Financial reporting by smaller charities: drivers of the cash/accruals choice

Abstract

All UK charities are required by law to publish annual accounts. This study is concerned with the choice faced by smaller charities whether to use the accruals (charities SORP) or receipts and payments (R&P) basis. A study of financial reporting by 90 smaller Scottish charities, supplemented by interviews, examined drivers behind the choice of approach. Both accruals and R&P accounts were considered legitimate means of reporting and the choice was found to be driven largely by perceived preferences of users of accounts rather than costs. KEYWORDSCharity accounting; cash accounting, accruals accounting, Scotland, charity regulation. IMPACT STATEMENTThis study shows that whilst R&P accounting has only been available to Scottish charities in the £100,000 to £250,000 income band since 2011, it is already being used by almost 4 in 10 charities in that band. Charities consider that both the accruals and R&P bases are legitimate means of reporting to stakeholders and the perceived requirements of the stakeholder influence the accounting choice to a greater extent than cost-constraints. The implication for policy makers is that both approaches have their merits in a framework of charity regulation with neither being considered more legitimate than the other.

Accountability and legitimacy of non‐profit organisations: Challenging the current status quo and identifying avenues for future research

“…In the United Kingdom, the government has played an active role in providing a better managed, more accountable and healthier NPO sector (Connolly et al, 2013a;Crawford, Dunne, Stevenson, & Hannah, 2009;Hyndman & McMahon, 2010. This is reflected in the positive view of smaller NPOs to the flexibility afforded to them in terms of reporting (cash/accruals) choice (Alsop & Morgan, 2019) and the findings that changes to public benefit reporting, initiated by the regulator, are leading to higher levels of NPO accountability (Morgan & Fletcher, 2013). The extant research in this area suggests regulatory legitimacy is a cornerstone of structural accountability for NPOs.…”

Manifestasi Surah Al-Kahfi Pada Praktik Akuntansi Manajemen Perkebunan Syariah

“…Keberkahan juga dapat berupa sifat ikhlas, rida, qanaah, dan istikamah dalam menjalankan perintah Allah (Djalaluddin & Mumpuni, 2020;Ryandono & Wijayanti, 2019). Terbukti bahwa zakat, infak, dan sedekah berpengaruh terhadap pertumbuhan ekonomi (Alsop & Morgan, 2019;Kober & Thambar, 2021).…”

How transparent are charitable foundations? A large-scale comparison of transparency levels in grant-making trusts and foundations in England and Wales

“…The format that the report and accounts must take depends on the income of the charity: non-company charities with an income of £250,000 or less can prepare 'Receipts and Payments' (R&P) accounts that are not bound by the SORP regulations. The CCEW does not mandate the content of R&P accounts, allowing charities the freedom to interpret the requirements (Morgan, 2010), although guidance on the preparation of R&P accounts does exist (Alsop and Morgan, 2021). All charitable companies, and charities with an income more than £250,000, must prepare and file accruals accounts that comply with the charity SORP (CCEW, 2016).…”