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Adam Rothwell
- Wednesday, October 31, 2007
THE WOODEN SPOON SOCIETY (see profile) is one of the least transparent and most inefficient charities we’ve seen. And that’s saying something.Last week, we completed our one-thousandth charity profile, and tomorrow we’re celebrating two years’ full-time research into how charities tick.
The vast majority of the 1,000 annual reports we’ve read reflect charities which have a genuine interest in being transparent – and our figures show that about 75 to 80 per cent of cash spent by those same charities goes to the cause.
But some organizations stand out. And Wooden Spoon is one of them.
Although the Spoon’s bosses have been quick to wheel out statistics claiming that, in one statement, 52p, and another statement, 72p out of every pound spent goes to the cause, the charity is strangely reluctant to reveal how it calculates them, and today on its website it appears to have abandoned them entirely.
The facts are simple, and they’re made clear in the Spoon’s accounts , signed off by the charity’s trustees and approved by PwC, one of the world’s biggest audit firms.
| Wooden Spoon spent £4.5m in 2005/6 Of that, £1.6m went to good causes £2.8m went on overheads |
We have no axe to grind. We have nothing personally to gain by criticizing the Spoon. But in our view it is unacceptable that a charity should spend so much on overheads, and so little on helping its intended beneficiaries. Even the Institute of Fundraising, the umbrella body which represents the major charities, agrees with us. We’ve complained to the Charity Commission about the Spoon on these grounds.
The Spoon has also raised some specific points. If you have the stamina for it, this is our response.
- The Spoon writes: “The costs of these events [i.e. fundraisers] may be significant, but must be reported separately from all related income.”
We say: This is a curious way to look at things. Most charities raise money by running events, and they are happy to have those events judged by how much money they rake in being compared against how much they cost. The difference between most charities and the Spoon, however, is that the Spoon generally runs remarkably inefficient fundraising events, and most charities don’t. - The Spoon writes: “If an event fails to deliver on this criteria [sic; i.e. a value-for-money test], then it is not repeated.”
We say: Again, this is a curious statement – because all the Spoon’s fundraising (on aggregate) looks to us to be some of the least efficient of any charity. We suggest the Spoon takes a serious look at how it measures value for money – because we know of no other charity which shares its views on this matter. - The Spoon writes: “Wooden Spoon is conscious of creating events which are accessible to all its supporter base.”
We say: Again, this is a perplexing statement if it’s supposed to justify inefficient fundraising. The vast majority of charities draw their support from a wide range of people – some of whom may not be rich. But most charities are much more efficient than the Spoon. - The Spoon writes: “Spoon has a unique structure. … The [regional committees] organize their own events.”
We say: This sounds like Spoon HQ is trying to shift the blame to its regional committees – which would be fine, were the regions’ activities not all funnelled through the central Spoon bank account. Spoon HQ has a duty under charity law to ensure that all the cash on its books is spent primarily for charitable purposes. But we’re worried that it is shirking that responsibility. - The Spoon writes: “Head Office is extremely judicious in its governance and takes great care in the management of overheads.”
We say: We’ll willingly congratulate the Spoon if it’s able to show that it keeps head-office overheads to a minimum. But that’s of little use if its fundraising activities are drowning in overhead costs. - The Spoon writes: “Spoon is extremely proud of its record with the Charity Commission and as far as Spoon is aware, no investigation by the Charity Commission is planned.”
We say: Last Friday, we lodged a formal complaint with the Commission against the Spoon’s excessive fundraising costs. As the Commission is bound to do, it will investigate our concerns – but we have no indication what it will conclude. Click here to read the full text of our complaint.
This is in any event a storm in a teacup. I imagine those taking part in WS events fully understand the charitable proposition and make an informed decision to attend (they might even enjoy it!) Therefore what this debate has to do with transparency is beyond me.
Don't shoot the messenger
rspcacambridge, I agree with you to an extent. However, there's nothing fundamentally wrong with a charity using the direct and indirect tax exemptions that apply to fundraising events themselves, rather than setting up a trading company. There's an argument that (whilst there is business risk attached to carrying out events in a charity) it is more efficient as the costs associated with a separate legal entity are avoided.
