tag:theconversation.com,2011:/us/topics/the-problem-with-big-charity-25343/articlesThe problem with big charity – The Conversation2016-03-03T11:11:11Ztag:theconversation.com,2011:article/548502016-03-03T11:11:11Z2016-03-03T11:11:11ZPhilanthropic foundations: black boxes that must become more transparent<figure><img src="https://images.theconversation.com/files/113414/original/image-20160301-31020-1hjr3dk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Penny for their thoughts.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-280064555/stock-photo-view-of-midtown-manhattan-new-york-city-with-coin-operated-telescope-on-bright-sunny-day.html?src=pp-photo-290657414-1aNzbFeuBVe4z7m3ycE75g-5&ws=1">Big city by Shutterstock</a></span></figcaption></figure><p><em>Charitable giving is big business, with many organisations handling millions in revenue. But big charities have come under fire for issues from bad accounting to actually doing more harm than good. In our short series on <a href="https://theconversation.com/uk/topics/the-problem-with-big-charity">The Problem with Big Charity</a>, Tobias Jung looks at how foundations work – or not.</em></p>
<p>A philanthropic foundation and an octopus have much in common. Their non-rigid forms mean that they are both flexible and able to squeeze into areas that are inaccessible to others. Both are seen as great problem-solvers and have tentacles that are far-reaching. However, understanding their movements is difficult, and they have a spectrum of defence mechanisms against potential enemies. While studying the octopus can be left to natural scientists, foundations warrant closer social and political examination.</p>
<p>Foundations are essentially independent charitable organisations. It is important to realise that there is no such thing as a typical foundation, as data from the <a href="http://data.foundationcenter.org/?_ga=1.113598337.745591055.1456569538">US</a> and <a href="http://www.efc.be/philanthropy-sector/foundations-in-europe/">Europe</a> shows. Some foundations, such as the Ford Foundation in the US or the Wellcome Trust in the UK have enormous wealth – the majority don’t. Some foundations, as illustrated by the cases of the <a href="http://nypost.com/2015/04/26/charity-watchdog-clinton-foundation-a-slush-fund/">Clinton Foundation in the US</a> or the <a href="http://www.theguardian.com/sport/2016/jan/29/shane-warne-foundation-announces-closure-after-speculation-over-funds">Shane Warne Foundation in Australia</a>, raise serious questions about appropriate and acceptable foundation practices – most foundations don’t. Some foundations might be used as fronts for <a href="http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1331&context=wmlr">illegal or clandestine activities</a> – most foundations aren’t. </p>
<p>Defining a foundation is therefore difficult. Many countries don’t make a legal distinction between foundations and other forms of charitable organisation. Even labels can be misleading: few would consider the British Heart Foundation to be a “foundation”, and yet the Carnegie Corporation of New York and the Henry Smith Charity in London both qualify. As independent charities, foundations can be “grantmaking”, concentrating on the distribution of funds to achieve their goals, or “operating”, running their own programmes to achieve their goals. </p>
<p>Their wealth can come from diverse sources, such as individual endowments or corporate wealth; their activities span the whole geographic and charitable spectrum. Even where legal distinctions between foundations and other charities do exist, it is often easier for <a href="https://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations/Private-Foundations">statutory agencies</a> to highlight what disqualifies an organisation from constituting a foundation than to pinpoint their specific characteristics. </p>
<p>This fluidity, combined with the private nature of foundations, offers great potential for achieving positive social impact. They can address issues, and work in locations and fields, where governmental, political or corporate organisations either face substantial obstacles or are not welcomed at all. However, this along with wealth, ambition and a vision for social change offers rich opportunities for <a href="http://www.shu.ac.uk/_assets/pdf/cvsr-DavidHortonSmith-13June2013-Dark-Side-Vol-Sector.pdf">different types of abuse</a>. Pursuing individual gains, interests and agendas are just some examples. </p>
<h2>Mysterious workings</h2>
<p>So do foundations live up to their promise? Are they innovators, risk takers and catalysts for positive social change? How do they achieve their aims? At what costs? Who benefits most? These questions are hard to answer. Foundations increasingly may encourage formal evaluations and assessments of the work they fund, but they remain notoriously difficult to research. As an organisational type, they largely continue to be black boxes: their internal workings are often opaque and academic research access is difficult to obtain. </p>
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<img alt="" src="https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=573&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=573&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113418/original/image-20160301-31040-80kqcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=573&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Inputs and outputs, but what’s inside?</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-89626807/stock-photo--d-abstract-background.html?src=QFYKP58O53Tk7ggyaQqixg-2-97">Black boxes by Shutterstock</a></span>
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<p>From the glimpses that we do have, there are indications that foundation rhetoric and reality do not always coincide. There are concerns that foundations can focus on symbolic and <a href="http://www.academia.edu/1114868/Foundations_Schools_and_the_State._School_Improvement_Partnerships_in_Germany_and_the_United_States_as_Legitimacy-Generating_Arrangements">legitimising actions</a>, and emphasise <a href="https://www.researchgate.net/publication/249820204_Revisiting_the_Big_Three_Foundations">ameliorative practices</a> instead of challenging or changing the status quo. </p>
<p>Critics point to the evident use of foundations as veils for advancing neoliberal and capitalist agendas <a href="http://www.academia.edu/529446/The_politics_of_venture_philanthropy_in_charter_school_policy_and_advocacy">in areas such as education</a>, agriculture and <a href="http://researchbank.swinburne.edu.au/vital/access/manager/Repository/swin:20048">international development</a>, and a world where elite and relatively closed networks of influence and decision-making can silence critical voices by being <a href="https://books.google.com.au/books/about/Foundations_and_Public_Policy.html?id=qs4m2MelhoAC">brought into the fold or through funding dependencies</a>. Then there is the issue that with a wider move towards social investment and emphasis on achieving “<a href="https://www.gov.uk/government/publications/using-a-total-impact-approach-to-achieve-social-outcomes">total impact</a>”, foundations might be encouraged to be risk-averse investors rather than risk-takers. </p>
<p>In the absence of a stronger research base on foundations, the extent of these issues remains unclear. This is especially so outside North America, with its longer history of “big” foundations, their role in shaping society, and the <a href="http://link.springer.com/article/10.1007/BF02354015">challenges this can cause</a>.</p>
