The Smile Train, which performs operations on kids with cleft lips and palates in poor countries, markets itself as a new breed of hyper-efficient charity. It claims you can change a child’s life forever for as little as £150. And it boasts that its overheads are less than one per cent of its total expenditure.

But there’s a problem with many of these claims. In my view, they’re probably nonsense. Here’s why.

1. The ‘less than one per cent overheads’ figure is simply untrue. Our profile of the Train shows that it spends roughly 40 (yes, forty) per cent of its income on marketing and administration. One lucky Train employee trousers £97,000 alone each year. How can we be so sure we’re right and the Train’s publicity is misleading? Simply because our figures are taken directly from the charity’s audited annual accounts, and the ‘one per cent’ figure on the Train’s website isn’t attributed to anything.
2. It’s difficult to know what the Train is actually doing with your money. The Train’s annual report is amongst the least transparent I’ve ever read. According to this document, the Train has two sources of income: cash from donations, and cash from its parent charity in the US. It then spends 40 per cent of this on admin and fundraising. The rest then gets transferred back to the States, and to the parent charity. It’s very hard to find out what happens next – though the money does get spent on cleft operations at some point down the line. But the reason for these international bank-transfers is hard to fathom, without further explanation from the charity.
3. It’s hard to find any evidence to back up the Train’s claim to be hyper-efficient. It is possible that a charity with 40 per cent overheads is efficient. But that sort of spending also needs some proper explanation. And although the Train’s website is extremely keen to make sweeping claims regarding the Train’s brilliance, it doesn't contain any evidence to back these up. The Train’s annual report is dreary and uninformative, and the website is devoid of footnotes or links to hard evidence.

It may be that the Train is merely lazy, rather than deliberately seeking to mislead potential supporters. I’d be very happy if it came forward with evidence to back up its claims. But until that happens, the Train looks like a charity to steer clear of.

Nerd corner: more on the Train's accounts

The Train’s accounts show that it received restricted donations of £4,374,311 from its parent charity, The Smile Train Inc., in the year to 30 June 2008. Note 9 in the accounts for this year show that these donations were restricted to be spent on “non-programme expenses, such as fundraising and support costs.” Note 10 elaborates on this theme. It states, “All funds donated by the public are designated to be donated to The Smile Train Inc. for inclusion in their direct charitable expenditure.” Aficionados of charity-accounting law will recognize, however, that these donations are merely designated rather than formally restricted – meaning that the charity may spend donors’ cash on anything it desires (within its objects), and is not legally constrained by the intention outlined in Note 10. This failure of the Train to restrict donors’ cash is perplexing.

These notes also cause problems on a level above that of accounting procedure. It is possible to come to an understanding from the Train’s US website that the charity’s founders commit to paying for the charity’s overhead costs. This may account for the £4.3m restricted donation Train UK received in 2007-08. This may also explain why Note 10 mentions the non-binding designation applied to supporters’ gifts. But the reason for the international bank-transfers between the UK and US brances nonetheless remain a mystery. Even if the charity’s founders are paying the UK Train’s overheads (which is possible), this doesn’t make the charity efficient. It would still be the case that 40 per cent of the Train’s UK cash is spent on overheads – a figure which demands explanation, and an explanation which the Train fails publicly to provide.

Final thought: the realm of the possible.

To put the Train’s accounting in perspective, it’s interesting to ponder what the Train could be doing with donors’ cash. It is possible for the Train to take this money, send it to the US, and for the US charity to send it back to the UK, restricted to be spent on admin and fundraising. As I say, this may not be happening. But it could be – and until the Train becomes more transparent, we’ll never know if it is.
 

 

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When Iceland’s banking system imploded in October 2008, charities with investments there lost about £80m. Ever since, they’ve been trying to get that money back. But last week the government ruled that charities would not be compensated for their losses. If they’d invested money in Iceland, the Treasury said, they’d never see it again.

You’d think that, on hearing this news, the charities affected would get busy fundraising to make up their losses – and take the decision graciously. After all, companies in a similar position never even had a chance of getting their money back.

Instead, however, the charities have got cross. Very cross. In an astonishing turn of events, the charities have lashed out at the Treasury for its supposed meanness. The boss of Cats Protection, one of those affected, says he is “absolutely furious” at the decision. The hospice Naomi House’s CEO said that she was “thoroughly disgusted” on hearing the news.

For my part, I am repelled by that attitude. The charities seem to think that – purely because they are charities – us taxpayers owe them something. But this is self-evidently an unreasonable demand. Why do charities feel entitled to make it?

When asked, the charities have no good answer. But they do have excuses (PDF). First, they mumble that their voluntary nature makes them ill-placed to make investment decisions. But they ignore the fact that the Charity Commission near-as compels charity trustees to take professional advice when faced with such knotty problems.