My main beefs with the original IG campaign against the charity were 1) they were interpreting the figures in an unrealistic way, as the income is so obviously associated with the events - one would not arise without the other and 2) this is a common method of fundraising, used by many charities.
The original article made comparisons with Absolute Return for Kids, for example, and manipulated figures to suit the angle taken by IG. ARK's last accounts show that their events raised £7m and cost £4m - ok, better than WS (not that much though), but less than 50% profit. They just happen to be in the rather fortunate position that their supporters are amongst the richest people in the City. They can rely on straight donations generating additional income, and in fact these form their largest income stream.
WS relies more on its events, and thus its overall figures appear 'worse'.
If IG (and the other commentators here) have a problem with this form of fundraising, then fair enough; I don't think it's fair to single out one charity that uses it.
Why do you think that would be an advantage? In fact I'm not sure it would be legal - cf the Maryam appeal - my interpretation of charity law is that if you are fundraising for charity and are raising more than the threshold amount you HAVE to register.
I think we're arguing about semantics here. As I've said earlier, I think WS ought to reconsider its structural setup and whether it ought to be a charitable trust + associated trading body. Arguably, since it is getting the celebrities free it ought to be making more net profit than comparable commercial organisations which would pay the going rate - so maybe its charge to end-users for putting on a "do" should be larger. I don't think we have those figures, so for all we know it IS making a significantly better profit (for charity) than the purely commercial versions do for their owners.
Personally I wouldn't go to the events if you paid me, but I don't think there's any evidence that they're siphoning off money that would otherwise have gone to different charities and wasting it.
As a group of influential individuals they could still organise their event and give the profits to charity with or without a registered status.
Don't shoot the messenger
Forget the bottom line figures. The charity exists because of its fundraising events, and vice versa.
The way the accounts are presented doesn't help this charity. If you compare expenditure on beneficiaries against net profit of fundraising events, the proportion is very high.
There's an argument that their model uses a relatively inefficient model of fundraising. The charity runs high-end events: I'm sure that no-one reading this thinks that those events are free to run, and I'm sure no-one attending would think that. If the charity did not run these events, it would probably raise virtually no money.
However: if this charity were to have its status withdrawn, a large quantity of money would be lost to the sector, as would the benefits of the work it does to the children who benefit from it.
Regardless of the rights or wrongs of Adam's complaint always seem to err on the side of not generating any more work for themselves.
Don't shoot the messenger
I think there are two different arguments here. There are those who seem to believe that money raised for charity is inherently worth more if it's generated in some kind of joyless, worthy way. I totally disagree with that. In fact who honestly gives a monkey's whether a WS fundraising event is a shameless display of ego (don't forget it may well not be), just so long as an impressive figure is raised for charity beneficiaries. If a champagne fuelled jolly has a worthwhile by product then that's fine by me.
On the other hand there's the purely legal matter about whether an organisation with poor ratios of expenses to fundraised income should have charitable status with all the associated tax benefits. I'm less than convinced that they should.
Don't shoot the messenger
LMC: Couldn't agree more.
David M: You're probably not surprised to hear that's what I think too...
Adam, Intelligent Giving
Nuff said - my lengthy post (now on page 2 of this thread) explains why I think Wooden Spoon is more for the egotists than the beneficiaries.
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... nearly Vlad the Impaler
My charity is an Amazon affiliate - which basically means we get some commission from sales "driven" to Amazon from our website - usually because we've recommended a particular book. The commission isn't much (1% of the value of the sale), but it's effectively free money for the charity because we already have a website and we want to encourage people to read animal care books.
The person buying the books won't buy them because he or she wants to make a donation to us, so it's not sensible to view the transaction as a highly inefficient method of fundraising with a 99% overhead - in fact I don't think anyone would do that.
Why is this really very different from what WS is doing? In both cases the "punter" is getting something that he or she genuinely wants and the charity is earning some money. Surely that's not the same as a situation where a chugger got to keep 99% (or whatever) of the donated cash and nothing's given in exchange.
I have not looked into Wooden Spoon, so would not like to comment on the accusations per se, but reading the comments on here and their official response the main thing which jumps off the page is the anger that a charity should be questioned on their work. The strange desire for "exploring regulation of self appointed commentators with The Charity Commission as an industry-wide requirement" says it all really. Charities should welcome rigourous scrutiny, rather than saying that (and I paraphrase some who have written below)- I had a good night and some of the money went to charitable causes therefore it is a great thing. I would also comment that just because the Charity Commission don't uphold a complain does not mean that there is good practice , just that it is not considered worth the Commission's time to investigate - which hardly seems something to brag about.
