Understandability and Transparency of the Financial Statements of ...

England and Wales have attempted to improve information about the work of their
larger charities by incorporating a „Summary Information Return‟ in their Annual
Return (Charity Commission, 2009e). These returns include information on the
charity‟s objectives and achievements; fundraising activities; activity costs; and
financial health. Charities also need to stipulate how their performance in the current
year will affect the charity in the future. Their legislation also is explicit about the need
for performance information, as can be seen in section 41(2) (b) of the Charities
(Accounts and Reports) Regulations 2008 section 41(2) (b) (i)-(iii) which states that the
following must be included:
Aims and objectives of the charity; the strategies adopted; the significant
activities undertaken to achieve the aims and objectives; and the achievements
of the charity in relation to the aims and objectives.
In New Zealand the Controller and Auditor-General (2008) released a report entitled
„The Auditor-General‟s observations on the quality of performance reporting‟. In this
he commented on the need to lift the quality of performance reporting in the public
sector to a satisfactory level since the lack of quality represents a significant weakness
in the public sector‟s accountability to its stakeholders (Controller and Auditor-General,
2008). He found that many performance reports:
do not seem to set out coherent performance frameworks showing logical links
from the medium-term outcomes information and organisational strategies to
the annual output information (Controller and Auditor-General, 2008, p. 7).
It is disappointing that, twenty years after the New Zealand public sector moved to
performance reporting, there is a lack of progress by the sector in improving what they
report. The charities sector can learn from this and in particular take notice of the
Controller and Auditor-General‟s report on his observations on the quality of
performance reporting, which includes:
a properly set direction; good measurement systems; and accessible reporting
of significant information while meeting cost-benefit tests (Controller and
Auditor-General, 2008, p. 37).
Having outlined the accountability documents that support the discharge of
accountability, next, the mechanisms by which accountability is discharged will be
reviewed.
5.4.2 Accountability Mechanisms
Accountability mechanisms are varied and can range from the monitoring of charities
performed by: charities regulatory bodies; rating agencies; auditors; independent
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