Next, they say that they do good work that’s put in jeopardy by the losses. That’s true, but does nothing to explain why taxpayers should stump up the missing cash.
And finally, they assert general moral authority. What sort of country is it, they ask, which lets charities suffer from their own bad decisions?

These arguments are entirely bogus. Charities spend a good portion of their collective existence trumpeting their independence from the government, flaunting it as one of the voluntary sector’s key strengths and defining characteristics.

But when things go wrong, they seem to say, this much-trumpeted independence must be put to one side. When charities make foolish decisions, they argue, the government – not the charities themselves – must bear the consequences. This is hypocritical. And it demonstrates a self-righteous attitude that does nothing but damage those charities’ names.
 

 

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Charity shops are the place to be this summer, with Mary Portas, Queen of Shops, overhauling one of Save the Children’s shops for TV. The Sun called it "the coolest shop in Britain". Visitors are also brimming with enthusiasm: "We both came here with the idea that we were going to spend while giving to charity. That encouraged us to come out and shop." reports one pair.

Ordinarily, that comment would be worrying. Using charity shops doesn’t generally add up to “giving to charities”. After all, most charity shops still spend most of their income on rent, salaries and the like, with only a small proportion going to good causes. Our brief survey of almost 60 large charities with shops in 2007 showed that for every £1 spent in a charity shop, only 18p goes to good causes. Other surveys put the figure a bit higher, but it's widely agreed that Charity Shops just aren't an efficient way to raise money for charity. Also, there’s better ways to get rid of your stuff for good causes (see our new charity shops and gift catalogues page for details.)

So buying or donating to a charity shop shouldn’t generally be thought of as equal to giving to the charity. But perhaps Mary Portas’ shop is an exception. During her reign, the shop’s income more than doubled. It's been so successful that Save the Children has already agreed to extend the Portas model to their other shops. But, as has been pointed out by others, Mary Portas' changes to the charity shop have hardly been revolutionary. There are other well-organised charity shops out there, run by equally determined and smart people. But the charity shop world is tough, and some of these still struggle to make much profit.  

So I will wait and see how Save the Children’s shops are doing after all the media coverage has died down. Let’s hope they keep income up and expenses down, and become an efficient way to spend money on good causes. Until that's proved true, I'll keep shopping at charity shops for the recycling and the cheap, off-beat fashion. But I won't think of it as doing my bit for charity.

p.s. It’s worth adding that there’s a risk to adopting the Portas model: suppose charity shops manage to raise prices. They might only be able to do so only by raising the costs the shop has to pay (e.g. by hiring new professional staff), and then they wouldn’t necessarily be a more efficient way to raise money for charity. Even worse, charity shops would no longer be a good source of cheap goods for the needy in the local community.
 

 

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A debate has kicked off in the charity world about whether, in light of the MPs’ allowances scandal, charity Chief Execs should be disclosing their own expense claims.  The argument is that the public have a right to know how charity CEOs, just like MPs, are spending their cash.

And according to John Tate at the Charity Finance blog, CEOs’ records on expenses are not all good. There is apparently a wealth of posh wine, laptops and business class train tickets to rival MPs’ duck houses, moats and toilet seats.

Clinging onto the Daily Telegraph’s coat-tails this way is understandable, but (to mix my metaphors) a massive red herring. The focus on expenses ignores a much bigger – and more important – problem: that the standards of transparency within the sector as a whole are unfortunately low.

Just look at our charity profiles.  Never mind the details of the CEOs’ expenses, nearly half (49%) of charities’ annual reports fail to provide even a broad-brush explanation of where their money came from, or how they spent it.

It’s not just charities’ finances where transparency is lacking either.  62% of charities fail to give an accurate report of their activities by not acknowledging problems they had in the year. Astonishingly, a small minority of charities (11%) don’t reveal how their work has helped their beneficiaries. And hardly any charities successfully talk about the impact they’ve had on the world.

Events at Westminster should act as a spur to increase the transparency of the charity sector.  But we need to make sure we get answers to these bigger, more basic questions about how charities have used donors’ money to bring about positive change first.  Fussing over how often a CEO claims for a bottle of wine is, in most cases, the least of the sector’s worries.
 

 

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Dr Richard Marsh, formerly Director of the ImpACT Coalition of charities, is to take over from me at Intelligent Giving on 1 July. I, for my part, am changing careers: from September, I’m going to be a history teacher at Oakham School in Rutland.

I’m thrilled that Richard will be joining IG. He’s the perfect person to lead our project to overhaul the way we rate charities, and will be able to bring much both from his experience running an international charity, and from his time at ImpACT – where he promoted transparency and accountability in the voluntary sector.