GR: I'm afraid you're wrong. WS is straight-up one of the least efficient charities in the country, and my (fascinating, I think) debate on this page with Charity Chris doesn't change that. Charity Chris - as I understand it - was primarily making a point about the Charity Commission and whether it would be justified in investigating the Spoon for being un-charitable.
When I complained to the Commission about the Spoon, they indeed took Chris's side and chucked out my complaint. But, after a bit of poking, it's clear to me that not everyone at the Commission would take the same line.
In other words, it's still up for debate - in regulatory terms - whether the Spoon is acting properly or not. But it's simply a fact to say that this charity is a very poor performer. Spending the majority of any charity's funds on admin is - as GR might put it - simply massive charity fail.
Adam, Intelligent Giving
Very late comment I'm sorry.
This year I decided to look for a charity that I could give some time to. WS appealed because 1) i have a lot of rugby contacts and 2) i know that these rugby contacts would happily take their clients to WS events for the chance to meet some rugby stars. These people currently entertain their guests at michelin star restaurants or 'conferences' in the maldives etc. WS offers these people an opportunity to entertain corporate clients in a way that is different to what their competitors may be offering.
This method of fundraising will never be as profitable as just sticking your hand out and asking for donations. No argument.
I don't think it is worth going on too much about the merits of WS and no doubt we can improve. However I think it would be very worth while the author of this article to really consider the actual impact of his actions. Could he have spent the same amount of time and focussed it in a way that would have had a positive outcome? Hopefully as youth gives way to experience he will learn because, in the words of today's youth, this article has been a 'massive fail'. The obvious mistakes in financial understanding pointed out clearly by Charity Chris show the author has a profound lack of knowledge in this area.
I sincerely hope that all my 'city boy' friends aren't put off by the headline of this story and decide to reallocate their WS funding back to ridiculously expensive wine and strippers.
I've come into this debate quite late, I fear, but as I used to work for TNT (a major supporter of Wooden Spoon) - I found this exchange extremely interesting. I'm not a financial expert, but the WS line seems to be that people commenting on the story need to be an accountant to "fully understand" the issue (i.e. agree with them).
Perhaps the dinner fundraiser does get people who would not otherwise give to charity to do so. But the idea that costs incurred in putting on a dinner should not be counted as overheads - am I reading that wrong? - seems absurd. On that basis, if this charity is 35% efficient, but feels that it is generating donations that would not otherwise be received, then at least it should say this. People could then make up their own mind whether this is a good way to give to needy children.
I was prepared to read the other side of the argument, but sadly the official WS response - written by a PR expert - uses the phrase "unofficial charity commentator" *eleven times*. This is a psychological technique intended to set up a negative association with IG's name, and whilst it's very clever, it's also sneaky, and I am not at all impressed.
For about the third time - IG are still misunderstanding some key points:
1) Fundraising activities DO NOT have to be for the public benefit;
2) Private benefit derived from a charity's trading activities, including fundraising, is not relevant in the public benefit assessment.
Write to the Commission all you like - this angle is going nowhere, as you still haven't taken these points into consideration.
"The last word on the Wooden Spoon" - dated 30th October.... On reflection perhaps a little optimistitic Adam?!
Whilst I disagee to some extent with IG's position on WS, I have to wholeheartedly concur with their view of the Charity Commission. I have raised serious complaints myself about a charity and have found their responses to be irrational and inconsistent. Still, I've not given up. If the charity concerned is finally held accountable then I will make sure that the public understand just how ineffectual their 'regulator' actually is. What a total waste of £30m pa of tax payers money.
Don't shoot the messenger
If you take a look through the archived Charity Commission Inquiry reports you'll see that they do investigate cases where they think fundraising costs have been excessive, but I don't think they've got the same mental model of how charities work that you have. From memory, ALL of the cases that were judged to be excessive involved situations where organisations were either sending begging letters or selling objects with low or nil value (e.g. badges) and using the bulk of takings to pay the people involved in doing the fundraising.
