The number of charities filing their accounts late surged 51% to 17,773 in 2023/24* from 11,778 the year before, a sign of the financial stress facing the sector, says chartered accountants and business advisors Lubbock Fine.
Falling donations and Government funding cuts are creating more uncertainty over the financial position of many charities.
In addition, that reduction in funding has put a strain on the finances of charities, forcing them to cut their spending and jobs, including within their finance and accounts departments. This reduced manpower, as well as the complexity of charity accounting regulations, means they are struggling to meet deadlines or delaying the filing of accounts.
Lubbock Fine Partner Hazra Patel explained that some charities are delaying filing accounts that they know highlight undesirable results as they do not want to shake the confidence of their donors and other stakeholders. In addition, the delays arise from the lack of ability for charities to invest in their finance functions due to the funding cuts impacting the sector. However, she said that delaying the filing of accounts can achieve the opposite, as a missed filing deadline can raise alarm bells about the financial stability of a charity.
Hazra Patel says, “Charities are under real financial strain, and they worry that a weak set of results will damage future funding prospects, so they opt to delay filing,” she said. “But delaying also raises concerns amongst donors who don’t want to donate to a charity with weak internal controls and processes that may put the use of the donated funds in jeopardy.”
When the filing of accounts is delayed, stakeholders might also assume that something is being hidden or that the organisation is generally not being run well.
Hazra Patel says: “That loss of confidence can reduce general donor support for a charity making a tough financial situation even worse.”
Repeated delays in filing accounts also increases the risk of scrutiny from the regulator, The Charity Commission. which can investigate persistent late filers.
*Source: Charity Commission data, for accounting periods ending 30 June 2023 and 30 June 2024.
