Charity Checks and Balances
Calls for charitable donations seem to get louder every day. But charities must prove that the money we hand over is money well spent.
I came to work in charities via finance. Before I joined the national employment charity Tomorrow’s People, I worked as an economist at the Bank of England and then at Goldman Sachs. In 2001, I joined the newly established New Philanthropy Capital (NPC), becoming chief executive in 2008 and leaving in 2011. During those ten years, NPC encouraged charities to demonstrate their impact and supported them in their efforts, something the organisation still does well today. The need to know what charities do, how they make a difference and how effective they are is more important than ever in a world where the competition for funding has become more intense. It was not enough, we believed, to ask for money just because you were a charity; you needed to prove that the money entrusted to you was being put to good use. And demonstrating the value of your work to potential donors is the best way to attract more support.
Source: Ipsos Mori, from Mind the Gap: What the Public Thinks About Charities, published by New Philanthropy Capital, 2015.
I continued the same line of work by setting up Pro Bono Economics (PBE) with Andy Haldane, chief economist at the Bank of England. The role of PBE is to match volunteer economists with charities who want an in-depth analysis of their wider economic impact. This work helps participating charities to appreciate the workings and importance of evaluations such as Social Return on Investment and Social Cost Benefit Analysis. It also demonstrates to charities the importance of collecting data to monitor performance and, where necessary, to direct resources more effectively.
Before I joined Tomorrow’s People I had known the charity for ten years and had admired its dedication to proving the value of its work and the priority it places on clients. Both NPC and PBE had worked closely with the charity, and both had given it the thumbs-up. Tomorrow’s People had an unusual and striking openness to scrutiny; they also talked the language of results and accountability, which was not widespread among charities at the time.
Such openness to independent scrutiny and examination should be expected - no, it should be demanded – by philanthropists. Charities must be expected to prove their worth in the same way as businesses do. That is the only way to be confident your valuable donations will be used wisely. Thankfully, this approach is now widely accepted – but donors could still get more information to help make the right decisions.
Reputable charities are accustomed to providing evidence of what they achieve to large foundations or in return for delivering government contracts. Private donors should expect the same evidence. The ideal charity should provide a mixture of stories to illustrate its work, creating the vital emotional pull for donors, and the data to back up evidence of impact.
Carrying out the necessary level of analysis can be time consuming and costly for charities, but there are organisations that can help. Between 2004 and 2011, Tomorrow’s People worked with Oxford Economics and then with FTI Consulting, who both highlighted the value of the organisation’s programmes. Today an updated analysis is under way, carried out by a team of economists from the Bank of England. We hope to publish this in the near future.
The 2015 Sunday Times Giving List reported an increased trend in giving by the UK’s wealthy elite. With larger donations to charities increasing, it is no surprise that wealthy individuals want to be more engaged, but part of this is a desire to see the tangible impact of donations and the impact on the broader community. For example, following the report by FTI Consulting, we at Tomorrow’s People know that every £100 spent on our employment programmes creates value to society of around £240. This return reflects the 87 per cent of the unemployed young people we help who make it into work or back into education. That is compelling evidence, we believe, that Tomorrow’s People makes a difference.
Source: FTI Consulting
Individuals donating to charitable organisations may have the misconception that charities are habitually inefficient in managing the money of donors. This impression has not been helped by some of the recent publicity surrounding charities. The reality is, however, that many, many charities do fabulous work, deliver real results and value for money and are more than happy to demonstrate this. I am very proud that Tomorrow’s People fits this category and was pleased to see my initial judgement about the organisation confirmed when I joined. It is the responsibility of charities to put their own houses in order and build a positive narrative about their work, opening themselves to scrutiny and providing evidence backed up with facts and figures. That is the right - and the only - basis on which to ask for and attract funding.