Spoon's much more like a charity shop with overheads (rent, rates, electrics etc.) that go to someone OTHER than the fundraiser.
For what it's worth, the first time I filled in an annual return that required me to comment on fundraising activities that raised less than 50% profit, I listed our charity shops with considerable trepidation and got back a response essentially saying the same as the response re Spoon - i.e. they don't have a problem with honest fundraising that has comparatively limited potential for profits; they only care about situations where charities are being run to enrich the staff rather than the beneficiaries.
Well, fundraiser, it does look like you’ve hit on something there. But on closer examination it turns out that both your response (and that of the Commission) are misguided.
This is why.
The Charity Commission’s letter to us says: ‘The Charity Commission does not have any guidance on the levels of return which would be acceptable for the various methods of fundraising’. This is curious. The Commission’s guidance ‘Complaints about Charities’ (CC47) says that the Commission will investigate complaints about charities which incur ‘fundraising or administration costs which are excessive’. But if what the letter says is true, then how is the Commission able to investigate any complaints made about ‘excessive’ fundraising? It appears not to be equipped to do this – a strange situation indeed.
The letter says, ‘If statistics are going to be used to compare fundraising costs, then they should be compared against similar methods of fundraising.’ But this is surely irrelevant. Whether fundraising costs are deemed ‘excessive’ must be a question of public/private benefit. It’s not a question of whether a fundraising event is competitive ‘in its class’ – since a whole class of fundraising events might be excessively profligate. This may be the case with the type of event organized by the Spoon.
Additionally, charities’ fundraising costs must be judged against other charities complete fundraising costs, not against the amount spent on a particular event. In other words: if we are going to make a comparison, we must compare whole charities against whole charities, not fundraising techniques against fundraising techniques. Few other charities, overall, and which we have examined, have such a poor return on fundraising investment as does the Spoon.
The letter says that, since 105% of available funds are being spent on charitable activities, then this means that the charity must be operating for the public benefit. This is not the case. After fundraising expenses have been subtracted, the charity may look as if it’s delivering a substantial good. But because the fundraising costs are so high, it seems as if the beneficiaries of the fundraising events are the primary beneficiaries of the charity – rather than those in receipt of charitable funds.
Public benefit must be established overall when looking at how the charity functions. And, overall, the Spoon spends more on fundraising (where a benefit accrues to the members of the charity) than it does on charitable activity. Therefore, we think that the public benefit delivered by the charity is outweighed by the private benefit accrued to its members when they attend events.
Now, I’m not a lawyer. Our argument may fall on a legal technicality. But when it comes to the key questions, our position is unchanged – and will, I think, remain so. The Wooden Spoon creates more benefit for its members than it creates for its intended beneficiaries. Its fundraising costs are excessive – and we know that because we can compare it to 1,000 other sets of charity accounts.
The Commission’s letter contains a wealth of faulty argument. And, rest assured, we’ll be writing to them to let them know our views.
Adam, Intelligent Giving
I am pleased that you have published the Charity Commission's reply to your concerns, albeit not on this site but on Facebook!
The Commission's accountants produced a table which is worth looking at as it shows that, quote' the level of funds applied to charitable activity is shown as a percentage of the funds available. This shows that in 2006 105.1% of available income was used on charitable activities, the lowest percentage applied was in 2005 51.9%. These figurwes are in all cases more than double that which you have compiled.'
They go on to say'..if statistics are going to be used to compare fundraising costs then they should be compared against similar methods of fundraising so that an accurate comparison is established. From our analysis of the information available from the accounts for the charity the Commission does not concur with your view that the charity's costs are excessive taking into account the method of fundraising which is employed by the charity.......the table produced show that funds expended on charitable activity as a percentage of available funds range from 105% 2006 to 60% 2005. As such this does not give rise to concern.'
I hope that Intelligent Giving's misinterpretation of accounts, and lack of appreciation of a charity that has already in its short history helped so many disadvantaged children, will not affect the level of giving to Wooden Spoon.
I agree with part of that...... I don't think that the criticism of Wooden Spoon amounts to anything of great import. However, my experiences of the Commission suggests that their staff (at all levels) are far from being the oracle with regards to Charity law and if you keep your eye out you may well see them come in for criticism on that score in the very near future.
