The Charity Sleuths

What the Intelligent Giving researchers are uncovering, and whose turn it is to make the tea

Monday, July 31, 2006

Unrestricted fun

We have recently found that a number of the smaller religious charities have really quite large unrestricted funds (the money that the charity has and is free to spend), relative to their expenditure for the year. This has been quite puzzling: it seemed at first that they were simply hording their money or saving for a rainy day. Raining frogs, perhaps.

However, on closer inspection it appears that some of them have included in their ‘unrestricted funds’ the value of their buildings. The theory being, presumably, that if it came to it they could sell their buildings and use the cash to continue their good works.

There is a certain logic to this. However, other charities do not include their buildings’ value in this, presumably feeling that these are integral to their work and/or that it is not easy to get their hands on the money tied up in them.

I do not know which method of accounting is more useful for donors. However, it is just this sort of variation that makes comparing charities by their figures alone difficult, and this highlights the need for charities to be absolutely clear about where they get their figures, and what they refer to.


Sunday, July 30, 2006

Terrorist questions

On Friday I scribbled our basic summary of UK-registered Palestinian charity Interpal. It reads thus (and here's an example of the word length and style we're using for our 500 reviews) :

Despite having been completely cleared of allegations of aiding terrorists, this development and relief trust has endured a heap of bad publicity. Ignore that; we found little to complain about in its clear and informative annual report."

However having just watched Panorama's report on the searingly obvious links between Hamas and the schools which Interpal funds, I'm going to have to rewrite it. The situation raises several questions for us:

  • Our overviews are supposed to be based primarily on what we find in a charity's annual report, relative to that financial year. We don't intend to touch them until we see the following year's annual report. Under which situations do we revise the overview?
  • Each review will have a "right to reply" area where charities will have space for 30 words to respond to the review. Under which circumstances will we offer an update on that?
  • Our reviews will carry links to related websites. If a website carries potentially damaging information about a charity - again, in which circumstances will we publish its address?

Suggestions by comment link below please...


Thursday, July 27, 2006

Weighty stuff

We spent three months, on and off, deciding which criteria to use to judge the transparency of charities. We ended up with a blend of the Charity Commission's document, "Hallmarks of an Effective Charity", the Commission's guidance to accounts ("SORP 2005"), plus tips from work done by Charities Evaluation Services and the New Economics Foundation. We shared these with the voluntary sector via an article in Third Sector and an online survey. We then finalised them based partially on how easy they were to use.

We decided to apply them to Annual Reports & Accounts only - not websites or other documentation - for reasons mentioned in our earlier entry.

We have just spent a whole day debating the weightings of our final 42 criteria. Is the fact that a charity has its Annual Report on its website more important than say, whether or not it lists its trustees within the report? You've not heard discussions like it.

We've done our best. We're not going to publish the weightings partly because we don't have the time or capacity to keep debating them but mainly because we know it will be too hard to reach consensus. Significantly, we will apply the same criteria to all our reviewed charities - and it's only one of several ways you'll be able to rank charities.

Next year we will look at the criteria again.


Thursday, July 20, 2006

Small but good

Take a look at the Galapagos Conservation Trust Annual Report for an example of a small charity (expenditure £441,000) that has produced a comprehensive report which enables it to communicate effectively with donors.

Not flash, not fancy, but it works.


Tuesday, July 18, 2006

Some conclusions

Having reviewed 400 charities in the blistering heat of East London, we have come to a consensus. These findings are not for the faint of heart. We name names and rank results.

In order of competence and based purely on outcomes, our ranking is as follows:

  1. Twister - loved for its retro styling as well as the combination of creamy indulgence and zesty refreshment.
  2. Fruit Pastille Lolly - a multi-coloured explosion on the palate, this cheeky little number boosts reviewer productivity. And brightens the place up.
  3. Magnum - the nemesis of the ordinary choc-ice. Extra points for the exquisite first bite. Almond variety particularly commended.
  4. Banana Lolly - a surprise entry for the Intelligent Giving team, but a fast favourite for its exotic flair.
  5. Feast - the chocolatey core sends you straight back to school, but reviewers couldn't agree if it was real chocolate. May drop off the rankings if found to be phoney.

Faced with such difficult work, feedback is essential. However rigorous the criteria used, reviews are always partly opinion, and we look forward to hearing yours...


Why Annual Reports?

Increasingly people are asking us why we are examining the Annual Reports of charities rather than other public-facing material. Here's the answer:

1. Every charity has an Annual Report, because it has to publish one by law. Not every charity has a Review or a web site or other publicity materials.
2. There is clear guidance from the Charity Commission on what should be in an Annual Report. There is no guidance, or norm, for what should be on a website or in marketing materials.
3. The smallest charity can produce a transparent and informative Annual Report more cheaply and easily than it can produce a transparent and informative web site.
4. And so.. wealthier charities tend to have better web sites than smaller charities. The playing ground is more level with Annual Reports.
5. A peripheral point, but significant: it takes far longer to review a web site than to review an Annual Report (I know - I used to review sites for Internet Magazine).

