Social Accounting and Audit

Primary purpose
Summary
Potential benefits
Who can use the tool?
What resources are needed?
Development, ownership and support
Third sector examples
Further sources of information

Primary purpose

Social Accounting (more strictly defined as Social Accounting and Audit) establishes a framework for ongoing monitoring, evaluation and accountability to stakeholders both internal and external to the organisation.

Social Accounting can help an organisation to investigate its performance against social, environmental and economic objectives, and ensure that it is working in accordance with its values. In the private sector, social accounting is aligned with corporate social responsibility.

Summary

The following are the key principles of the social accounting process according to the Social Audit Network (SAN), a network providing assistance to third sector or social economy organisations throughout the UK and internationally [1].

According to SAN, social accounting should be:

  • Multi-perspective: encompassing the views of people and groups that are important to the organisation.
  • Comprehensive: inclusive of all activities of an organisation.
  • Comparative: able to be viewed in the light of other organisations and addressing the same issues within same organisation over time.
  • Regular: done on an ongoing basis at regular intervals.
  • Verified: checked by people external to the organisation.
  • Disclosed: readily available to others inside and outside of the organisation.

SAN has identified three steps to Social Accounting and Audit, preceded by a Getting Ready stage preparing the organisation before embarking on the process.

Getting ready: The organisation learns how Social Accounting works, what resources it requires, decides how the process will be managed; and makes an informed decision about whether to go forward. Often, this is done in conjunction with an orientation or a ‘taster session’ in which representatives of the organisation explore the process of social accounting.

Step 1 Planning: In the first stage of Social Accounting, the organisation clarifies its mission, objectives and activities as well as its underpinning values. It also analyses its stakeholders through completing a ‘stakeholder map’. These exercises help the organisation to make explicit what it does, why and how it does it, and who it works with and whom it seeks to benefit.

Step 2 Accounting: In this phase, an organisation decides the ‘scope’ or focus of the social accounts, especially if it will build a comprehensive picture over time. The organisation then sets up ways of collecting relevant information over a period of time to report on performance and impact against its values and its objectives, encompassing both quantitative and qualitative. The information is then brought together and analysed.

Step 3 Reporting and auditing: The information that was collected, collated and analysed in Step 2 is brought together in a single document, which serves as a draft of the social accounts. People from outside the organisation (a Social Audit Panel) then review this document to check that the report is based on information that has been properly gathered and interpreted. When the Panel is satisfied with the report and its findings, the organisation can make its report available to the stakeholders and wider public in full or as a shorter summary.

Social Accounting and Audit is really about examining the ‘social, environmental and economic’ performance and impact of an organisation. There are a variety of key terms which are included in the glossary as part of the new, revised manual.

Potential benefits

  • As Social Accounting examines the social, environmental and economic performance and impact of an organisation, it can offer an organisation a method for obtaining a holistic and regular process of examining both how it is doing (performance) and what its effects are on people, communities, and the environment (impact).
  • Customers, service users, or clients can be involved with the social accounting process and thereby feed their perspectives into the organisation’s planning and measurement process. These individuals or groups can also request / read social accounts to know more about organisation.
  • Social Accounting can feed into strategic planning, as it offers an organisation the ability to systematically review its strengths and areas for improvement.
  • Organisations have a great deal of flexibility within the framework. They may go through the process in different ways, and report on the process differently, tailoring it to fit their needs and requirements. An organisation can choose to report on any indicators that it sees fit, thereby making it possible to fit many ‘proving and improving’ tools within the framework, including quality systems or indicators of impact that are required by purchasers, funders, or lenders.
  • There is flexibility in the time scale for completing the process and in building up to a comprehensive set of accounts. The full process can be done in stages over two or more years if the organisation focuses on different aspects of its activities or objectives in each year. This is only recommended if the whole picture will be complete within a reasonable timeframe.
  • The external validation process can be an important reality check on the information the organisation has gathered.
  • Having a verified and comprehensive statement of the organisation’s impact and performance can help in reporting to funders/investors, reporting to stakeholders and in compiling annual reports.

Potential limitations

  • Social Accounting can be quite labour intensive, especially the first time. If the organisation has not done basic strategic planning in some time, it can be difficult to progress through the process rapidly.
  • Although engaging in a social accounting process can be seen as a commitment to improvement, social accounting is not explicitly recognised by funders and lenders.
  • The social accounting process is not particularly useful for benchmarking, as the questions asked and methods for finding the answers are left to each individual organisation to decide. However, there are some organisations that are investigating reporting to a common framework (e.g. CTAC in Manchester).

Who can use Social Accounting and Audit?

Organisations of all sizes and types can undertake Social Accounting. The SAN Social Accounting and Audit Manual and CD describes the three-step process in detail and provides practical how-to resources. The manual is particularly geared towards social enterprises, social economy organisations, and grant-funded voluntary and community sector organisations.

AccountAbility’s methods may be useful for larger organisations who are serious about addressing a corporate social responsibility agenda.

What resources are needed?

Leadership

One person or a group of people will lead on the Social Accounting work. The involvement and commitment of the organisation’s senior management are essential. It is recommended that staff at all levels be involved with consulting stakeholders and measuring progress, performance and impact.

Proficiencies or skills

It is helpful for someone on staff to have experience with social research, e.g. surveys and other methods of consultation. If the organisation doesn’t have this proficiency, it may be helpful to bring in some outside assistance.

Staff time

Staff time is required throughout the Social Accounting cycle. Generally more time is needed to set up the process at the beginning and to compile, analyse and write up the information at the end.

Courses, support, and information

Nearly all organisations find introductory sessions very useful, and many require ongoing support through the process, depending upon their skills and experience, and the internal time they are able to dedicate to the process, especially in the first round of accounts. Consultants may also help with consulting stakeholders – providing someone impartial to help collect difficult or sensitive information – or to help compile and analyse information. The SAN Social Accounting and Audit Manual and the AA1000 Assurance Standard are available to assist organisations in the process.

Development, ownership and support

Development of the overall Social Accounting framework was led by the New Economics Foundation along with John Pearce and Simon Zadek, who head the two main organisations in social accounting, Social Audit Network and AccountAbility respectively. These two and several other organisations offer courses, taster sessions and support for the social accounting process. See the Further sources of information section below for contact details.

Third sector examples

Social accounting and audit has been popular among social enterprises, community enterprises and voluntary organisations. Organisations that have undertaken social accounting include:

  • The Body Shop
  • Furniture Resource Centre (FRC) Group
  • Traidcraft
  • Community Enterprise Unit Ltd. (Devon)

Further sources of information

SAN publishes a series of Guidance Notes on the social auditing process, and maintains a list of SAN-approved Social Auditors. See www.socialauditnetwork.org.uk for more details.

AccountAbility was launched in 1996 as the Institute for Social and Ethical AccountAbility to promote accountability for sustainable development. It brings together businesses, academics and practitioners who are developing ways to measure and report on the social and ethical performance of organisations. For more details see www.accountability21.net

1. The social Audit Network is a collaboration of individuals that works with many social enterprises and other organisations in the social economy/ third sector.

 

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