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ACCA Strategic Professional · Strategic Business Leader · Governance scope and approaches

A medical research charity is funded by donations and government grants. Its trustees are unpaid volunteers, and the donors want assurance that funds reach the stated cause. Which feature of not-for-profit governance best addresses the donors' concern?

Reporting on how restricted funds were used and what charitable outcomes were achieved best addresses the concern. It gives donors evidence of stewardship and accountability for the cause. Surplus-linked pay, share listing or donor-appointed auditors do not fit a charity or would weaken independence.

  1. ALinking trustee remuneration to the charity's annual surplus
  2. BReporting on how restricted funds were applied and on charitable outcomes achievedCorrect
  3. CListing the charity's shares on a recognised exchange
  4. DAllowing donors to appoint the external auditor annually

Explanation

Donors are stakeholders who need stewardship evidence, which comes from reporting on use of restricted funds and results delivered. Trustees are unpaid, so linking pay to surplus is inappropriate, and charities have no shares. Donor appointment of auditors would compromise independence.

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