<h2>Good works and glass pockets</h2>
<p>It is very easy to criticise foundations. Giving away money effectively, addressing and dealing with complex social and political issues, and achieving positive change are all difficult and time-consuming. Great ambitions are often accompanied by epic failures. Social expectations of what foundations can achieve need to be realistic. Philanthropy’s history and the nature of “<a href="https://archive.org/details/giftformsfunctio00maus">gifts</a>” also highlight that <a href="http://www.cgap.org.uk/news/154/59/A-History-of-Western-Philanthropy.html">social control and reciprocity</a> have always been central to philanthropic action. </p>
<p>It is important to remember, though, that this works both ways. Tax gifts granted to foundations from the public purse, the social impacts and costs that led and lead to foundations’ wealth, and questions around democratic principles in private organisations working for the public good mean that much stronger critical engagement with foundations is needed.</p>
<p>Foundations are aware of these problems. They acknowledge the need for better foundation classifications and for <a href="http://research.effectivephilanthropy.org/sharing-what-matters-foundation-transparency?utm_campaign=Sharing+What+Matters%3A+Foundation+Transparency&utm_source=hs_email&utm_medium=email&utm_content=26533153&_hsenc=p2ANqtz-_a5vMtT5P44ErtLKVpuusZyLcjG0wbS6UnC-LkC8roJZ4Id5CufpFkdf3UYpWOUX7mRAXF0L-QfdVbnKzRhJ8o9bX9WA&_hsmi=26533153">a more transparent and accountable foundation sector</a>. Various initiatives have been put in place. They range from the publication of “<a href="http://www.shellfoundation.org/Our-News/Coverage-Archive/Learning-from-Failure--New-EVPA-Report">failure reports</a>”, which share lessons on what does and what does not work, to the <a href="http://glasspockets.org">Glasspockets</a> initiative, which is intended to encourage and provide transparency on foundations and the public good they provide.</p>
<p>Despite this, the governance and funding structures for most of these initiatives reveal that these are foundation initiatives, driven and funded by foundations themselves. So while having glass pockets is a nice idea, more transparent bodies that would allow us to get a better understanding of the internal workings of foundations would be much better.</p><img src="https://counter.theconversation.com/content/54850/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tobias Jung receives funding from the Economic and Social Research Council for the 2015/16 Seminar Series 'Philanthropy to the rescue? Exploring the opportunities, strengths and challenges of philanthropy', <a href="http://seminars.philanthropy.scot">http://seminars.philanthropy.scot</a>, Grant reference ES/M002578/1. </span></em></p>Their structures and funding give them scope and access that others don’t have, but foundations also lack accountability.Tobias Jung, Senior Lecturer in Management, University of St AndrewsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/553572016-03-02T11:03:29Z2016-03-02T11:03:29ZWhy ethical investing is hard for big charities<p><em>Charitable giving is big business, with many organisations handling millions in revenue. But big charities have come under fire for issues from bad accounting to actually doing more harm than good. In our short series on <a href="https://theconversation.com/uk/topics/the-problem-with-big-charity">The Problem with Big Charity</a>, Paul Palmer looks at how to make good investments.</em></p>
<p>Charitable organisations by definition aim to do good with the money they receive and spend. But what about the investments they make? What if these investments don’t appear to match the aims that the organisation promotes? For example, a charity that promotes conservation would raise eyebrows if they invested and received returns from an oil company. Some charities have come under particular scrutiny for this mismatch, while others <a href="http://www.theguardian.com/environment/2015/aug/14/wellcome-trust-urged-to-divest-fossil-fuels-health-professionals">have faced calls to divest their money</a> from uncomfortable concerns. Others use ethical investing as a guide. </p>
<p>Ethical or <a href="http://www.ussif.org/sribasics">Socially Responsible Investment</a> (SRI), sometimes also referred to as sustainable investment, is about taking steps to ensure that an organisation’s investments reflect its values and ethos and do not run counter to its aims. This kind of investment takes environmental, social, ethical and governance factors into consideration and is based on achieving the greatest impact from investments by both pursuing maximum financial return and ensuring investments complement, rather than undermine, the wider aims of the organisation. There is no one-size-fits-all model for how to do this – instead, there are a number of approaches that can be used separately or in combination.</p>
<h2>Three ways to do it</h2>
<p>Positive screening involves selecting companies for investment that have a commitment to responsible business practices and/or that produce positive products or services. This approach can include selecting companies whose products help to combat climate change, such as technologies for generating renewable energy. Positive screening can also mean selecting only the best performers in a sector on a range of criteria such as their record on human rights or pollution.</p>
<p>Negative screening excludes companies or sectors that do not meet the ethical criteria that a charity has set. For example, a health charity not wishing to invest in the tobacco industry.</p>
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<span class="caption">Not a great investment for a health charity.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-272174156/stock-photo-picture-of-young-alcoholic-drinking-beers-alone.html?src=94VQCcJRbU9lKOgUzkFH2A-1-25">Drink by Shutterstock</a></span>
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<p>Engagement, or shareholder activism, is using the influence and rights of ownership to encourage more responsible business practices. This mainly takes the form of dialogue, but it can also extend to using voting rights to enact change.</p>
<h2>Legal obligations for charities</h2>
<p>Charity trustees are responsible for making investment decisions and are required under charity law and <a href="https://www.gov.uk/government/publications/charities-and-investment-matters-a-guide-for-trustees-cc14">guidance from the Charity Commission (CC14)</a> to do what is in the best interests of the organisation. Generally speaking, this means maximising financial return; however, CC14 allows an organisation to choose to take a lower rate of return if: a particular investment conflicts with the aims of the organisation; the organisation may lose supporters if it does not invest ethically; or there is no significant financial detriment.</p>
<p>Those responsible for the investments must clearly articulate why certain companies or sectors are excluded or included. With their professional advisers, trustees should also evaluate the effect of any proposed policy on potential returns and balance any risk of lower returns against the risk of alienating support or damaging its reputation. </p>
<p>The leading case law in this area is the <a href="http://www.eccr.org.uk/module-htmlpages-display-pid-41.html">1991 Bishop of Oxford Case</a>, a test case to clarify the law on the conflict between the maximisation of return and the primary principle of the charity’s mission. It clarified that an ethical constraint based on the charity’s mission takes precedence over the fiduciary maximisation duty, so cancer charities can exclude tobacco company shares, for example. </p>
