The actions of a few do not mean the charity sector is rotten

I blogged yesterday about what I perceive to be a growing neo-liberal attack on the charity sector. Then I read an article by Michael White on the Guardian Society blog calling for increased charity regulation, reform of Britain’s ‘ramshackle charity laws’, ‘mergers of tiny bodies’ and a cull of charities, among other things.

Clearly it is not just libertarians that believe something is rotten in the charity sector.

There are of course legitimate questions arising from the recent collapse of Kids Company and before that the expose of some very unethical practice going on in big charity fundraising. But it’s worth bearing a few things in mind as we seek answers to the important questions surrounding these events:

There are hundreds of thousands of charities and smaller community groups that do amazing work supporting the vulnerable and most marginalised in society. They do so, in the main, because of state or market failure – picking up the pieces of an inability or unwillingness of others to help those in need.

The vast majority of these are small, local organisations that operate on a shoestring – with turnover below £20,000 – and are run by volunteers who give their time freely to help others. They are not – despite the sweeping generalisations of commentators – awash with lavishly paid executives or frittering buckets of taxpayers’ cash. They are delivering essential support to those in need for a pittance. Having supported grass roots community groups for 20 years – much of it as a grant maker – I can say with some confidence that you would be hard pressed to find a better example of value for money than in Britain’s community sector.

The questionable practices of a tiny number of large high profile charities should not be allowed to taint the entire voluntary and community sector.

Next let’s take the issue of mergers and consolidation. Since 2010 there have been huge pressures on the not for profit sector which was the first place many public bodies looked to cut their budgets in the face of central government austerity measures. That resulted in numerous closures, mergers – where they made sense, though shotgun weddings are generally a bad place to start – strategic alliances and consolidation. I myself saw the start of a slow and painful decline of the organisation I was running, Urban Forum, which was wound up last year.

The diversity of Britain’s not for profit sector is something that is rightly admired by the rest of the world. The US may have its culture of philanthropy – and UK efforts to replicate it have had only modest success – but that has developed in the absence of a welfare state and social inequality that anyone concerned with social justice would find abhorrent. We have a vast array of small, local community groups and charities that reflects the complex social mix which makes Britain great.

Should it really matter if a group running on a few thousand pounds in one neighbourhood is doing similar work to another group in another neighbourhood? Whatever their similarities they are also doing something different – and that is working in their own neighbourhood for their own community.

In fact I think one of the lessons to be learned from Kids Company is that the desirability of growth and expansion – a mantra that has sadly been appropriated from the private sector – can have disastrous consequences. Expanding from their South London base to Bristol and Liverpool increased the charity’s exposure to risks, but it also ran the risk of disconnecting the organisation from its beneficiaries. Any perception that small local groups are inefficiently duplicating services and support disregards the added value that a connection with a place brings. Merger should be approached with extreme caution.

A lack of transparency over how charities raise and spend their money that some have complained of is underpinned by one of the most heavily regulated statutory frameworks we have in this country. Charities are required not just to comply with company law but also with a separate, additional set of regulations set out by the charity commission. The Charity SORP (Statement of Recommended Practice) sets out very precisely how charities must report on their financial activity – and places a very high administrative burden on charities. I remember some years ago the Treasurer of the charity I ran, who was an experienced insolvency practitioner at a very large accountancy firm, expressed amazement at what was required – saying it was ‘more work than a million pound company’. If it’s not working for people then it should be changed, but don’t blame the charities that are already complying with some of the strictest regulation any corporate bodies face.

There is a need for proportionality in regulation – and this already happens to an extent with a threshold for increased statutory reporting of financial accounts. However, if there is an argument for greater regulation and administrative burden being placed on charities (and I remain unconvinced) then it should be highly targeted.

Sweeping generalisations attacking the charity sector do not help the poorest and most vulnerable that rely on their support.

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