Gareth Jones: How Live Aid helped to spark the professionalisation of charity finance

04 Dec 2018 Voices

Image courtesy of Squelle / Wikimedia Commons https://bit.ly/2rkxGwy

The Live Aid benefit concerts, which took place simultaneously in the UK and US in 1985, were a landmark in charity fundraising.

Prompted by a shocking BBC News report from Michael Buerk on the famine that was taking place in Ethiopia, the concerts are estimated to have directly raised £150m for famine relief.

Yet less well known is the impact that Live Aid had on standards of charity finance. That’s according to former Charity Finance editor Andrew Hind, anyway, who I interviewed for the magazine’s 250th issue this month.

Increased scrutiny

The article, which features interviews with four former editors, looks back at the environment that charities operated in when Charity Finance was first published and tracks the professionalisation of the sector over the subsequent decades.

Regarding Live Aid, Hind contends that the concerts significantly increased the profile of aid and charitable giving. And although there was much that was positive about this, it also meant a greater degree of scrutiny for the sector.

During this time, there were a series of high-profile scandals in the corporate sector, most notably the Guinness share-trading fraud. As a result, serious questions were being raised about standards of corporate governance and management, and charities were not immune from this.

“People suddenly woke up to the fact that not only were charities big news with big money involved, but that they were just as susceptible – some would say more so – to abuse and poor leadership,” says Hind.

One of the ways that charities and their regulators responded was via the development of accounting practice and reporting.

The first Charities SORP was published in 1988, and as Hind points out, before this point charities could virtually choose the results they wanted to present.

“The most notorious area was the treatment of legacies,” he says. “There was this device called a legacy equalisation account – how finance directors were allowed to get away with this I don’t know – but essentially it was a way of putting legacies into a pot and drawing on them as and when your income and expenditure account could do with being boosted a bit.

“There were also no real rules on depreciation, there were no rules on reserves, and no rules on disclosure of related-party transactions or anything like that.”

Moving forward

Today’s debates about transparency and good practice in the charity sector can be seen as part of the same continuum.

Since the mid-1980s, the level of scrutiny placed on the charity sector has grown and grown, and today it is higher than it has ever been. While some accusations levelled by the media are unfair or inaccurate, broadly speaking public scrutiny has helped to bring about a stronger, more trustworthy sector.

Transparency of charities’ operations is likewise at a peak, assisted hugely by the rise of internet and by the Charity Commission making every charity’s annual report and accounts available on its website.

And rules around annual reporting are more rigorous and detailed than they have ever been. The introduction of the first Charities SORP in 1988 was just the first step in not only giving assurance to external stakeholders but also helping charities themselves to examine and improve the way they operate.

Today the SORP could be on the brink of another step change. With some hard thought about who the audience is for annual reports and accounts and what skills are needed to take the framework forward, we could see important improvements in readability and in putting greater focus on how charities achieve their missions.

But overall, while there is always more work to be done, history tells us that charity management has come a long way over the past 28 years.

A timeline covering key milestones in the charity sector since 1990 is available to download here

Subscribers to civilsociety.co.uk can hear more from former Charity Finance editors about the development of the sector here

 

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