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<img alt="" src="https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113205/original/image-20160229-4096-v37nvd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Not a good look.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/Panorama_(TV_series)#/media/File:BBC_Panorama.png">Wikipedia</a></span>
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<p>Failing to adhere to principles certainly runs a reputational risk, as Archbishop of Canterbury, Justin Welby, discovered when in 2013 he said he wanted to “compete Wonga out of business” – the online payday loan company was subject to criticism over its very high interest rates. But hardly a day later, an investigative journalist found that the Church Commission, which looks after the £6 billion investments of the Church of England, <a href="http://www.theguardian.com/business/2013/dec/31/church-england-wonga-justin-welby-archbishop-canterbury">held an £80,000 stake in Wonga</a>. Comic Relief also <a href="http://www.dailymail.co.uk/news/article-2521057/BBC-Panorama-expose-reveals-Comic-Relief-sitting-100m-say-money-spent.html#ixzz41CTlEuNs">reportedly invested</a> millions in funds with shares in arms, tobacco and alcohol, according to a 2013 Panorama investigation.</p>
<h2>Avoiding a media storm and reputational damage</h2>
<p>So if a charitable organisation wants to set up a practical ethical policy on exclusions it needs to work out what activities should be avoided, what constitutes a material involvement, and where information – such as how much profit a company makes from an undesired product – should be obtained.</p>
<p>Defining the activities for exclusion is the first step but isn’t always straightforward. For example, with alcohol-related investments, should the exclusion apply to companies which manufacture alcoholic products or to distributors and retailers? Trustees must come to an objective agreement as to precisely what activities to exclude and why these conflict with their charity’s objectives. </p>
<p>In principle, a company with any involvement in an excluded activity should be avoided but in practice some definition of materiality is normally applied. Such tests can include proportions of sales, profits or numbers of employees. However, obtaining information is particularly problematic when a strict materiality test is used. For example, a fund manager will clearly know when a company earns 50% of its profits from alcohol but may not if the figure is just 0.05%. Annual reports and accounts can be informative, but of course accentuate the positive and bury the negative. </p>
<p>Screening services provided by specialist ethical services can help. There is however a cost to screening funds, and charities need to ensure that costs versus benefits and risks are properly assessed. Until recently, most large investment managers did not offer cost effective funds but this is changing, with major players, including UBS and Blackrock, now entering the market to offer a range of active strategies and passive funds, using socially responsible, <a href="http://www.investopedia.com/terms/e/etf.asp">exchange-traded funds</a>.</p><img src="https://counter.theconversation.com/content/55357/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Palmer has been a charities consultant to UBS since 2003. ESRC funded a research seminar series on Corporate Social Responsibility (CSR) in 2012 that he was involved in</span></em></p>Health charities should probably avoid investing in booze – but sometimes it can be hard to tell. So how do charities avoid the pitfalls?Paul Palmer, Professor of Voluntary Sector Management, Associate Dean for Ethics, Sustainability and Engagement, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/504862016-03-02T06:15:33Z2016-03-02T06:15:33ZFive ways foreign aid and NGOs can make things worse when disaster strikes<figure><img src="https://images.theconversation.com/files/110801/original/image-20160209-12603-1mnhf47.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Taking stock.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-368766788/stock-photo-dunkerque-france-january-refugee-camp-grande-synthe-in-france-is-a-muddy-camp-with-a-lot.html?src=mxu7BIFtK43UBT71Y1KCKg-1-79">Man by Shutterstock</a></span></figcaption></figure><p><em>Charitable giving is big business, with many organisations handling millions in revenue. But big charities have come under fire for issues from bad accounting to actually doing more harm than good. In the third of our short series on <a href="https://theconversation.com/uk/topics/the-problem-with-big-charity">The Problem with Big Charity</a>, Gina Yannitell Reinhardt looks at how not to do international work.</em></p>
<p>In 2015, the world faced earthquakes in Central Asia, flooding in South-East Asia, and epidemic illnesses in parts of Africa. Together, natural and man-made disasters took <a href="http://www.emdat.be/advanced_search/index.html">more than 31,000 lives</a>. People across the globe donated <a href="https://docs.unocha.org/sites/dms/Documents/GHO-FINAL-web.pdf">more than US$19 billion</a> in humanitarian contributions of cash, material goods, and services to alleviate the harm caused by these critical events – but were our efforts are well spent?</p>
<p>Nearly all of us are collective donors in some sense – when governments send relief to disaster areas, the money they use comes from taxpayers. Many of us are also individual donors, sending funds directly from our own wallets to charitable organisations and coordinated appeals. But in the past ten to 15 years, <a href="http://www.boston.com/bostonglobe/ideas/articles/2010/09/12/the_worlds_humanitarian_aid_organizations_may_do_more_harm_than_good_argues_linda_polman/">allegations of counterproductive relief efforts</a> and <a href="http://www.nytimes.com/2013/07/17/nyregion/state-questions-charities-on-flow-of-hurricane-aid.html?_r=3&">unused donations</a> have generated concern among donors – not only because money might be misspent or cause harm but also because this this might also <a href="https://www.cafonline.org/docs/default-source/about-us-publications/future-world-giving1.pdf">discourage charitable giving</a>.</p>
<p>These concerns are not unfounded; large-scale international disaster relief can have drawbacks that range from wasting resources to seriously undermining local governments. Here are five potential problems.</p>
<h2>1. Poor coordination</h2>
<p>One of the biggest challenges to disaster relief is coordination. After disaster strikes, immediate necessities (food, water, medication, blankets) are important, but what is the best way to deliver them? </p>
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<img alt="" src="https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113226/original/image-20160229-4096-piwbae.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Picking the right things.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-362510741/stock-photo-athens-greece-november-one-of-a-worehouse-organised-by-citizens-of-athens-with-help.html?src=YaXJdmknLRvpbI_iZZc57Q-1-86">Clothing by Shutterstock</a></span>
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</figure>
<p>We often feel compelled to donate our own clothing and other items. Unfortunately, pouring donated items into a devastated region <a href="http://ssir.org/articles/entry/who_is_responsible_for_the_second_disaster">can slow relief efforts</a>. The influx can cause what many term “the second disaster”, overloading relief workers with extra responsibilities and <a href="https://nonprofitquarterly.org/2013/01/24/how-to-do-disaster-relief-right/">taking up precious space</a>. </p>
