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Third sector needs independent scrutiny body'

Finance | Becky Slack | 1 Nov 2007

An independent body should be set up to scrutinise the work of charities, according to New Philanthropy Capital, an organisation that advises donors on which charities to support.

NPC says it will only be a matter of time before charities are subject to the same level of scrutiny as the public and private sectors, and so an independent body separate to the Charity Commission should be established to pre-empt this.

Speaking to an audience at the Royal Society for the Arts last night, Martin Brookes, NPC’s head of research, said that as an increasing number of ways are developed to measure value, combined with a public thirst for data, it is hard to see how charities will escape the performance assessment that “is now so pervasive in the rest of society”.

“The fact that charities benefit from over a billion pounds of subsidy from taxpayers’ money makes the anomaly harder to sustain,” he said. “The lack of scrutiny is not healthy and it is not fair to the donor or the taxpayer. This money could go into schools and hospitals. No-one sits in judgement over the value for money provided by this [subsidy].”

While he recognised the challenges associated with measuring charity effectiveness, Brookes said it was not impossible to do and the benefits would be felt not only by donors but by the end users and the charities themselves.

“Donors can, at least in theory, find ‘better’ homes for their money. And, charities themselves might benefit from comparing performance - some should be able to improve and others have valuable experiences and practices to share,” he said.

The new institution proposed by Brookes should regard its stakeholders as donors, funders, charities and their beneficiaries. Independent to government, it should sit alongside the Charity Commission and be concerned with assessing and improving the performance of charities, working through influence rather than by coercion. An estimated £3m-£5m would be needed to fund it.

Adam Sampson, chief executive of Shelter, responded to Brookes, warning that while he agreed there is a need for scrutiny, it needed to be at a level appropriate to the sector.

“We need to choose the right numbers and the right figures. We need to concentrate on outcomes not processes,” Sampson said. “And if we are to have a new body, it should not be self-regulated. Self and regulation are two words that should never be used in the same sentence.”

Brookes’ comments chimed with an address by Charles Nall, CFDG chair and corporate services director at the Children’s Society, to the inaugural Charity Finance VAT and Tax Roadshow last week.  Nall urged charities to demonstrate their impact or risk losing their tax privileges.

“Grow up and frame what you do in terms of value not prices,” he told the assembled senior finance professionals.  “We know we have an impact but we are not clever at demonstrating what it is.”

He continued: “Things that have a strange protected status, and can’t demonstrate their value, get axed. There is a political danger that cumulative privilege may become unacceptable as our slice of the economic cake grows.” Nall argued that as a consequence, increased political scrutiny and a questioning of how charities are taxed, would follow. “Scrutiny is not a threat if we’ve got our house in order but a sign we’re doing things right.”

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