Understandability and Transparency of the Financial Statements of ...

This focus on reporting the achievements of the charities in relation to their objectives
is also seen in England and Wales where registered charities with income over GBP1
million now need to complete a „Summary Information Return‟ (SIR). The SIR‟s eight
sections includes one on „The charity‟s objectives and achievements‟ where charities
are asked to describe their main objectives for the year and whether they were achieved
(Charity Commission, 2009e).
In this study the importance of reporting on the outcomes of charities‟ activities was
highlighted by the following quotations from interviewees:
The activities of the organisation are far more important than the financial
statements (Interviewee 5 BA).
It [the charity] has to be accountable but it also has to be impactful.
(Interviewee 9 BM)
Your constitution is your objective, that is what you really need to be reporting
on, whether you are achieving your objectives. (Interviewee 15 BM)
The most important thing is what the organisation exists for and how well it is
able to meet its aims. The smart organisations that I see in the charities sector
are the ones that integrate some outcome reporting within their financial
statements. But they‟re few and far between. (Interviewee 18 A)
However, although there is a growing demand for outcome reporting few, if any,
charities are doing it. This was illustrated recently in the US where Ken Berger from
Charity Navigator asked 200 charities they currently evaluate to send him information
on their current outcomes – only 10% were able to provide meaningful outcomes
reporting (Social Solutions, 2009).
As Molloy and Cordery (2009, p. 48) note “lapsed donors rarely claim they couldn‟t
afford to carry on giving, but they often say they‟ve lost faith in the effectiveness of their
giving”. This is supported by Lumley (2009) who considers that, rather than telling
donors about overheads, charities should concentrate on what that administration cost
achieves, particularly in relation to making a difference in the lives of charities‟
beneficiaries, as discussed next.
8.3.1.1 Making a difference in beneficiaries’ lives
A particular emphasis in outcome reporting is in relation to beneficiaries, for whom
outcomes can be defined as the change in their circumstances brought about by the
outputs, or the immediate products or services generated by the charitable organisation.
In New Zealand, Joan Buchanan, a charity consultant, has noted that most charities are
really trying to make a difference in peoples‟ lives and just need to communicate this
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