<p>In some cases, material donations also generate waste. When <a href="http://blog.ups.com/2011/09/29/compassion-on-sale/">shoes are sent to regions</a> where people do not wear shoes, for example, the host country may end up paying for their disposal. Or when maize is sent to regions where people rely mostly on milk and meat, it can lead to <a href="http://www.fao.org/3/a-ag301t.pdf">more alcohol being distilled</a>.</p>
<p>Then there are the knock-on effects of appeals for sudden big emergencies. A heartfelt outpouring can harm other charitable endeavours by redirecting scarce funds. In difficult times even the best of us have to decrease our contributions. The 2007 recession, for example, <a href="http://givingusa.org/giving-usa-2015-press-release-giving-usa-americans-donated-an-estimated-358-38-billion-to-charity-in-2014-highest-total-in-reports-60-year-history/">hit US charitable giving</a> which didn’t bounce back until 2014. In a time of donation scarcity, increasing donations to a disaster area can take funds away from other endeavours that <a href="https://theconversation.com/five-ways-to-become-a-really-effective-altruist-53684">might be able to use it better</a>.</p>
<p>Good coordination, on the other hand, enables the most efficient use of donated money. For example, Juanita Rilling, director of the <a href="http://www.cidi.org/">Centre for International Disaster Information</a>, calculated <a href="http://blog.ups.com/2011/09/29/compassion-on-sale/">the cost</a> of supplying water to 40,000 people a day. It jumped from US$500 (if purchased locally by relief coordinators) to anywhere from US$200,000 to US$750,000 when purchased abroad and shipped in – an increase of 400%-1500%. </p>
<h2>2. Exacerbating existing problems</h2>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113227/original/image-20160229-4066-1u2962m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Who gets to the front?</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-178664708/stock-photo-lalibela-ethiopia-january-unidentified-volunteers-hand-out-food-to-pilgrims-after-celebration.html?src=m-yfSUmbXxPU7HNhrh8iaw-2-18">Aid by Shutterstock</a></span>
</figcaption>
</figure>
<p>Without careful management and distribution, there’s a good chance that <a href="http://link.springer.com/chapter/10.1007/978-0-387-32353-4_7">already-marginalised groups will suffer discrimination</a> when it comes to relief and recovery. After the Indian Ocean tsunami, members of the Dalit caste were <a href="http://www.ifrc.org/en/news-and-media/opinions-and-positions/opinion-pieces/2007/addressing-discrimination-in-disasters/">forbidden from drinking water</a> out of the same tank as other survivors because they are <a href="http://www.bbc.co.uk/news/world-asia-india-18394914">considered “untouchable”</a>. <a href="http://www.ifrc.org/en/news-and-media/opinions-and-positions/opinion-pieces/2007/addressing-discrimination-in-disasters/">Similar discrimination</a> has been suffered by women, children, homosexuals, the elderly, religious and ethnic minorities around the world.</p>
<p>There exists <a href="http://www.humanitariancongress.at/two-authors-two-views-aid-fuel-conflict">an important and unsettled debate</a> over whether relief efforts might even fuel conflict by exacerbating class or ethnic divides. Already scarce resources <a href="http://www.sciencedirect.com/science/article/pii/S0305750X08001757">may become critical means</a> of securing allegiance and manipulating the opposition in a place of conflict. <a href="http://www.alnap.org/resource/3533.aspx">In Sri Lanka after the 2004 tsunami</a>, an age-old struggle for power focused conflict on a battle for aid resources, and violence subsequently increased. </p>
<h2>3. Internal brain drain</h2>
<p>If coordination is good and immediate relief goes well, damaged communities move into the recovery phase. For individuals, this includes finding or returning to work, and rekindling personal networks, all of which require access to basic public services. After catastrophic disasters it makes sense for philanthropic groups to provide these services; the very governmental units that would respond to a disaster, and the neighbours on whom they might call on for help, have been damaged. In 1992, for example, Hurricane Andrew <a href="http://understandingkatrina.ssrc.org/Quarantelli/">destroyed structures</a> that housed welfare services, medical centres, and first response units (police, fire, and ambulance) in southern Florida.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=420&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=420&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=420&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=528&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=528&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113231/original/image-20160229-4063-ojydue.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=528&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Public sector jobs taken elsewhere.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-275157701/stock-vector-medical-staff-and-patients-different-situations-set-isolated-on-background-vector-illustration.html?src=hod4Jxzg7OJMRTU05H95JA-1-1">Health professionals by Shutterstock</a></span>
</figcaption>
</figure>
<p>The charitable provision of these services can have mixed consequences. Most philanthropic organisations want to staff their rebuilding efforts with local workers. This practice is beneficial to a post-disaster economy as it provides an external source of wages. But if salaries and work standards of these visiting organisations are higher than those offered in the recovery area, these visitors end up siphoning off that community’s best workers, causing an <a href="http://journals.plos.org/plosone/article?id=10.1371/journal.pone.0035840">internal brain drain</a>. Top employees are no longer available or willing to work in the public sector, and the local government must attempt to rebuild its own capacities without the community’s best thinkers and hardest workers. </p>
<h2>4. Damage to accountability and trust</h2>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=465&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=465&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=465&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=584&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=584&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113229/original/image-20160229-4087-102rsvh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=584&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Hurricane Katrina: homes and livelihoods lost.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-174475100/stock-photo-a-shrimp-trawler-boat-wrecked-and-grounded-on-a-louisiana-bayou-in-the-aftermath-hurricane-katrina.html?src=DTlHabmHnOClND4SOFBnRg-1-0">Hurricane by Shutterstock</a></span>
</figcaption>
</figure>
<p>Perhaps more importantly, when external organisations step in to take over they can <a href="http://www.sida.se/contentassets/1756188e06354b6286c76aeb0afdaf2e/joint-evaluation-of-the-international-response-to-the-indian-ocean-tsunami_3141.pdf">undermine recovery</a> in multiple ways. For one thing, bad experiences can make <a href="http://www.alnap.org/resource/3533.aspx">citizens lose confidence</a> in their own governments’ ability and willingness to provide public services. After Hurricane Katrina, for example, survivors <a href="http://prq.sagepub.com/content/early/2015/03/25/1065912915575790.full.pdf+html">exhibited less trust</a> in their public officials’ credibility and competence at managing disasters than those who didn’t directly experience the disaster.</p>
