Day 4: Accountability and Transparency

We know that accountability and transparency are crucial to securing public trust and confidence in the charity sector. Donors, beneficiaries, regulators, and the public must have confidence that your charity is responsible, effective, and ethical. If you have the trust of the public and your stakeholders, your charity is more likely to be resilient.

What does accountability and transparency look like in a charity? The Charity Commission has previously interpreted this as providing relevant and reliable information to stakeholders (including the watchdog itself) in a way that is free from bias, comparable, understandable and focused on stakeholders’ legitimate needs.

A high level of transparency allows trustees to:

• demonstrate that resources are being used wisely and for the stated purpose;
• show that the charity is being organised and managed properly;
• demonstrate that the charity is carrying out its activities properly; and
• attract donations and funding to enable the charity to continue its activities.

What does this mean in practice?

1. Financial Accountability and transparency:

It is vital that charities maintain accurate financial records, conduct regular internal audits, and are transparent about how funds are spent. This should not be the responsibility of one person or trustee but a shared responsibility. This not only reassures donors but also reduces the risk of financial mismanagement.

One area we often see charities failing in is the timely filing of annual accounts. If your charity files late this becomes public knowledge and will remain on the public record indefinitely. When we review a charity’s public record, late filing is an immediate red flag that there are governance issues. Same for your funders and stakeholders. Timely filing should be non-negotiable.

2. Operational Transparency:

Beyond finances, a resilient charity ensures that its operations, business plans, successes and outcomes are openly shared with stakeholders (unless there is good reason not to be). This fosters trust and engagement.

In larger charities, its normal for the board to delegate to its executive significant decision-making authority, but the board must have robust oversight of the charity’s operations and hold the executive to account.

3. Board Accountability:

The board itself must also be accountable and must lead the charity in doing so. Strong governance includes policies and procedures for board self-assessment and performance reviews to ensure that the board remains effective. However, board accountability and transparency depend on having a good working relationship with its senior staff. There are some steps that you can take maintain this:

• Ensure there is a strategy for regular and effective communication with executives.
• Regularly review the processes for identifying, prioritising, escalating and managing risks.
• Review whether your charity’s committees have suitable terms of reference and suitably skilled people. Do they have effective oversight of the charity’s activities? There should be clear lines of responsibility and reporting between all bodies.
• Ensure that there is a transparent, effective and timely process for making and handling a complaint, both internal and external. Such complaints should be dealt with constructively, impartially and effectively.

In their investigation into SPAC Nation, the Regulator makes clear its focus on upholding public trust and maintaining accountability. The charity lacked transparency in how its donations and funds were managed. It also lacked accountability as its spending and decision-making could not be traced or accounted for.

The Commission emphasises the need for Trustees to be able to evidence the authority and reasoning for spending and implementing strict rules on how funds are held.

A resilient charity will create a culture of accountability by regularly publishing impact reports and encouraging open communication and feedback from donors, volunteers, and beneficiaries.

In the event of a serious incident, a charity should not only respond appropriately in order to minimise the impact, but should also be transparent about the incident and steps taken. The Charity Commission exists not only to regulate but also to support charities. As demonstrated by Effective Ventures Foundation UK, it generally responds well to trustees taking the appropriate steps to report risks, protect their charity and comply with their legal duties.

Good governance involves not only planning for risk but acting diligently when weaknesses come to light.

When we are transparent and accountable, we inspire confidence and loyalty. Our stakeholders become our advocates, spreading the word about our impact and attracting even more support.