, such as Charity Finance Group and the Small Charities Coalition, to develop more user-friendly guidance on various topics.

However, it seems to have retreated from a commitment made at the launch of the ICAEW project a year ago, to lead the expansion of the work into a broader peer review scheme once the pilot was complete.

In April this year the regulator launched another, similar project with the Institute of Chartered Secretaries and Administrators to help new charities improve their governance, and it confirmed to civilsociety.co.uk that it is also in discussions with other bodies about developing further such projects.  

A spokeswoman said: “In the long term, we hope that the sector itself will take more of a lead in devising and implementing review initiatives.  We will always take an interest in the findings of such reviews, which we hope will inform our regulatory approach, but this does not necessarily imply that we need to be closely involved in the development of all review projects.”

Click here to read the full ICAEW report by Nick Brooks.

This article was taken from www.civilsociety.co.uk – http://www.civilsociety.co.uk/governance/news/content/13288/