<p>Public confidence is key to re-establishing public services, and implementing new policies to help mitigate or avert future disasters. People who don’t trust that education and healthcare will be reinstated are <a href="http://prq.sagepub.com/content/early/2015/03/25/1065912915575790.abstract">less likely to want to live in the affected area</a>. And those who don’t trust their disaster managers <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1540-6210.2007.00826.x/full">may ignore key communications</a> when the next disaster occurs.</p>
<p><a href="http://www.jstor.org/stable/1061596?seq=1#page_scan_tab_contents">Governments can face challenges</a> when outsiders step in to provide key services, including a lack of ownership over policy decisions made by outside organisations, which means the governments themselves can eschew accountability and responsibility for any outcomes. If a government can blame poor decisions on organisations who have departed, then no one has to be accountable for the decision. Even accountable local governments can have difficulties stepping back in to provide public services after an external organisation has done so for too long.</p>
<h2>5. Corruption</h2>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113225/original/image-20160229-4110-1hskcxc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Who’s in control?</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-222087067/stock-photo-the-trucks-on-a-highway.html?src=cEwlssjdH5NnyKVcZ1QAbg-1-1">Supplies by Shutterstock</a></span>
</figcaption>
</figure>
<p>Of course, organisations often have to navigate difficult issues on the ground, such as corruption – something that can hamper the work of organisations externally <a href="http://www.theguardian.com/global-development-professionals-network/2013/jan/28/corruption-ngo-development-aid">and internally</a>. Transparency International (TI) <a href="http://www.transparency.org/whatwedo/publication/preventing_corruption_in_humanitarian_operations">produces a report</a> that details how large inputs of resources, pressures for rapid distribution, and difficulties in expanding scope can increase opportunities for the abuse of power.</p>
<p>One of the most insidious side effects of poorly managed recovery involves sexual exploitation. West African refugee children in 2001 reported that humanitarian staff withheld food unless sexual favours were given. TI reported that this practice led to “unwanted pregnancy; abortion; single (often teenage) parenthood; abandoned children; HIV and sexually transmitted diseases; lost education and employment opportunities,” and psychological trauma. </p>
<p>Fortunately, humanitarian organisations and international donors are aware of these pitfalls, and have implemented several mechanisms to combat them. The results of these efforts are just now becoming available, and show cause for optimism. The Philippines <a href="http://poseidon01.ssrn.com/delivery.php?ID=635090098026019006082098098016027113003055008027063057097027045058020010022106004115027081092106120088069053067006126088001127031075121080095121114071065109092081070126020029124126019100071&EXT=pdf">is a prominent example</a>: the Department of Social Welfare and Development coordinates disaster response, which means social protection is the highest priority. The national government now funds and operates several social protection programmes, such as training and cash transfers, which focus on the country’s most marginalised populations during recovery. It also takes the lead during international interventions, coordinating food security, shelter, camp coordination and management, and protection, which improves coordination. </p>
<p>Reports from TI and others also offer best practices and monitoring strategies for field staff, and organisations such as <a href="http://www.integrityaction.org/who-we-are">Integrity Action</a> unite and empower citizens and local and international organisations to work amid colossal challenges without causing more damage. Responding to disaster isn’t easy, but there are ways of getting better at it.</p><img src="https://counter.theconversation.com/content/50486/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gina Yannitell Reinhardt receives funding from the US National Science Foundation. </span></em></p>Meaning well and doing good are great, but organisations can do more harm than good if they’re not careful.Gina Yannitell Reinhardt, Lecturer, Department of Government, University of EssexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/543682016-03-01T12:42:13Z2016-03-01T12:42:13ZHard Evidence: which charities get the most money and is it enough?<figure><img src="https://images.theconversation.com/files/110798/original/image-20160209-12606-1mvwcy7.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C1000%2C817&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Who gets what?</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-372230098/stock-photo-volunteer-voluntary-volunteering-assist-charity-concept.html?src=4WI3xJ32wzX_Ln0rmrKrlg-2-2">Giving by Shutterstock</a></span></figcaption></figure><p><em>Charitable giving is big business, with many organisations handling millions in revenue. But big charities have come under fire for issues from bad accounting to actually doing more harm than good. In the second of our short series on <a href="https://theconversation.com/uk/topics/the-problem-with-big-charity">The Problem with Big Charity</a>, Cathy Pharoah looks at the big UK players.</em></p>
<p>Charities are an increasingly established part of the institutional landscape. They have strong brands and millions of people invest their hopes of a cure for cancer in donations to Cancer Research UK or the preservation of Britain’s valued landscape through the National Trust. Most of us will be familiar with the many charities in the frontline of care for the most disadvantaged at home and abroad, such as the NSPCC, OXFAM, Leonard Cheshire Disability and Shelter. And many UK national artistic and cultural institutions are likely to be charities, too, such as the Royal Opera House and the Tate Gallery.</p>
<p>The total income of registered charities in the UK <a href="http://apps.charitycommission.gov.uk/ShowCharity/RegisterOfCharities/SectorData/SectorOverview.aspx">is now £71 billion</a>, and over the last five years has grown by 37% as more services are provided by the sector. But are we beginning to expect too much from our major charities, putting both public willingness to give and needed services at risk? </p>
<h2>The go-to solution</h2>
<p>Governments seeking to reduce the state’s role in public service delivery find charities a highly attractive alternative. Charities are independent, relatively free from bureaucracy, and can raise funds from multiple sources including voluntary donations and their own trading activities, as well as from statutory contracts. In addition, the sector has an enviable historic asset base <a href="http://apps.charitycommission.gov.uk/ShowCharity/RegisterOfCharities/SectorData/SectorOverview.aspx">worth £190 billion today</a>. This includes investments in funds and fixed assets such as property, which also generates income. That’s not to mention voluntary donated labour, with a value estimated <a href="http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech756.pdf">at £50 billion a year</a>. </p>
