Government funding for charities: what kind of transparency do we need?

Daniel Fluskey | 7 January 2015

What is a charity obliged to do in return for its financial support? How much detail should a charity give about who funds it? Do tax payers know enough about how their money is used and which charities it funds?

These are the questions that the Centre for Policy Studies are asking in a report launched this week. Having looked at the income of charities as publicly available from the Charity Commission they’re stating that at least £3.1 billion of large charities’ funds comes from public money and they conclude that more needs to be done around the reporting requirements so that every charity lists the Government grants and amount that they receive.

At the heart of this are the questions around how charities operate, how transparent and open they should be, and how they are funded.  Is that important? Absolutely. As the report says, charities are set up to work for the ‘public interest’ – and how they are funded is something that the public are interested in. But it’s important to note that the charities that the public support tend not to be the ones where the vast majority of the tax-payer money goes. And in some cases it probably won’t cause much interest, as the report itself says “It is unlikely that anyone is too concerned about how much money RNLI receives from local authorities for providing beach lifeguards, particularly since it is clear from the accounts that the charity is overwhelmingly funded by donations from individuals.”

But we need to be mindful of how a headline such as ‘Taxpayer funding may account for half of the top 50's annual income’ can come across. The majority of public funding goes to organisations which wouldn’t normally come to the public’s mind when asked to name a charity (The Arts Council, United Church Schools Foundation Ltd, Big Local Trust etc) so a headline saying how much of their tax goes to ‘charity’ might mean that individual people think that they don’t need to donate to the causes they support. So it’s worth remembering what the situation is for ‘normal’ charities: 75% of all the voluntary sector has no direct financial relationship with the state, and the income that is received through Government grants and contracts is decreasing. The last Civil Society Almanac shows that fundraising (voluntary donations and fundraising trading) are the sector’s main source of income.

An important question is missing from the report, one that looks at what is achieved with the public money, not just where it comes from. Yes, transparency of funding is important but it’s hard to look at that properly without seeing the impact that the funding has. In terms of what the public are interested in, it’s the work that the charity does and the difference they make that comes out as their top priority. More implicit perhaps is whether charities should be receiving public money at all. Charities deliver public good, they work in the public interest – and as is recognised are more effective and efficient than Government at finding solutions, caring for people, and delivering services for people and communities. Where charities can make a real difference to the people’s lives and for causes that we benefit from it is right that the state supports this.

So, can some charities get better at transparency in their reporting? Yes – although again it’s worth noting that the CPS report does say that some charities are doing this already (The National Trust, Oxfam, Save the Children). The new SORP that comes into force this year does give further guidance and clarification on how charities report their financial information, and we know that charities are taking more steps to increase their transparency. But without a greater emphasis and recognition of the impact of the work that charities do which benefit us all we won’t get a proper understanding of the role and value of the sector. To paraphrase Oscar Wilde, we’ll know the price of everything, and the value of nothing.

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