‘True and Fair’ Foundation report is neither true nor fair

Posted on December 12, 2015 by Karl Wilding
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Today’s Daily Telegraph features a story on a ‘report’ from an outfit called the True and Fair Foundation, which is run by someone called Gina Miller, who describes herself as a philanthropist and transparency campaigner. The report is described by the Charity Commission as ‘flawed’, by Sue Ryder as ‘misleading’, and by Which? as ‘very misleading’.

The headline is ‘1,000 charities ‘spent less than half’ of funds on good works’.

Ms Miller says she thinks this is ‘an utter disgrace’ and ‘it is time a light was shone on the sector so people can see just how their hard-earned money is really being spent by charities’. She says charities should be required to spend at least 65% of their income on charitable expenditure.

Deliberately misleading

The idea is to make you believe that when you give £10 to charity, only £4, or whatever, goes to the charity’s ends. The other £6 goes on jacuzzis, caviar, that sort of thing.

Of course, this isn’t what’s actually going on.

Where your money really goes

The reality is that the £10 you donate is part of a total £20 the charity has at its disposal to spend. There’s your £10, and there’s also the £10 margin that it made on trading. In order to get this other tenner from trading, it had to spend £30. It got back £40, £30 of which covered its outlay on the trading, and £10 of which was the profit that went to the end cause, along with your £10. In doing all this, its total income was £50 – your £10, plus the £40 from trading. The £20 it has to spend on its cause is 40% of this £50.

Do you think only 40% of your donation has gone to the cause? In fact, the charity has added to your donation with its trading.

The charity could perhaps stop generating income like this, and rely solely on your £10. But then it would have less money to spend on its cause. Most large charities have a mix of different income sources like this. It’s part of what makes them sustainable and able to do so much.

You can see explanations from Sue Ryder, British Heart Foundation, Cancer Research UK and Guide Dogs rebutting this report and setting out their spending in detail.

A bad idea

So, to meet Ms Miller’s arbitrary ‘65%’ demands, Sue Ryder could shut down its charity shops. It would be spending less on trading, so its ratio would look ‘better’ in her eyes. But it would have millions of pounds less to spend on the people it helps.

It’s complicated, but not that complicated

There are some charities cited in the report that don’t neatly fit this explanation, but this is at the essence of what is going on in most cases. In some cases, the charity’s entire income comes from trading, like Which? or the Lloyd’s Register Foundation. Others have slightly different explanations. The Racing Foundation, which Ms Miller bemoans for its 8% ratio of charitable expenditure to income, received a one-off £50m endowment in that year which understandably dwarfed its normal outgoings. It’s a perfectly reasonable explanation for the ratio being what it is.

It also highlights that charity accounts (which record total incoming resources, such as grants to spent over numerous years) are not the same as company accounts. We explained this in detail to Ms Miller when we saw her report before it was published, and signposted independent academic charity accounting specialists she can refer to, but it appears our advice has been ignored.

(The True and Fair Foundation don’t mention in their report that their own 2013 ratio of charitable expenditure to total income was 47%. Though at least they managed to submit their accounts on time that year, unlike previously.)

We tried to explain it to the True and Fair Foundation

We spent a long time, as did several of the charities mentioned in the report, and other experts, trying to explain all this to Ms Miller and to the Telegraph. I’ve offered to meet and help Ms Miller if they do in fact wish to develop an analytical framework. They didn’t want to listen. Ms Miller, who runs a network of investment websites, seems to have been more interested in self-publicity than in accurate or constructive research.

(This is all, for reference, nothing to do with campaigning or with staff costs – those issues are a red herring here.)

We’re all for transparency at NCVO. We do a lot to make charity finances accessible, through our UK Civil Society Almanac programme, for example, and have consistently campaigned for greater transparency in various areas. But this ‘report’ is a prime example of an adage I have long held dear: just because you have put your ramblings in PDF format, it doesn’t make them more valid. There are interesting debates to be had about the detail of charity reporting requirements and how they can help readers to understand how charities work.

This ‘report’ contributes nothing to those debates.

In fact, it is so misleading in its analysis – and I can only conclude deliberately so – that the only reasons I can think of for publication are ones of self-interest, self promotion or outright ideological attack on charities. I suspect the analysis is so bad however that the only body whose reputation will suffer is the True and Fair Foundation and all those associated with it, including Ms Miller.

UPDATE, February 2016

Following a complaint to The Telegraph by NCVO, and mediation by IPSO, The Telegraph has made substantial amendments to its online article, and published a correction in print. We are grateful for their constructive engagement in this process.

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Karl Wilding Karl Wilding served as NCVO's chief executive from September 2019 to February 2021.
All blog posts by Karl Wilding

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