<p>Charities are increasingly expected to step in where statutory funding cuts bite into welfare, and are often the go-to solution for flexible, value-driven and cost-effective services whether in social care, education, culture or leisure. As prime minister David Cameron <a href="https://www.gov.uk/government/speeches/prime-ministers-speech-on-modern-public-service">said</a>: “We are injecting competition, saying to the private sector … and to charities: come in and deliver great public services.” </p>
<p>But despite the big rhetoric, the voluntary sector is estimated to contribute <a href="http://data.ncvo.org.uk/a/almanac14/what-is-the-sectors-contribution-to-the-economy/">a tiny 1% of GDP</a>. An analysis of income change in some of the UK’s largest service-providing charities, which raise funds from a mix of donations, trading and statutory sources, shows that their combined income has barely changed over the last few years, increasing at an average of less than 1% a year after adjusting for inflation (see chart below).</p>
<iframe src="https://datawrapper.dwcdn.net/StRkF/1/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="600"></iframe>
<p>The figures reveal harsh realities around charitable funding for different causes. The incidence of cancer <a href="http://www.macmillan.org.uk/Aboutus/WhatWeDo/Ouresearchandevaluation/Researchandevaluation/Keystatistics.aspx">is projected</a> almost to double by 2030, to affect around 4m people in the UK. Cancer research and care are hugely important to the public, but while remaining our largest charity, Cancer Research UK’s growth has been modest. Public concern may be shifting more to cancer care, as shown in the growing support for Macmillan, whose income has increased significantly on the back of successful public fundraising. Although a great performance, the real challenge facing the need for cancer care and treatment over the next decades is enormous. Costs of cancer care and treatments <a href="http://www.nhs.uk/news/2011/12December/Pages/cancer-treatment-cost-may-increase.aspx">are projected</a> to rise from £9.4 billion to over £15.3 billion, and it is difficult to see how charities can meet any gaps in NHS provision at this level of need.</p>
<p>The figures for charitable provision of children’s care raise concerns, too. While Barnardo’s has shown a modest growth over the period, both Action for Children and NSPCC have taken a large hit to their income. Children and young people’s care is another area of growing need in our society, with numbers in foster or residential care increasing since 2008 (until then, they had been falling) – there are now 70,000 18-year-olds needing care, <a href="https://www.nao.org.uk/report/children-in-care/">the highest number since 1985</a>. At a total cost of £2.5 billion, such services are vulnerable to statutory spending cuts. Again, it is difficult to see how charities could meet any further gaps, given that care of children and young people is a cause finding it difficult to increase public support. It may be that the public fundamentally believes that children at risk in our society are a government responsibility. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/110794/original/image-20160209-12582-1656swc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Falling support.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/bagsgroove/5722251013/in/photolist-9HE2Se-4TNvUt-d4dTG-d4dW5-6g4dK6-jV7Myr-7Z7ADn-j5cQT-7Z7GSM-LtTDc-5HAt5U-qT7QPY-fkmEy2-5MznSS-JBqPh-nxe41c-bNjHDe-bibNPz-8FBZxY-6g8u5o-a98Mz3-MoAeC-jswRe-6g4kqP-8Gqpxb-nXgrzF-a2jedE-6g8pNY-8ohFgH-7bmjM-eiUTYF-5e7TcR-H6PEF-avGQXc-asrU4x-8GngDv-3JrfpW-dtaKAV-5AYLxS-8o2Ge9-98eNYH-96UFV8-7zcwMs-7ZaUjh-8o2G7J-6g4g46-bRN3f6-7535o8-DLh1L-52qocC">bagsgroove</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Support for animal welfare and conservation, which are totally dependent on the donating public, appears to have fallen, too. It is possible that in a time of global crisis and austerity the public is giving higher priority to international causes which attract <a href="http://www.cgap.org.uk/uploads/reports/GIVING_BACK_TO_COMMS_OF_RES.pdf">around £1 billion</a> in private giving per year, equivalent to just under 9% of the Department for International Development’s <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/482322/SID2015c.pdf">£11 billion aid budget</a>. </p>
<p>Well over one quarter of the income shown above (28%) derives from the government itself, meaning that these charities are vulnerable to the very spending reductions which the government hopes they will help redress. Charities such as Mencap receive around nine tenths of their income from the public sector, and disability is not a popular cause with the donating public. </p>
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<img alt="" src="https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/110797/original/image-20160209-12571-1d2400y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Not as popular a cause as you might think.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-368395073/stock-photo-disable-parking-road-sign-marking-on-tarmac.html?src=pd-same_artist-368395115-WNensOCDSaHVWg6ZELzAlQ-3">Disabled by Shutterstock</a></span>
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<p>How far can charities’ financial viability be based on a public willingness to support growing service needs when evidence strongly suggests giving <a href="http://www.cgap.org.uk/uploads/Briefing%20Notes/CGAP%20BN11%20Decade%20of%20donations.pdf">has flatlined for the last few decades</a>? Charities are being expected to do more with less, and to make savings in providing services to the poorest and neediest in society which the government itself finds too expensive. All the evidence suggests that we are not funding charities sufficiently to do the job.</p><img src="https://counter.theconversation.com/content/54368/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cathy Pharoah is Director of Third Sector Prospect, a research consultancy. </span></em></p>Some charities get millions and have a large number of assets, but they’re also doing more too.Cathy Pharoah, Co-Director, Centre for Charitable Giving and Philanthropy, Cass Business School, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/498252016-02-29T11:00:18Z2016-02-29T11:00:18ZWhy has trust in charities been declining?<figure><img src="https://images.theconversation.com/files/113196/original/image-20160229-4074-7lthfo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">What gives?</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-226677172/stock-photo-scrunched-blank-cheque-on-a-grey-background.html?src=pp-same_artist-226677226-JuRQpngfIOKjVY2gh-Zmvg-3">Cheque by Shutterstock</a></span></figcaption></figure><p><em>Charitable giving is big business, with many organisations handling millions in revenue. But big charities have come under fire for issues from bad accounting to actually doing more harm than good. In the first of our short series on <a href="https://theconversation.com/uk/topics/the-problem-with-big-charity">The Problem with Big Charity</a>, Jonathan Garton looks at the importance of trust.</em></p>
<p>Many of us regularly donate to charity in order to do good. From rare diseases to abused animals and cancer research, each year we donate <a href="https://www.cafonline.org/about-us/media-office/donations-to-charities-fall">around £10 billion</a> to a diverse range of causes such as homelessness, cancer research and animal abuse. In the US, donations <a href="http://www.charitynavigator.org/index.cfm/bay/content.view/cpid/42#.Vi9lmZ28PRY">are as high as US$358 billion</a>. </p>
