Sector voices strong reaction to call for scrutiny of charities

A call for a new independent body to scrutinise charities’ performance and effectiveness drew a mixed reaction from across the sector.  It has also been dismissed by Government. 

In his speech to an audience at the RSA in November, Martin Brookes, New Philanthropy Capital’s Director of Research, made a call for a new body to run parallel with the Charity Commission, and to produce performance data and rank charities by the value for money they deliver from donations.

Brookes argued, “Outside the public sector, privately owned utility companies are assessed and regulated by Ofgem, Ofwat and other bodies. And publicly listed companies are scrutinised and assessed by an army of analysts in the pay of investors and banks as well as by specialist journalists.

“All of these bodies and programmes involve independent scrutiny, analysis and, often, judgment”, he said, adding, “The position of charities is very different. The Charity Commission, as official regulator, asks only if a charity is ’for the public benefit’ in the language of the new Charities Act. In other words, is it legitimately a charity?”

In his lecture to the RSA, Brookes highlighted how increased external scrutiny and measurement had contributed to improved performance in other areas such as health and education and argued that the same mechanisms could work in the charity sector.

He went on to state that charities received a total of £1.3bn of subsidy through tax-efficient giving in the last financial year, and that private donors —“that’s you and me” – give almost £9bn which impact is not adequately recorded or monitored.

The solution he recommends is a non-departmental public body, perhaps under the auspices of the Cabinet Office, which should report to a newly created House of Commons third sector select committee or the Public Accounts Committee.

As there was "little doubt" that the performance of charities varied greatly, Brookes said that an external scrutiny body, distinct from the Charity Commission, could make information about those variations available to donors, and this would give charities more incentive to improve.

The call was criticised by Stuart Etherington, Chief Executive of the National Council for Voluntary Organisations, who stated that setting up such a body would be “regulation gone mad” and would severely damage civil society.

Adam Sampson, Chief Executive of Shelter, was more positive in his response.  He agreed with Brookes’ argument in principle, which he believes has started a long overdue debate, and said that “the relative absence of scrutiny and critique allows poor practice and inefficiency to go unchallenged”. He recommended heeding a cautious approach, adding that “any scrutiny system must value honourable failure as highly as it values worthy predictability”.

Speaking at the ACEVO annual conference the following week, Martin Narey, the head of Barnardo’s, agreed with Brookes that scrutiny is important. Narey has undertaken to measure the impact of the charity’s projects in the UK. He said, “We need to do that for two reasons. First to demonstrate our effectiveness to the local authorities and others with whom we contract. But just as importantly, in an era where NPC and others are increasingly offering a commentary on charities’ relative effectiveness, to demonstrate to beleaguered donors, both individuals and corporates, why they should give to us.”

The office of Phil Hope, the Minister for the Third Sector, said that efficiency and effectiveness is already being sufficiently studied by the Charity Commission.

One important outcome of Brookes’ speech is that it has raised an uncomfortable issue and poked it above the parapet.

• Read the full speech on New Philanthropy Capital’s website.