We plan to refine our criteria next year. I welcome suggestions on how we might do that.


Monday, July 10, 2006

No donations, please

Charitable donors may well be nervous about where to direct their money, but apparently they aren't half as anxious as the charities who receive it.

Out of six charities I phoned, four of them had no idea whether or not they accepted donations from the public. It seems like a no-brainer: surely if a donor is waving a cheque at you, there isn't so much red tape that you can't just accept it? But two of the people I spoke to sounded utterly flummoxed by the question, a third said she wasn't qualified to answer, and a fourth explained that donations were usually made by 'big people'.

It seems that whereas most charities will beg for your money, some of them just don't know what to do with it.


Friday, July 07, 2006

Quis custodiet...

Having made a previous entry about charities making enormous mistakes in their accounts (26/6/06), I feel I should make the point that the Charity Commission themselves make the odd error or two.

To take a random example (out of many):

Sisters of Mercy of the Union of Great Britain (Charity no. 288158)

The Charity Commission says their income for 2004-05 is £5,525,218

Actually, the figure is £6,189,457

Not exactly a finger slipping on a keyboard.


UPDATE: There is actually a slight difference in the use of terminology here. The Charity Commission (CC) uses the terms 'Gross Income' and 'Total Expenditure' on its 'Show charity' page but these headings do not feature in charities' Statement of Financial Activities or in the Notes to Accounts. They are terms borrowed from the Charities Act 1993. What their accounts show are the 'Total Incoming Resources' and 'Total Resources Expended'.

The differences between these are as follows:
While Total incoming resources are all resources available to the charity in the given year, Gross income is this amount less any gains from disposal of fixed assets, investments, or from revaluation of assets, minus amounts received specifically to increase any endowment fund. But funds released from an endowment fund are included.

Also, to get the Total Expenditure, the CC excludes items like loss on disposal of fixed assets, losses on revaluation and decreases in the endowment fund from Total resources expended.

Why does the CC use these terminologies?
Basically to help in establishing the thresholds of the charities used for determining the requirements for accounts' scrutiny (audits) and also whether the charity should prepare accounts based on the 'accruals' basis or the 'receipts and payments' basis.

Also, because these excluded items are not in the regular 'business of the charity', it helps the CC compare one charity with another.

We use Total incoming resources and Total resources expended as a way of judging the charity by 'the resources it commanded' in the year, and 'the total use of those resources'.


What is it you do again?

The Ramblers Association's Annual Report 2004/5 does not contain the charity's stated purpose (a.k.a. objects). Remarkable. It would be difficult for a donor to lend its support to an organisation when he/she has no idea what it does.

In this case it is not too serious as the report gives comprehensive details of their work, but it remains a glaring omission. We've never come across this before.


Thursday, July 06, 2006

Losing their religion

On our data capture questionnaire we ask, "Which religion is your charity affiliated to?"

Among our test responses, a charity which is a member of the Evangelical Alliance, and which clearly has a Christian ethos, replied "None".

When I emailed to ask them why, they replied: "Our board and senior management are Christians but we do not actively promote our organisation as a Christian Charity," followed by the somewhat contradictory rejoinder, "We do not hide what we are and clearly indicate that we are members of the evangelical alliance."

I suspect that most secular donors would feel misled to read that this charity was secular.

I also suspect that many charities with a religious ethos are afraid of losing secular donors.

We'll have to rephrase the question.


The wrong kind of donor?

One of our criteria for deciding which charities to review is: do they accept donations from the public? Working this out is not as simple as you might think.

Yesterday I emailed the Wetland Trust to ask them if they accepted donations from the public, as it wasn't clear from their documents. They replied with one line: "Thanks for your inquiry. It would depend on who the donor would be."

Can anyone tell us what that means?

UPDATE: After further enquiries, the Wetland Trust has informed me that they will only accept donations from the public if they are over £100,000. Any lower than that and apparently it is not worthwhile. I wonder if the trustees and current funders agree on that.


Tuesday, July 04, 2006

Further information

There is a limit to how much information we can get from the public-facing documents of major charities, but our user research has shown that there is a lot more the donor wants to know. Do they have ethical investment policies, for example? What about charity "Challenge Events"? Are they religious, and if so, how religious? What would £100 a year fund?

In order to get this further information we sent an online questionnaire to 15 charities randomly selected from our lists, and less than 24 hours later, we have received our first reply, hoorah!