IG’s trustees are just as happy as me. Neill Ghosh, the chairman, said that IG is “extremely lucky that Richard will be able to take Adam's place. Richard’s skills and experience make him the perfect person to take forward our ambitious agenda, improving both charities and the way people give.”

My last day at this office will be on 17 July, after a brief hand-over period to Richard. But before I go, I hope I’ll have a chance to write some more on this blog. After all, I’d hate to leave charities thinking that they had no further room to improve.
 

 

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Buried in an article in last week’s Daily Telegraph was an astonishing admission. The NSPCC’s newish boss piped up that his charity’s biggest, most high-profile campaign – the Full Stop drive – had been a flop. “I don’t think it advanced us towards the goal of ending child cruelty in terms of the expectations at the beginning,” he said.

This is a simply remarkable admission. The NSPCC has been trading off its promise to ‘end child cruelty’ through the Full Stop campaign for years. For just as long, thoughtful commentators have pointed out – in private, mostly – that for any charity to make such a sweeping claim is ridiculous and potentially harmful. Promising the earth may recruit armies of donors in the short term, but it also inflates expectations of what charities can deliver, and encourages other organizations to make equally unrealistic claims – like when Oxfam recently claimed to be able to deliver utopia on earth.

So, is it a surprise that the Full Stop campaign didn’t work? No. No charity can ever end something like cruelty to children. But is it a surprise to see the NSPCC admitting its failure? Absolutely yes.

That’s because charities generally don’t admit when they get things wrong. Only a third of charities, according to our analysis of their annual reports, ever admit that they encounter even the smallest problem or setback. When they exist, big problems are even more rarely referred to.

So the fact that Andrew Flanagan, the charity’s boss, decided to make the campaign’s failure public is both brave and encouraging.

It’s brave for the simple reason that he didn’t have to say anything. Sadly, charities can get away with keeping quiet about problems like this. And it’s encouraging, because I hope – at least – that it sets a precedent. If other charities see the NSPCC backing away from reckless promises and owning up to setbacks, they might follow in its wake. And if that encourages charities to be more honest and open with their donors, then that’s a big step forward for the whole voluntary sector.

via Queer Ideas
 

 

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Every year, almost 40 per cent of people who are signed up for a charity direct debit at the start of the year cancel it. That is a damning statistic. Charities are forever telling supporters that they need long-term, non-stop support. But the stats show that, once donors have signed up for this long-term commitment, charities are appallingly bad at holding them to it (PDF).

A new report from fundraising consultancy Bluefrog provides further depressing evidence of many charities’ lacklustre efforts at looking after their supporters. The report, which is based on 110 telephone interviews, 12 three-hour workshops, and hundreds more informal conversations with so-called ‘lapsed’ donors, explores why people stop giving.

In one respect, the report’s conclusions are strikingly obvious. People stop giving because they don’t feel charities value them, or their gifts. No surprise there. But what’s really fascinating is the report’s insight into why people keep on giving, in spite of charities’ shoddy treatment.

In this respect, the report is stuffed full of revealing anecdotes and sobering conclusions. “Worrying numbers of donors are disengaged,” the report says. “Put simply, if these relationships [between charities and their supporters] were friendships, business partnerships or romances, the majority of them would have broken down fast” (emphasis in original).

Oh dear. But it goes on. “POOR COMMUNICATIONS PUSH CHARITIES AWAY FROM DONORS,” the report says: “By making changes that donors dislike ... by taking donors for granted ... by breaking promises ... by not paying attention  ... [and] by not knowing when to stop,” people are given an excuse to stop giving.

Anecdotes from Bluefrog’s interviews litter the report. “[Giving] seems just so kind of impersonal, and just about the money,” says one interviewee. “I signed up to something that I thought was different. But it was just more junk mail and phone calls asking for more money,” says another. “I’m not sure if I can see them [the charity] organizing a piss-up in a brewery,” added another.

Donors, it seems, feel that charities treat them badly. That’s why so many of them give up giving. But if charities so often behave like that, why don’t even more people cancel their gifts?
 

Guilty giving

There are a number of legitimate, admirable answers to this question.  No doubt, most people keep on giving because they genuinely believe that their charity is doing an excellent job, and deserves their cash. But another factor may also be at work. Guilt.

Bluefrog’s research reveals that, once people have started giving to charity, they feel bad about stopping. When people do cancel their direct debits, the report says, people “blame themselves[,] because they are too nice to blame charities. ... People do not like to admit to having had higher expectations.” The report also reveals that people typically spend a long time contemplating cancelling their gifts before they actually do so.

