Charities, transparency and government funding

New year, new calls for greater charity transparency

Regular readers of this blog will no doubt be aware that the issues of transparency and public trust and confidence are regular fare. For the unitiated, we’ve long thought that transparency, like free speech, is a good thing: sunlight is the best disinfectant. But like free speech, transparency has limits, and comes with it responsibilities. Anyway, this latest instalment arrives via today’s short report from the Centre for Policy Studies, a think tank, entitled ‘Transparency Begins at Home: Why Charities Must State Who Funds Them’.

We read this stuff so you don’t have to

The digested read is as follows: it’s difficult to tell from the accounts of the largest charities who funds them. Some charities are really government quangos. And it gets even more complicated when you realise universities, academies and housing associations can be charities. The SORP isn’t much cop because it focuses on transaction type and not income source. And charities don’t follow it anyway: just look at how grants and contracts get mixed up. All of which is bad for democratic accountability and the health and the role of charities. And it’s even worse in Scotland.

If my summary seems slightly flippant, I do the CPS report a disservice. The report highlights issues and challenges that we’re well aware of here at NCVO: the very wide range of organisations with charitable status; the different applications of the charities’ SORP (note the R…); and the challenge of using accounts for the sort of funding analysis we undertake. Whereas this report is based on looking at the accounts of 50 large charities, we analyse approximately 10,000 (yes, 10,000) charities’ accounts every year with TSRC to produce the Civil Society Almanac and data for the National Accounts. Central to our analysis is who funds the sector: not in some Watergate-esque investigation to follow the money, but because public policy on issues such as funding and independence is better serviced by good quality data. And for that, we need charities to report who funds them.

Holding accounts to account

Our experience is that reporting is still variable, but that it’s much better than it was. It’s probably also worth mentioning that the accounts are also much easier to get hold of than in years past. But there’s still seemingly a chicken and egg situation: no-one reads them (so I am told), so there isn’t much call to improve their accessibility for an audience beyond the accountancy profession and grants officers.

Oxfam collecting box: looks pretty transparent to me
Oxfam: looks pretty transparent to me

I don’t think that this is a compliance issue for the Charity Commission to deal with. More likely it’s a good practice issue. There are great examples – look at the ICAEW award winners, for example – so we should all be getting behind CFG and the like in spreading good practice and getting more to the same level.

The criticism in the CPS report is aimed at large charities, but some of the less compliant reporting we’ve seen has been from smaller organisations employing accountants who aren’t charity specialists. It’s probably also worth noting that think tanks aren’t uniformly great when it comes to reporting their funding sources, if one recent assessment is anything to go by.

Who funds you? Report card

Improving reporting doesn’t quite nail the issue of whether charities are reporting the source of funding. This is worthy of a blog in itself: probably just worth saying here that the recent decision to change the 2015 Annual Return so that charities report levels of public funding is a somewhat incomplete solution. For that, we need to look through the other end of the telescope.

Where does my money go?

One of the arguments made for greater transparency in the CPS report is that we should know public money is spent. We agree. We just don’t think charity accounts are the best way to achieve a greater level of transparency around public spending. For that, better to identify funding at source and tag the recipient by sector, using company numbers and charity numbers. That way all recipients of government funding are captured, regardless of sector. It also increases the chances of consistency in how data are recorded: there are fewer funders than recipients.

We’ve been pushing at this agenda for years (see here, for example), as have others. And I think there are tangible signs of progress: DCLG now has guidance on local transparency; the Cabinet Office are thinking about our suggestion that Contracts Finder’s awards notices should include charity numbers. We’re also pushing for a standard transparency clause in all government contracts so that the public can see how much public money is being spent, whoever the recipient. As our ability to link datasets improves transparency will increase exponentially. Which probably does take us back to accounts and the importance of narrative: from ‘Where does my money go’, to ‘What did you achieve with it?’

Transparency begins at home

The CPS report makes some sensible observations about the state of charity reporting, with much to agree about. But there’s also stuff in there with which we strongly disagree. Rehashing tired old myths about dependence on government funding, and how that funding corrodes independence are wrong. These concern never seem to made in relation to private sector organisations supplying the same services under contract. It’s unhelpful for the wider debate about how we might improve transparency that some useful points are used to justify ideological fodder about charities’ role in relation to the state.

Transparency around charity funding has improved significantly in recent years. It’s going to get a whole lot more transparent too. So in that sense, the report is already outdated. The debate, and the task ahead, for the sector is how to inform, shape and contextualise the massive wave of charity data that will be available to us in future years.


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2 Responses to Charities, transparency and government funding

  1. Richard Spencer says:

    Thank you for this Karl,

    Some really interesting and stimulating points and observations.

    The debate around reporting and transparency almost exclusively relates to funding. I believe this reinforces a number of unhelpful ‘frames’ which are used to assess and indeed judge/beat-up charities.

    One of the more unhelpful frames is the sector descriptor ‘not for profit’. Not only does this inaccurately lead the witness to regard this as the sector ‘purpose, this also then defines the arena of debate for reporting and transparency. From the outset, this becomes one of finance.

    This has created various (small scale) hues and cries such as people clamouring for ‘minimum clicks to the CEO salary’ on a charity website. Frankly this is a complete waste of everyone’s time and energy – and probably makes the sector less effective and less efficient.

    Transparency, regulation, funding are indeed important issues – but let’s call for a drive for more transparency and regulation relating to the ‘for good’ for which the sector stands.

    Currently impact reporting by individual charities is variable and certainly improving. But as a sector it is woefully fragmented, incoherent and as a result largely meaningless.

    I would love to see the charity beaten up and judged for missing its ‘for good’ obligations as a sector (and praised for exceeding them) and shifting the balance of debate from regulation and transparency of funding to regulation and transparency of impact.

    ..actually, less of a shift of balance – because there is no debate around consistent reporting and transparency of impact across the sector.

    What can we do to build demand for reporting and transparency of impact? I would look to the Charity Commission to support and drive this, but there seems to be little appetite at present.

    How do we kick this off?

  2. Marija Antanaviciute says:

    Thanks for the article. Maybe the problem is not the lack of regulations or regulatory bodies but lack of people with the right skills? Charity sector is full of brilliant and dedicated people, but their professional, especially financial skills are not as extensive as their enthusiasm.

    @Richard Spencer: Impact is becoming a buzz-word and catch-all term. The innovation that the sector is in desperate need is a some sort of mechanism that does some sort of cost-benefit analysis on impact. I share your worries regarding transparency of impact. I am even more worried about over-commercialization of the sector, where charities focus less on ‘the good’ part and more on ‘the funding’ part.