Why transparent reporting in the Trustees Annual Report is important

The preparation of the trustees’ annual report is often treated as a check-box-exercise. As such, not much consideration goes into preparing the report. However, this is a very important document that enables trustees to outline to their stakeholders their activities, objectives and plans for the future. By providing this information, stakeholders will have a better understanding of the charity’s work, and can hold the charity to account.

Charities have historically faced challenges with regards to adverse media coverage regarding chief executives’ salaries and how donations made to charities are spent. In some instances, these issues relate specifically to segments of the charity sector, i.e. the research carried out by the Populus on behalf of the Charity Commission which highlighted the falling trust and confidence in the charity sector related specifically to the largest charities. Likewise, adverse media coverage regarding CEO salaries also related specifically to the largest charities.

However, through the Trustees’ Annual Report, charities are enabled to tell their story in their own words - this includes transparently outlining their practices and thus avoiding misconceptions. The Trustees’ Annual Report also enables trustees to go a step further by transparently outlining both their environmental and social impact as good practice, clearly setting out their commitments and plans for the future. This may include disclosing their policies for ethical investment, how trustees are inducted inclusively as well as voluntarily reporting on gender pay gaps if not mandated to.

As a standalone document, the trustees annual report makes the financial statements more accessible to users who are not from a finance background, enabling them to access information that is much easier to understand.

The trustees annual report can be improved easily by ensuring that prior to preparing it, a copy of the SORP is downloaded and ensuring that each requirement set out in Section 1 that must be disclosed in the Trustees Annual Report is comprehensively included.