Once people start giving, in other words, they feel guilty when they think about stopping. And if that’s the case, then it’s a fair bet that a big chunk of charities’ donors keep on giving because they don’t want to feel bad about stopping – not because they feel particularly enthused about the cause. And that’s extremely bad news for charities in the long run.
 

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Poor old George Galloway. It seems that the MP for Bethnal Green and Bow cannot help but get involved with troublesome charities.

Take his recent ‘Viva Palestina’ appeal. Apparently, it raised over £1 million for an aid convoy headed for Gaza (the convoy has since reached its destination and handed over aid to Hamas).

I say ‘apparently’ because we can’t be sure: although the appeal appears charitable, the appeal was not registered with the Charity Commission (which regulates all charitable activity in England and Wales) and so wasn't required to make public its accounts, or indeed any other information. When the Commission tried to contact the appeal with its concerns, it got “no substantial response”. It has since launched an investigation.

This has a haunting resemblance to an earlier Galloway appeal, which also failed to register with the Commission. An investigation found that around 30 per cent of its income came an “improper source” involved with the Iraqi oil-for-food scandals.* And, to top it all, Galloway’s nominated charity when he appeared on Big Brother also ran into serious trouble with the Commission. The conspiracy theorists are already getting hot under the collar.

Questions have been raised about the Charity Commission itself. After all, it has significant and sweeping powers, including the right to suspend charity staff, and take over charity bank-accounts. George Galloway claims the Commission's power is being abused - it's a political weapon, he says, in the fight against a popular MP. But others have attacked the Commission for being too timid, and too fearful of political consequences to use its powers. The rhetoric is heated, and you might be forgiven for wondering why the Commission exists at all.

But before the Commission's critics get too excited, it's worth looking at one image of world without a Charity Commission:

“widespread abuse . . . by politicians and other wealthy individuals who have exploited the tax-exempt status of NGOs to set up fraudulent organizations that serve private and often corporate ends.” (NGO Accountability p94.)

That was the Philippines, where genuine charities only avoided a government clampdown by starting their own regulator. Or take Saudi Arabia, whose errant charities have caused international incidents. Or Australia, where only basic tax details have to be submitted by charities, and even these are often omitted. In general, life without a charity regulator is worse. So I’m thankful that we have a Charity Commission, even one which is attacked from all sides of the political spectrum. I’ll be watching the progress of the Viva Palestina inquiry with an open mind.

N.B. Please don’t let these antics put you off giving to Gaza. There are plenty of ways you can give and be confident that your money is well looked after. See our articles on giving to Gaza and Palestine in general.

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*Please contact the Charity Commission for the full report (it's not available online). In fairness to the Charity Commission, independent reports from other organizations seem to support some of their results.

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Today we announce a new service to help charities write better annual reports. In our experience reading over 1,600 charity annual reports, we've concluded that most charities could do with a bit of help putting them together. And that help is what we now want to provide.

Our advice will make your charity's annual report more transparent, more interesting, less confusing, and more useful as a document that donors will find interesting - and which will, we think, help you attract more supporters.

> As seen in Charity Finance magazine

The service - which will cost £125 for charities with an income of less than £500,000 a year, and £200 for larger charities - is straightforward. If you'd like some help with your charity's annual report, or review, here's how we can help.

1. You send us a copy of a draft of your annual report or review.
2. We'll analyze this for overall quality and transparency, in line with our 43-point Charity Review System.
3. We'll then send you email feedback on how your report can be improved, with practical tips and advice.
4. You'll then have the opportunity to follow this up and ask us any further questions which you want answered.

We've tried to make the whole process as simple, and as practical, as possible. So, if you're interested in improving your charity's annual report, just let us know if we can help. Call 020 8981 3848 and ask to talk to Sarah, or email sarah.hedley@intelligentgiving.com. We're looking forward to hearing from you.
 

 

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Our trustees are the people with ultimate control over Intelligent Giving – they set our strategy, and make sure we’re doing a good job. In other words, they’re a pretty important bunch. And today, we can announce a new appointee to our trustee board. He was appointed after going through an open application process, which we advertised on this website a few months ago.

We are delighted to welcome Mick Aldridge, Director of the Public Fundraising Regulatory Association, into the Intelligent Giving family. Mick, who’s previously denounced our work as “disgusting,” and “grossly irresponsible,” and accused of us indulging in “fundraiser-bashing” has decided to take a more subtle route towards shaping our agenda. Mick brings to the board his deep insights into the fundraising profession, and his knowledge of media strategy and crisis-management.
 
Toya Forchils, Chair of Intelligent Giving, welcomed Mick's appointment. "We're glad IG and the PFRA can move on from their history of disagreements," she said. "We've always admired the flair with which Mick has led the PFRA, and are looking forward to working with him much more closely in future."
 

 

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