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How will charities defend pension shortfalls to supporters? 2

Finance | Vibeka Mair | 28 Jul 2010

As the Big Society brings more attention to the voluntary sector, charities will face more scrutiny on their finances, how will they excuse potential pension deficits asks Vibeka Mair.

Last week brought a sense of excitement for the charity sector. The coalition government’s Big Society plans propelled civil society into the forefront, with sector leaders and commentators filling the newspapers and airtime.

Ignoring the naysayers and sceptics of the Big Society for a moment, the plans could herald a new age for civil society, but with increased attention will come increased scrutiny.

Take two letters to the Times last week.

W.K.Shooter, an accountant, wrote to the Times complaining about what he felt were excessive wages at the Royal National Lifeboat Institution (RNLI):

 “28 individuals were earning between £60,000 and £79,999, and 40 earning between £60,000 and £139,999,” he said. “As I understand it there are many volunteers, and the lifeboat crews are paid very little. To whom then is this level of money paid and can it be justified?”

Philip Circus sent a letter in response to Shooter, complaining about pension shortfalls in the sector:

“The greatest scandal is the number of charities that still provide final-salary pensions for their staff,” he said. “Pension black holes are now common in charities and increasingly that is where the donations of supporters are going.”

While the relentless press flurry about high wages across sectors does not always trigger mass public outrage – take the head teacher paid £240,000 backed by parents and ousted BP chief Tony Hayward garnering support from Daily Mail readers for his £11m pay deal - can charities justify to supporters that some of their donation is filling what is essentially a debt?

This is especially pertinent in light of the recent Charity Commission’s latest trust and confidence report which revealed the most important factor for the public in trusting a charity is knowing that a reasonable proportion of their donation reaches the cause.

The true extent of pension deficits in the sector is unknown -  figures released by actuarial services company Alexander Forbes revealed that deficits from the sector’s 20 largest fundraising charities had grown to £720m by the end of the year, an increase of around £100m in just six months. This week we report on a Scottish charity that has collapsed as a result of its shortfall.

As more of these stories emerge, the sector will need a good argument to maintain support.

Circus’ conclusion to his letter to The Times is a stark warning for the sector: “For too long, charities have hidden behind the natural reluctance of people to question anything that operates under a cloak of charity…charitable donations are in large measure public money, and if public confidence is to be retained, there needs to be a far greater degree of scrutiny and accountability.”

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