Grant Thornton UK LLP today publishes its first annual review of the governance practices of the top 100 charities by income: The science of good governance – Towards charity best practice.
With public sector funding cuts and dwindling voluntary donations, charities are feeling the squeeze, yet there is a greater demand for their services. In these tough times strong governance is more important than ever to enable charities to respond effectively and rapidly to emerging risks and deliver on their objectives.
Grant Thornton has reviewed the annual reports of the top 100 charities, assessing trustee, structure, governance, risk management and impact disclosures. The research highlights many examples of good governance practice, for instance, the 31% representation of women on charity boards, compared to 22% of female non-exec directors in the FTSE 100. However, there are areas charities can develop to achieve further best practice. The report aims to support charities in using their annual reports to manage and communicate their governance more effectively and build greater trust.
Commenting on the report’s findings, Carol Rudge, Head of Not for Profit, UK and Global, Grant Thornton UK LLP, said: “Annual reports represent a valuable opportunity for charities to demonstrate transparency and trust to their stakeholders, showing how they are governed and what they have achieved. We know best practice does exist but it is not always disclosed. Conversely, governance performance is a strong indicator of commercial or structural challenges for charities.”
The report notes that the top 100 charities have the same need for transparency and best practice as the FTSE 350, and as they lead the charity sector should set the tone for less resourced charities.
The review finds that more than three quarters (77%) of the top 100 charities show how they performed against aims stated in previous reports and provide a clear summary of the charity’s main objectives. However, only 27% make detailed disclosure of their future plans.
The study sets out a number of recommendations to include in annual reports such as:
- how trustees are recruited, inducted and trained
- information on the skills, diversity and attendance of board trustees
- more detail on the nature of the risks charities are exposed to and how trustees are addressing these risks.
The review of financial statements also calls for greater disclosure of charities’ reserves policy and also provides useful benchmarks so charities can further understand good governance in practice.