<p>But trust in big charity is falling, rocked by stories from aggressive fundraising practices – blamed for the death of a 92-year-old woman – and <a href="http://www.bbc.co.uk/news/uk-33788415">allegations of mismanagement</a>, to reports <a href="http://www.dailymail.co.uk/news/article-2521057/BBC-Panorama-expose-reveals-Comic-Relief-sitting-100m-say-money-spent.html">of huge cash surpluses</a> and <a href="http://www.dailymail.co.uk/news/article-2835947/The-Great-British-rake-really-happens-billions-donate-charity-Fat-cat-pay-appalling-waste-hidden-agendas.html">sizeable funds spent on administration</a>. Indeed, research published by the Charities Aid Foundation in September 2015 suggested that public trust in charities <a href="https://www.cafonline.org/docs/default-source/about-us-publications/cafpartyconference-report2015.pdf">had fallen significantly</a> in the past year. </p>
<p>When asked in 2014 whether most charities are trustworthy and act in the public interest <a href="https://www.ipsos-mori.com/researchpublications/publications/1679/Public-Trust-and-Confidence-in-Charities-2014.aspx">71% of over 1,100 people agreed</a>, a figure broadly in line with <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284715/ptc_ipsos_mori_2012.pdf">previous years</a>. In 2015, this had fallen to just 57%. </p>
<p>A decline in trust is perhaps unsurprising in light of such negative, high-profile stories. It is important to remember that the majority of the public still consider most charities to be trustworthy, but that doesn’t mean we should be complacent – and we ought to be concerned by any decline in the reputation of the charitable sector. </p>
<p>Any organisation that relies on donations generates an information gap between those who fund its activities and those who benefit from them, which makes it difficult for us to judge the extent to which our donations are put to effective use or make an independent assessment of their quality. This information gap can be exacerbated by geographical considerations, as with a charity that provides disaster relief on the other side of the world, and also by time, as when a charity accumulates reserves to spend at some future time. Certain charitable services, such as the provision of education or social welfare, can also be difficult to evaluate meaningfully on anything other than a long-term basis, regardless of whether they are funded by donations or by charging fees. </p>
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<img alt="" src="https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/102210/original/image-20151117-4973-1994m0a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A love of charities.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-229965889/stock-photo-glass-money-jar-with-a-label-with-the-word-donations-on-it-and-two-handcrafted-wooden-heart-shapes.html?src=pd-same_artist-228578737-0lnE0oBozG8oAn2jz_bjew-1">www.shutterstock.com</a></span>
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<p>This is why the law subjects charity trustees to a range of duties designed to prevent abuses of power, such as the duty to account for the stewardship of the charity’s assets, the duty to participate actively in the charity’s management, and the duty to plough any profit back into the charity’s services and not distribute it to private hands. There is also an overarching duty to act only in the best interests of the charity in the course of their trusteeship.</p>
<p>Carrying out these legal duties can in itself lead to negative publicity, such as when the Church of England <a href="http://www.theguardian.com/artanddesign/2008/dec/08/church-of-england">chases people for payments for chancel repairs</a> to local churches, which it has argued in the past must be done by trustees “to exercise their powers in its best interests”, or when charities such as <a href="http://www.theguardian.com/uk-news/2015/jul/28/daughter-wins-164000-decade-long-legal-battle-mother-will-charities">the RSPCA are forced to defend their interests</a> when families challenge wills that have left them out an inheritance in favour of a charitable cause or <a href="http://www.dailymail.co.uk/news/article-1252213/Judge-slams-RSPCAs-court-attempt-double-300-000-left-generous-animal-lover.html">other legal challenges over estates</a>.</p>
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<img alt="" src="https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=352&fit=crop&dpr=1 600w, https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=352&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=352&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=442&fit=crop&dpr=1 754w, https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=442&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/113198/original/image-20160229-4074-aiwguk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=442&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">shutterstock.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-332186816/stock-photo-london-uk-october-known-as-the-law-courts-the-royal-courts-of-justice-houses-the-high.html?src=HDe0BNJ93WZjm3Hn67UagQ-1-42">Court by Shutterstock</a></span>
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<p>However, this does not mean that trustees always behave and safeguards are only effective if trustees are held to account when they breach them. But the information gap can mean that donors with an incentive to seek redress against breaches of duty are unaware when they occur. The regulatory agency, the Charity Commission, can investigate suspected breaches and take corrective action, although it has been criticised in some quarters for being <a href="https://www.nao.org.uk/wp-content/uploads/2013/11/10299-001-Cup-Trust-Book1.pdf">slow to act when concerns are raised</a>, as in the recent case of <a href="http://www.thirdsector.co.uk/andrew-hind-criticises-charity-commissions-inadequate-leadership-cup-trust-affair/governance/article/1329825">the Cup Trust</a>. </p>
<p>In the case of fundraising, there is also legislation regulating the conditions under which professional fundraisers are permitted to solicit donations on behalf of charities, and if the current <a href="http://services.parliament.uk/bills/2015-16/charitiesprotectionandsocialinvestment.html">charities bill</a> becomes law this will be expanded so that the public, and vulnerable people in particular, are shielded from aggressive tactics and unreasonable intrusions into their privacy. </p>
<p>Rules and regulations, though, are a double-edged sword. Some oversight is desirable but charities must remain independent from government interference if they are to offer the public a meaningful alternative to services provided by the public sector. They must also <a href="http://www.theguardian.com/voluntary-sector-network/2014/mar/11/will-the-public-trust-the-charity-sector-in-10-years">remain free to innovate</a>, even if this carries with it a possible reputational risk. It was the charitable sector that gave us the first schools, the first public libraries and the first hospitals: we cannot know what other firsts we will miss if charitable activity is overly stifled by the regulatory framework in which it operates. But this should not distract us from the importance of regaining the public’s trust in charities: a sustained decline would be at the expense of the sector’s effectiveness and would leave society poorer for it.</p><img src="https://counter.theconversation.com/content/49825/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Garton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Potential donors must able to put their trust in charities.Jonathan Garton, Professor of Law, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/541402016-02-04T11:31:59Z2016-02-04T11:31:59ZAccounting for Kids Company – why charities’ books must add up<p>The collapse of the charity Kids Company has attracted a huge amount of attention – not least as a result of the drama involved. Investigations into what went wrong have brought forth <a href="http://www.bbc.co.uk/news/magazine-34676281">stories</a> of teenagers queuing up to pick up envelopes of money from the charity that they promptly spent on drugs. </p>