Don't shoot the messenger
I don't understand where you are trying to get to on this subject. The sector regulator has written a clear letter explaining the position and saying that there is no case to answer. This charity is not breaking charity law - they are using legitimate (if slightly unusual) fundraising methods. The Commission has a lot of experience in this area - I don't understand how IG can set itself up to know more than the Charity Commission about charity law. The Commission is right to point out the relative efficiency of use of the 'net incoming resources available for charitable application'.
You might not like the way that this charity works. That is hardly an objective criterion for assessing the good that the charity does, or how efficient it is.
If you sincerely believe that charities should not be allowed to raise funds in certain ways, or trade (even using subsidiary companies?) then surely campaigning for a change in law, rather than attacking one exponent of relatively unusual fundraising techniques would make more sense.
IG's other original point about this charity was that the report wasn't particularly good at highlighting outcomes, which seems fair enough. Martin Brookes's recent lecture on the subject of measuring charities impacts is relevant in this context. It would be nice to see IG campaigning for positive change in a constructive way - much more likely to end in a positive outcome for the sector generally.
Sadly, tabloid style hatchet jobs on individual charities generate much more publicity.
In reply to Martin Davies.
The local regions are fairly autonomous, but you msake a good point asking why there is a Head Office. The reason is becuase eveythuing that is raised regionally is matched by Head Office. Therefore the £100,000 raised in our region means that £200,000 is actually available to spend.
The problem is that Head Office events tend to be very glitzy, corporate, high value events in order to raise the money to match the regions. I understand that many of these events have actually been loss making.
This, I think, is the main reason why on the face of it Spoon looks inefficinet. In reality, on a regional basis it is very efficient becuase there are no overheads and everyone attending a local event knows that there funds WILL be spenct locally.
Finally, and quite importantly Spoon events tend to be very good fun and are always over subscribed wth waitinhg lists for our Dinners. I do not think that particiapnts/ donaters will be worried about the recent report quite simply becuase we can guarantee that any m oney they give us will be spent on projects. 99% will probably never get involved in any of the Head Office organised events.
We've finally got permission to publish the Charity Commission's response to our complaint about the Wooden Spoon. You can see what they said by logging onto our Facebook group.
We think the Commission's argument is wrong for several reasons, but don't have the time to issue a full rebuttal of their points just yet. But we will. Eventually.
(If you don't have a Facebook profile, then do please get in touch and we'll email you a scanned version of the letter.)
Adam, Intelligent Giving
In my experience letters from the Charity Comission are always perplexing and never deal fully with your concerns.....As the train of correspondence builds you'll probably also find self contradiction and perversity feature heavily.
Don't shoot the messenger
Alex raises a good point here, and we'd very much like to publish the full text of the Charity Commission's letter to us about the Wooden Spoon. However, before we do this we need to clarify whether we have the right to reproduce the letter in is entirety - since we don't own the copyright to it.
It's worth saying, however, that we think the central thrust of the letter's argument is perplexing and doesn't deal fully with our concerns.
Adam, Intelligent Giving
In the bigger picture of charity 'crimes' this one really is chicken feed. Whether or not you approve of WS's methods of fundraising the fact remains that their accounts are completely transparent enabling any potential donor to make an properly infromed decison.
Don't shoot the messenger
This discussion can go on forever.Adam Rothwell formally reported Spoon to the Charity Commissioners and saw fit to make his letter public.I hope that he will also publish their reply.
Its not the money thats the problem. Its the inefficiency, percieved or real, in getting it.
Is it a charity? Or a business?
It certainly seems to have a lot of staff for a grant-maker.
Maybe everyone is making the mistake of presuming that the organisation is inefficient when it might be down to a few regions running events at a loss.
OK, a regional committe raises in excess of £100k every year. Which is used to fund projects in that county. Exactly what need is there for head office (with its 9 staff?) to be involved? If all the regions work like that, how is the total organisation seen as inefficient?
The fundraising looks inefficient with the figures given. So can WS explain how perceptions are wrong?
It is not the regional events I object to, they are damn good, and raise a lot of money. I do not however like to be told that my annual membership fee, which I and every other member really regards as a charitable donation is increasing from £35.00 to £45.00 take it or leave it.- I left it!