In May 2020, the Charity Commission published a report call “Regulating in the public interest: the relationship between Charity, charities and the general public”. While at 31 pages it’s a bit of a read, it includes some helpful insights into what the public expects from charities, how that informs the Commission’s regulatory framework and how well charities are matching up to expectations.

One aspect that particularly caught our eye was the statement that “it is difficult to overstate the importance of [knowing where the money goes] in influencing public trust towards the charity sector”.

Perhaps unsurprisingly, when asked what factors are most important to them when it comes to how a charity operates, by far the most important appears to be “that a high proportion of the money it raises goes to those it is trying to help”. 79% chose with this compared, for example, to 52% who chose “that it operates to a high ethical standard” or 50% who chose “that it’s making an impact”. Only just over a third (37%) chose “that it’s well run” and a derisory 1 in 8 (16%) chose “that it treats its employees well”.

For us the most troubling comparison is between the 79% who chose “that a high proportion of the money it raises goes to those it is trying to help” and the 50% who chose “that it’s making an impact”.

The challenging question we would like to pose is:

This question is all the more pertinent when read alongside the finding that 72% of the public consider that the charities they know about (usually those they are supporting) are making an impact compared to only 57% who feel that a high proportion of the money is going to those the charities are trying to help.

Of course we are not saying that charities should not try to be as efficient as possible but we know from bitter experience that organisations that are too lean often fail, sometimes spectacularly (take Kids Company for example). If charities are to be run well and run safely they need to invest in a certain amount of administration. Without it, mistakes are made, fraud can happen and staff or beneficiaries can get hurt.

Charities also need to invest in fundraising and many of the more lucrative forms of fundraising cost more as a proportion of the amount raised. Is it better to spend £2,000 raising £10,000 or to spend £40,000 raising £100,000. If I were CEO of a charity I know which I would choose (assuming a good measure of certainty of outcome)?

The problem with focusing on measures such as the percentage of money raised that is spent on so called “overheads” is that it not only asks the wrong question (how big is the input rather than how big is the outcome), it also encourages charities to obfuscate and even lie about the real numbers. Activities that are properly administrative are often classified in the accounts as “frontline” or the real costs of fundraising are buried in the costs of the “frontline” staff who help the fundraisers. Somehow this is easier than properly evidencing the impact of the charity’s work.

We even know of at least one major charity that claims 100% of the funds raised from the public is spent on the frontline work. While this is strictly true, it does not mean they spend nothing on overheads. In fact they have extensive overheads but the money they make from the investment of permanent endowment is enough to cover the overhead costs, so nothing raised from the public goes towards those costs. Is it really a transparent statement to say that 100% of the money raised goes to the frontline? We don’t think so and it makes life all the more difficult for those charities who cannot say the same because they don’t have the benefit of a large permanent endowment.

Therefore, our plea is for charities to get much better at evidencing the impact of their work and to use that evidence to tell a better story about what they do and why it’s important to spend some money ensuring they do it safely and effectively. We know this requires a little more to be spent on “overheads” (i.e. monitoring an evaluation) and that it will require leadership and courage from charity leaders to make it happen.

The sector has some extraordinary leaders and now is the time for them to step up and tell it how it is; of course the scoter need to be efficient but it is much, much more important that it is effective and makes a difference for those it services.

If you would like to know more about impact assessment or any other issue raised in this article please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone conversation about your needs.