NPC and NCVO debate charity scrutiny

In a speech at the RSA last November, Martin Brookes, New Philanthropy Capital’s (NPC) Director of Research, raised a number of important issues about transparency and accountability in charities.  He also proposed that Government establish a new body to scrutinise charity performance.  The response from the sector was mixed. 

Because charity performance is crucial to the lives of beneficiaries as well as to wider society, Philanthropy UK believes that these issues warrant further exploration.  We invited Martin and Stuart Etherington, Chief Executive of the National Council of Voluntary Organisations (NCVO), to share their perspectives, and thank them for their thoughtful responses in this robust debate, published in the exchange below. 

We encourage you to share your views and experiences.  Please contact me at editor@philanthropyuk.org.

- Susan Mackenzie, Philanthropy UK Director 

Dear Stuart

I believe society has a moral obligation to squeeze value out of charities, to maximise their performance and benefit as many people as possible through their work. In a lecture I gave last year at the RSA I developed a simple argument about charities’ performance.

I started with the observation that charities’ performance – what they achieve – goes unscrutinised. Second, I argued that evidence suggests that charity performance varies enormously, even across charities tackling similar issues. Lastly, I argued that in other sectors independent scrutiny has improved performance. All these steps are supported by a range of evidence.

The implications of this are profound. It suggests that charitable performance – and therefore the lives of beneficiaries – could be raised by introducing independent scrutiny. I proposed government establish a new body to provide public and independent assessment, helping improve performance.

The argument is simple but the reaction was striking. Most people accepted my argument up to the last point. The idea of a new government body provoked considerable dissent, including from NCVO. Few people have, though, addressed the problem which arises if you accept the argument up to, but not including, the final proposal.

Given the important contribution charities make to society, it is vital that we address, constructively, issues of performance and scrutiny. NCVO is an important voice in this debate, and I look forward to engaging in this dialogue with you.

Yours sincerely
Martin

Dear Martin

Like the need to address climate change, it is difficult to argue against improving charity effectiveness. The question is how: is it via the actions of numerous individual decisions and an empowering, enabling framework, or via a centralized, command-and-control super-structure? I share your vision of an effective sector that above all achieves more for beneficiaries, but another statutory ‘quango’ will not achieve that vision.

What should be the mechanism for such change?  Your conclusion is based on contentious evidence: is performance really unscrutinised?. Individual donors scrutinize charities in a competitive marketplace everyday, increasingly acting like the savvy consumers they are in other markets. These consumers don’t want government to tell them what to buy; they look to independent market intermediaries (like NPC), friends and colleagues to support their own instincts of what is good value. Other buyers in the charity market – government, foundations – regularly scrutinize performance.

Competitive pressure forces charities to improve their performance as donors and buyers, sooner or later, will compare. An increasing array of intermediaries (such as Guidestar UK) are already supporting choice.

Our focus should therefore be the creation of an enabling framework, building on the work of NPC, NCVO and others. It should streamline and reform, not bureaucratise, as is government’s wont. And it should prioritise the beneficiary perspective of effectiveness, hardly the remit of the State.

Yours sincerely
Stuart

Dear Stuart

I am surprised that you believe donors have the information they need (and should want). They simply do not – charities themselves are often ill equipped to provide it, and precious few report on their performance, though many wish to do so. Trusts and foundations similarly do not ask for and receive good information about performance. Raw information about activities and finances is very different to analysis and assessment of performance. By performance, I mean what charities achieve, how beneficiaries' lives are improved – and independent analysis of this is best.

Intermediaries like NPC and Guidestar are important, but progress on developing and improving evidence on performance is achingly slow. Consequently, competition for funds is not on the basis of performance. Addressing this challenge need not create a bureaucracy and is not about telling donors what to think. Your letter is the first time I have heard someone suggest the quality and flow of information in the sector is adequate.

A well functioning market requires good quality information. In the absence of this, there is a market failure which creates a role for government. The threat of government intervention often hangs over industries wrestling with these problems (look at the current debates about the credit rating agencies). If the charity sector puts its own house in order, then government involvement would be unnecessary.

Yours sincerely
Martin

Dear Martin

Civil society is neither the market nor the State and as such government intervention in the assessment of performance is neither warranted nor welcome. With the exception of contractual relationships, civil society’s performance is nothing to do with government.

Contrary to your response, I have not argued information on performance is adequate. Understanding of civil society is indeed imperfect, though I think the growth in civil society organisations over the last decade suggests that ‘market failure’ is not evident. There are clearly questions about what types of data are required and who information on performance is for, with an emphasis on helping organisations improve. Funders and donors do not always allocate scarce resources based on effectiveness, and I think we have to accept that the voluntary impulse that leads to gifts of time and money is for many motivated by a complex range of factors that may or may not include effectiveness.

There is much to do to help organisations improve their effectiveness, not least of which is educating donors that it costs money to measure performance. As you say, intermediaries have a role, but government involvement remains an unlikely and unwelcome threat. This is neither complacency nor producer interest on my part: I still strongly believe that the independence and values of civil society would be threatened by any generic government role in performance assessment. 

Yours sincerely
Stuart

Dear Stuart

You appear to acknowledge one aspect of the problem – a lack of information about performance – but not necessarily the desirability of independent assessment of performance. You seem relaxed about this whereas I think its absence lessens overall performance and reduces public benefit. On this perhaps we can accept a significant difference in opinion.

The suggestion of government involvement clearly upsets you. In which case, perhaps its threat would be a good thing in spurring the sector to greater efforts. For the record, I disagree that the performance of charities is outside the State's legitimate remit.

Yours sincerely
Martin

Dear Martin

The robust nature of our debate perhaps highlights a broader lack of consensus around these issues. In particular we shall agree to disagree about the role of the State, whose hand – real or threatened – would inevitably and unintentionally damage what we so value about civil society.
 
But there is much we agree on. We share a vision of an effective civil society. And I share your view that independent scrutiny will help us to achieve that vision, as will better understanding of the effectiveness agenda. Therefore, I hope NPC and NCVO can work together to support civil society organisations to deliver the best possible outcomes for their beneficiaries.
 
Yours sincerely
Stuart