The evolution of the UK charity Statement of Recommended Practice: The influence of key stakeholders

In the early 1980s, a landmark study identified significant poor reporting practice in UK charities. As a consequence, a journey was commenced with the aim of improving accounting and reporting as a basis for enhancing accountability by charities. Much of this change has been effected through the publication of evolving Statements of Recommended Practice (SORPs) on accounting and reporting by charities. This paper analyses the evolution of the SORP through time using insights from stakeholder theory, and argues that the key stakeholders influencing the evolving SORP have been government and the accounting profession.

The Hand of Government in Shaping Accounting and Reporting in the UK Charity Sector

Accounting in the UK charity sector has changed massively over the last 25 years, with various stakeholders influencing what has occurred. Using insights from stakeholder theory, and interviews with a number of key actors, this article focuses on the influence of one definitive stakeholder – government – in developing a regime of quality accounting and reporting in the sector. In particular, the evolution of the Statement of Recommended Practice for charities is explored. It is argued that a much tighter and more meaningful regime of accounting and reporting has been encouraged by government, amongst other stakeholders, and this has led to a more accountable and healthier charitable sector.

Towards Charity Accountability: Narrowing the gap between provision and needs?

Although charities currently play a rich and varied role in modern society, their continued success is dependent upon the public's trust. With respect to charity accountability, two key questions emerge: to whom is a charity accountable; and what form should that account take? Despite the widespread acceptance that charities should discharge accountability, there is limited knowledge of the relative importance of different stakeholder groups and whether the information currently being disclosed meets their needs. Using extensive document analysis and a survey of stakeholders, this research explores these issues in the context of the top 100 UK fundraising charities. Furthermore, it compares the results with much earlier research to identify changes over time.

UK charity accounting: an exercise in widening stakeholder engagement

Given the economic and social impact of the charity sector in the United Kingdom (UK), the importance of good governance has been recognised as a basis for underpinning effective and ef?cient performance, and for ensuring that charities meet the legitimate aspirations of key stakeholders. A major aspect of this is high-quality accounting and reporting. Over the past 25 years attempts have been made to improve this through the medium of successive, evolving versions of a Statement of Recommended Practice (SORP) for charities. As a foundation for the future review of the SORP (expected to be published in 2015), the SORP Committee undertook its largest ever consultation on an accounting pronouncement. This paper presents the ?ndings of that consultation and, analysing them using stakeholder theory, concludes that this ambitious exercise facilitated much wider stakeholder engagement than had been experienced before and has the potential to legitimise further the SORP.

Conversion Ratios, Efficiency and Obfuscation: A Study of the Impact of Changed UK Charity Accounting Requirements on External Stakeholders

Key stakeholders in the UK charity sector have, in recent years, advocated greater accountability for charity performance. Part of that debate has focussed on the use of conversion ratios as indicators of efficiency, with importance to stakeholders being contrasted with charities’ apparent reluctance to report such measures. Whilst, before 2005, conversion ratios could have been computed from financial statements, changes in the UK charity SORP have radically altered the ability of users to do this. This article explores the impact on the visibility of such information through an analysis of the financial statements of large UK charities before and after the 2005 changes. Overall, the findings suggest that, despite the stated intention of increasing transparency in respect of charity costs, the application of the changes has resulted in charities ‘managing’ the numbers and limiting their disclosures, possibly to the detriment of external stakeholders.

Charity accountability in the UK: through the eyes of the donor

Purpose – The purpose of this paper is to explore accountability from the perspective of charity donors.

Design/methodology/approach – The research utilises semi-structured interviews with a range of donors. In addition, it summarises the main findings from key related research (that uses document content analysis and questionnaire surveys) as a basis for better appreciating donor engagement.

Findings – This research offers evidence that while donors are viewed as the key stakeholder to whom a charity should be accountable, the relevance of the information commonly disclosed in formal charity communications is questionable. This is viewed as significant in terms of small dependent donors, although less critical in the case of non-dependent large donors who have power to demand individualised information. However, although all donors do not particularly engage with these formal communications, they are viewed by them as having significance and their production and publication serves as an important legitimising tool in the sector (enhancing trust and reputation).

Research limitations/implications – This research is based on semi-structured interviews with individual small donors and large institutional donors to large UK charities and therefore any generalising of the conclusions beyond large charities, and beyond the UK, should be undertaken with care. In addition, it focuses solely on the perceptions of donors, and other stakeholder groups are also important in this process.

Originality/value – Despite the widespread acceptance that charities have a duty to discharge accountability to their stakeholders, there is limited knowledge of their information needs and whether the performance information currently being disclosed fulfils them. This study provides a unique insight into the perspective of a key stakeholder group (donors) with respect to accountability.