Understandability and Transparency of the Financial Statements of ...

It is also possible to see [on the Charities Register] which organisations have
'foundations‟ alongside them although it is not always clear why they are not
consolidated. (Interviewee 2 M/A)
However, a more cynical interviewee suggested that charities would obscure this link by
changing the charitable trust name:
They‟ll rename them [charitable trusts] with totally different names that aren‟t
related to the original [charity] name [pause] and the only way that you might
track that actually going down is by doing searches to find a commonality of
directors. (Interviewee 12 M/A)
Another suggested reason for not consolidating relates to the lack of available
information on the separate fund as people were „empire building‟ and keeping
information to themselves:
All those people who are managing those [funds] are control freaks they haven‟t
shown us [Charity‟s Board] a pure set of accounts at all. And rightly speaking,
they should be incorporated with the main set of accounts. But right now it‟s
not. (Interviewee 4 B/A)
Other interviewees considered that the cost of consolidation outweighed the benefit of
consolidation:
I had to acknowledge that the costs of doing so [consolidating] were far
outweighed in any benefit. However, it ought to be possible for the [charity] to
understand its entire financial structure. What its assets were and how those
assets could be used to achieve the mission of the [charity]. But I was never able
to get that far because I think in a sense there were two things that prevented it.
The first was that there were too many groups that were afraid that that would
result in their losing some control over their little kingdoms, little kingdoms
being $100 million in places, you know. And the second was that the [charity]
itself didn‟t have a clear enough vision or strategy that would enable it to make
the maximum use of its resources. The benefit that I saw [with consolidated
accounts] was that the [charity] could then make strategic decisions and it could
use its resources in the most effective places and ways. I never managed to sell
the vision and everybody else was too committed to their own continuing activity
anyway. (Interviewee 5 T/B/A)
Interestingly one charity didn‟t include their separate entity because they forgot to do
so:
I forgot to include them!! Because they are managed separately, even though
legally part of the [charity]. In fact, we are currently looking at creating a
separate legal entity for the XXX for this very reason. (Interviewee 20 B)
The above quotation highlights the lack of understanding of the legal perspective, where
the separate funds are not viewed together as they are separate legal entities, which is
not always the same as an accounting perspective. There appears to be a lack of
understanding of the accounting definition of control, perhaps due to the limited number
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