<p>Reports also emerged that the charity claimed its closure would lead to <a href="http://www.theguardian.com/uk-news/2015/aug/25/kids-company-warned-officials-closure-could-lead-to-riots-and-social-unrest">riots and attacks on government buildings</a>. And transcripts can be read of a long and rowdy <a href="http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/kids-company/oral/23222.html">session</a> of the public administration and constitutional affairs committee of MPs, which investigated the closure of the charity and took evidence from Camila Batmanghelidjh, Kids Company’s founder:</p>
<blockquote>
<p>Camila Batmanghelidjh: I would like to ask you on what basis you have decided that this is a failing charity. Because if it is on the basis –</p>
<p>Chair: Because it has gone bust.</p>
</blockquote>
<p>The less dramatic story, and the more worrying one, is about financial control in Kids Company and the value placed on financial literacy across the charity sector.</p>
<p>Kids Company produced annual accounts which it duly deposited with the Charity Commission, the charity regulator. It went through the proper audit process every quarter, every year – something Alan Yentob, chair of the charity’s trustees, frequently mentioned <a href="http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/kids-company/oral/23222.html">in his evidence to the MP inquiry</a>. However, the fact that every year referred to Kids Company’s shortage of reserves, and potential cash flow problems, seems to have been outweighed by the copious data making claims for its successes. </p>
<p>In 2013, for instance, its <a href="https://www.accountancylive.com/sites/default/files/Kids%20company%20Annual_Report_2013.compressed.pdf">annual report</a> (pdf) featured data on the problems of “750 exceptionally vulnerable young people” who had been successfully helped by the charity, and another 200 under-14s, one in four of whom had no tables and/or chairs in their houses. Kids Company was also very vocal in claiming that it supported “some 36,000 children, young people and vulnerable adults”. But this has <a href="http://blogs.channel4.com/factcheck/kids-company-qa/21849">been disputed</a>, as only 1,900 cases have been passed onto London local authorities since its collapse.</p>
<p>Even if all of Kids Company’s impressive data were true, the reader of the accounts has nothing to measure them against. How were these sample groups selected? What was the evidence for these problems? Is this better or worse than other charities, or than what might be expected of Kids Company? Reports of Kids Company’s good deeds were heeded over its financial viability, as indicated by <a href="https://www.gov.uk/government/publications/kids-company-funding-ministerial-direction">exchanges between the government and senior civil servants</a>.</p>
<h2>Judging results</h2>
<p>What has attracted less attention than the apparent overstatement of clients was the reluctance of Kids Company to let its results be monitored. The National Audit Office (NAO), tasked with certifying the accounts of all government departments, <a href="https://www.nao.org.uk/report/investigation-the-governments-funding-of-kids-company/">commented</a> that the government had “relied heavily on Kids Company’s self-assessments to monitor its performance”. Until 2013, the key performance indicators that the NAO requested did not appear in Kids Company’s quarterly monitoring reports. </p>
<p>This improved in 2013-15 when the government specified some “delivery expectations”. As the NAO <a href="https://www.nao.org.uk/report/investigation-the-governments-funding-of-kids-company/">reported</a>, Kids Company outperformed to a startling degree: “Against a target of 1,347 interventions in 2013-14, they delivered 30,217 interventions.” But how successful were the interventions in improving outcomes? There was no pre-arranged standard for measuring success so the government could not monitor it.</p>
<p>When the MPs inquiry asked Kids Company’s auditor about the charity’s reserves – how much he thought would be a safe level – he <a href="http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-administration-and-constitutional-affairs-committee/kids-company/oral/24766.html">suggested</a> six months of expenditure or roughly £12m would be an appropriate level. In its last available balance sheet for 2013, the last available, Kids Company shows its unrestricted reserves were just £434,282 <a href="http://www.bbc.co.uk/news/uk-33861713">in 2013</a>, with a further £1.3m in restricted reserves and designated funds – about enough money to keep it going for a fortnight. </p>
<p>The trustees stated in the 2013 report that they were aware reserves needed to increase, but that their “business model is to spend money according to need, which is consistently growing. We aspire to build up our reserves when circumstances allow”. It seems that they deferred the aspiration for too long.</p>
<h2>Causes vs accounts</h2>
<p>Some have accused a focus on accounting as a distraction from worthy causes. Some decisions, <a href="http://www.sciencedirect.com.eresources.shef.ac.uk/science/article/pii/S1045235411001699">it is argued</a>, should not be made on the basis of purely financial costs and benefits. How can individual welfare or happiness – and the contribution of charity – be valued in monetary terms? Financial accounting is just a reductive simplification of the work charities do, treating people’s welfare as an expense to be contained. On this basis, we should not criticise Kids Company for its financial collapse – the work it did was invaluable.</p>
<p>But the alternative to measuring and monitoring charity performance is not the free flow of support to the deserving. It is the loss of resources that could potentially have been better managed and better used elsewhere. Kids Company received a total of <a href="https://www.nao.org.uk/report/investigation-the-governments-funding-of-kids-company/">£46m of public funding</a> – £42m in central government grants, £2m from local authorities and £2m from lottery organisations – between 2000 and August 2015, when it filed for insolvency. </p>
<p>If Kids Company had been accountable, run by trustees who understood the financial risks they were taking, and monitored by funders against measurable outcomes, it might not have gone bust.</p><img src="https://counter.theconversation.com/content/54140/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Josephine Maltby does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Reports of Kids Company’s good deeds were heeded over its financial viability – with disastrous results for the charity in the long run.Josephine Maltby, Professor of Accounting and Financial Management, University of SheffieldLicensed as Creative Commons – attribution, no derivatives.