Charities, transparency and campaign spending: rights and wrongs

Transparency and accountability are mission critical

I think transparency, and its big sister, accountability, are important and necessary in voluntary organisations. I agree with Beth Kanter, author of The Networked Nonprofit, who argues that too many charities are akin to ‘fortresses’ that are  ‘losing ground today because they spend an extraordinary amount of energy fearing what might happen if they open themselves up to the world’. I also set great store by William O. Douglas’s observation that ‘Sunlight is the best disinfectant’, although I remain unconvinced that philanthropic graft is the widespread problem that some headlines might lead us to conclude.

To that end, with colleagues at NCVO I’ve put a lot of effort into arguing for open data, use of social media and increased transparency (such as on executive pay). And I personally would love to see the UK equivalent of Glass Pockets, if not the McCarthyism that led to the term first being coined.

Such matters aside, it being August and all that, I wasn’t too surprised to find NCVO being accused of making life worse for charities by being against transparency. Why so? We have responded to a recent Charity Commission consultation on what questions should be included in its annual return by suggesting that charities should not disclose what they spend on campaigning activities. Putting aside silly season stuff, this is an important topic worth a brief exploration. Apologies for a slightly longer blog than normal…

Why is the Charity Commission asking for this information?

The rather simple response is because they were asked to by the Public Administration Select Committee, hence the consultation. It’s also worth noting the Commission is consulting about a wider range of questions, including reporting on how much income charities receive for delivering public services. Some of the proposals are eminently sensible. Our response to the consultation is here.

In this blog, I’m focusing on the campaigning expenditure question. The wider contextual issue is, of course, public and parliamentary interest in campaigning by non-party campaigners more generally and the inevitable growing pains of a society that is, it seems to me, shifting from a representative democracy to a [digitally powered] participative democracy. Civil society has always played an important role in holding institutions to account, and the argument that what is good for the goose is not without merit. Throw in a dash of moral outrage and we arrive at the latest in a series of transparency and accountability initiatives that those working in development will know all too well. Transparency is the new, er, black.

Transparent jellyfish

There are strong arguments for transparency…

It strikes me that as voluntary organisations we depend upon, and have earned, widespread public trust and that this is in part because we are relatively open and accountable in the way that we operate. It’s no accident that this trust coincides with evidence of public support for the campaigning role and activities of charities. What’s more, a modern, grown-up sector shouldn’t be afraid to disclose what it spends on campaigning: after all, it’s what we expect of business in relation to lobbying.  And we might well just confuse critics by showing just how little we spend on these activities compared to others. So, it’s not lightly that I turn to the arguments against reporting campaigning expenditure.

…but fewer arguments for implementation.

In producing NCVO’s response, conversations with members have highlighted some serious practical barriers to implementing the reporting of campaigning expenditure in the Annual Return. For what it’s worth, I think the Commission’s proposal fails all five of NPC’s tests for opening up such data.

The most obvious is that the proposal requires a different approach to accounting for expenditure than that currently used in the [recently revised] SORP. There are no two ways about it, this is an administrative burden with a real cost.

A second problem is defining what would come under the definition of campaigning expenditure. Would the time I spent today meeting a civil servant be included, for example? What about the overlap between fundraising and campaigning activities? I could go on: the point is, arriving at a workable, comparable definition is beyond the remit and timescale of the proposals. A rushed introduction would incentivise the sort of gaming typified by Goodhart’s Law and reduced public trust.

This leads to more fundamental issues of principle. I don’t think it’s a regulatory matter how much charities spend on campaigning, any more than it is relevant for the regulator to ask how much charities spend on facilitating people to volunteer. These are issues for charities to discuss with supporters. There’s evidence from a number of fields that once regulators start to ask for this sort of information it might create a public perception that charities need to be held accountable in response to some sort of problem. Trust and confidence are related – but they’re not the same thing. It’s been argued that building confidence via regulation can undermine trust – the last thing our sector needs.

Far better that we as a sector take our own lead – as we have done on executive pay – and design our own standards, and publish in our own terms, so avoiding classic responses such as gaming. Some charities are already publishing campaigning expenditure – stand up, RSPCA – and we might well take this as a lead. But it’s not an argument for this being a regulatory requirement.

And, finally, there remains the nagging doubt that this would be the first step in controlling the proportion of expenditure that is allowed on campaigning (as is the case in Canada, which has a limit of 10% of resources). I’m not a fan of ‘thin end of the wedge’ arguments, but in the current febrile environment for campaigning it seems foolhardy to ignore them.

Would it work? Here’s the science bit…

I’m an advocate of transparency as a route to accountability. Yet it’s worth highlighting that from the development field in particular there’s some heavyweight analysis that asks serious questions about whether transparency and accountability initiatives deliver on what they promise. In a report for DfID, John Gaventa and Rosemary McGee highlight that the assumptions that transparency initiatives lead to greater accountability are largely untested – and that providing information in itself is not a guarantee that citizens can then hold those providing information to account.

Elsewhere, Jonathan Fox has argued that this sort of transparency is ‘opaque’, the sort that ‘does not reveal how institutions actually behave in practice in terms of how they make decisions, or the results of their actions’. In short, there is a danger that transparency is political and bureaucratic, rather than social and citizen-led. For transparency to produce accountability, it’s got to be led by donors. Sunlight, on its own, isn’t a strong enough disinfectant.

Sunlight Soap WW1 Advert - a different type of campaign

Conclusion: should the Annual Return record charities’ expenditure on campaigning?

On the balance of evidence, we have concluded that the answer is no.

For an organisation that itself aims to model the gold standard of transparency and accountability, this has been an issue we have debated long and hard. We understand not all will agree, but we believe that both the principle and practical issues point to this conclusion.

Although we have rejected the proposal that campaigning expenditure should be included in the Annual Return, we will continue our work in encouraging charities to provide this sort of information on their own terms, accompanied by the context and engagement that will strengthen the links between transparency and accountability.

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Karl Wilding Karl Wilding, Director of Public Policy and Volunteering, leads NCVO's volunteering, policy, research and campaigning work in the UK and internationally. With lead responsibility for shaping the external environment for the voluntary sector, he blogs about the big issues facing voluntary organisations.

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