6 August 2015
Spotlight moves to Charities
by John Watson
Most of our institutions have come under the spotlight in the scandals of recent years. The status of MPs has been damaged by the expenses scandal. The press has been damaged by investigations into hacking. Government and the entertainment industry will be prime fishing grounds for the child abuse enquiry headed by the New Zealand Judge, Dame Lowell Goddard. Athletics is back under scrutiny for the use of performance drugs. Banks are under pressure from mis-selling scandals and prosecutions relating to the manipulation of interest rates. Now it seems that it is the turn of charities.
There are a number of straws in the wind. The first, of course, is the comments of the Chairman of the Charities Commission that charities need to root out abuses if they do not wish to be regulated. Then there are: the report commissioned by the government from Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, in response to concerns about fundraising methods; the comments by Crispin Odey of “You forgot the Birds” and his suggestion that because the decline of the Hen Harrier is a valuable fundraising tool for the RSPB, they would lose money if that decline was reversed; the problems at Kids Company; and the concern over the appointment to the ruling council of the RSPCA of a vegan who compares farming to the Holocaust. None of these might amount to much if taken on their own but together they surely mean that the charitable sector is coming up for review.
Perhaps the most revealing point is made by Mr. Odey, who comments that a number of charities are run for the benefit of those working in them rather than to achieve their charitable objective. Charities are big business and the RSPB, of which he is so critical, has an income of over £100 million a year. Originally it was claimed that 90% of this went directly towards conservation work but the charity now refers to 90% of net income being spent in this way. That is a subtle distinction and raises the question of how charities do actually spend their money.
In fact the expenditure of a UK charity is a little like that of a UK company. Salaries have to be paid to individuals. Goods have to be purchased. Services have to be obtained and paid for. That, unless the charity is one which actually hands out cash, is probably about it. The point to note is that one way or another all the money raised will inevitably find its way into the pockets of private individuals.
There’s nothing wrong in that, of course. If you wish to distribute medical supplies you must first buy them from a pharmaceutical company and, provided that you buy them on fully commercial terms, that is exactly what you exist to do. Similarly staff need to be paid a proper rate for the job, as do those who provide other services. The problem is of course when the easy availability of cash results in a bloated bureaucracy. Then the money is effectively siphoned off into funding people’s lifestyles but the charity is still able to claim that it was spent in pursuance of its charitable objects.
There are narrow dividing lines here and most charities fall on the right side of them. Still, if you had founded a charity, made it your life’s work, drawn your living expenses from it and then began to think that it would function better without you, it would require a very high degree of integrity to jump off the gravy train. This is a conflict of interest not entirely dissimilar from those exposed in the banks.
Then there is concern at the way in which charities raise money. We have all been approached by “chuggers” asking for money for charitable causes. Suppose you decided to take the same approach to selling life assurance policies and sent your young salesman out onto the pavement. The FSA would be down on you like a ton of bricks and yet is not entirely clear why it is so different. Money is being taken for a purpose and the question is whether that purpose is sufficiently defined and explained.
There are quite a lot of difficult issues here and some of them have probably been fudged in the past. As those looking at the charitable sector delve deep it seems likely that some fairly odd things will come out.
