Why fakecharities.org is wrong about charities
May 16th, 2009 | Tags: | 13 CommentsTwo-sentence version: Fakecharities.org thinks government funding makes charities mouthpieces of the state. It is wrong.
Long version…
Bad Science author Ben Goldacre brought the website fakecharities.org to the attention of a fairly wide readership the other day when he wrote this Twitter post:
FakeCharities.org: fun idea, nicely run site http://rly.cc/8qVXn
The link is to a blog post on the website of the free-market think-tank the Adam Smith Institute, who describe fakecharities.org as ‘excellent’.
Without disrespect to Ben, the purpose of this post is to argue that fakecharities.org is not a fun idea, or a good one. Instead it demonstrates a serious misunderstanding of the charitable sector and (I think) a wilful attempt to change public perceptions of what charities are.
A bit of information first. Fakecharities.org says it is edited by The Devil’s Kitchen, a libertarian-leaning UK political blog. The fakecharities.org domain is registered to Chris Mounsey, a freelance graphic designer who is also head of communications for the recently reformed UK Libertarian Party.
There site is very open about its intentions. It describes itself as:
A directory of those so-called charities that receive substantial funding from either the UK or EU governments.
These charities are usually brought to our attention through interviews in the mainstream media (MSM) in which they support the position of the government that funds them.
Further, there is nothing charitable about tax being taken, by force, from you and me: charity is about voluntary giving. These organisations thrive on theft.
At fakecharities.org, we believe that these effective QUANGOs and state-lobbying agencies are not only undemocratic but, being funded through taxes rather than donations, are effectively stealing donations from real charities—those that do valuable community work.
Let’s break down some of the assumptions that the site makes about charities.
- There are ‘fake charities’ and ‘real charities’.
- ‘Fake charities’ are those who operate mostly on statutory income (money from public sources).
- ‘Real charities’ are those who operate mostly on non-statutory income.
- Charities who operate mostly on statutory income are government mouthpieces principally engaged in lobbying to make government policy look legitimate.
- Charities who fall outside this group do ‘valuable community work’.
- By extension, these ‘fake charities’ do not do ‘valuable community work’.
Here’s why it’s wrong.
Government is not throwing money at charities. Fakecharities.org drastically underestimates the extent and complexity of statutory funding. Income from government bodies does not come in the form of massive bungs to charities’ central funds. One of the biggest problems charities face is that government money always comes with strings attached, and not in the way fakecharities.org thinks. More often than not it is ‘restricted’ income – money that can only be used for certain a very defined purpose.
Charities have a role in public services. Most of the time, this purpose is the delivery of public services. It is seldom, if ever, lobbying and campaigning. Historically, this money has tended to come in the form of grants. It is increasingly coming in the form of service-delivery contracts, which place even stronger conditions on how it can be used. Charities have to bid for contracts, often against private companies as well as other charities. This system (known as ‘commissioning’) is complex, expensive for charities and usually operated at the local authority level rather than by central government. The rather glamorous idea of a QUANGOesque demi-monde in which charities exist to talk up government policy is fantastical. More often than not, charities spend their time fighting for contracts from local councils.
Yes, there is a lot of money in this. We shouldn’t underestimate the scale of this: according to the Charity Commission, 60% of medium-sized and large charities deliver public services, and so receive some sort of statutory income. One third of these, it’s true, receive 80% or more of their income for service-delivery work.
But no, it doesn’t come easy. However, this does not mean that all those charities are in some sort of financial wonderland. Charities that are heavily reliant on government money, far from being shills for government policy, are hugely vulnerable to it. If policy changes, their money goes. Over two-thirds of public-service contracts are for a single year or less, which makes financial planning a nightmare. Only 12% of charities manage to cover the full cost of their service-delivery work from the government, because these grants often don’t cover basics like heating, lighting and office admin.
Charities are feeling the pressure. Barely more than a quarter of charities who deliver public services feel that they are free from pressure to conform to their funders’ wishes. Charities who operate largely on government money find it very difficult to develop new areas of work because they simply cannot afford it. They are caught in a vicious circle: since they often cannot afford sophisticated fundraising operations, they cannot get the unrestricted income they need to avoid this pressure. They have a tendency to chase government contracts, a process which is itself costly and time-consuming. This is not a world in which charity chief executives are throwing wads of cash in the air while singing the praises of government initiatives.
Most charities do not lobby. The lobbying role of charities is not larger than it should be: it is not large enough. Uncertainties about how campaigning fits with charitable status, together with prohibitive costs of entry, discourage many charities from trying to influence policy. Yes, there are plenty of high-profile examples, but many simply do not know where to begin. They are left mopping up the outcomes of social problems which they believe could be more effectively tackled by early intervention from government. (This is not a view I expect libertarians to share, though of course many libertarians believe very sensibly in a market-orientated approach to early intervention which may be even more efficient. It’s just that, bluntly, that market does not yet exist and will take time to be created. At the moment, the best hopes for early intervention lie with the state.) For the full picture on charities’ campaigning activities and their many limitations, see New Philanthropy Capital‘s excellent report Critical Masses, written by some of my former colleagues.
Fakecharities.org’s view of the sector is inaccurate. It is also, I think, corrosive. Of course waste in public services is not good, but the website’s bold but wrong assertions, and its series of institutional character assassinations (see the A to Z listing), do nothing to improve the quality of public-service delivery or the lot of charities, and provide a very distorted image of the work charities do, completely ignoring the difficulties they face, and inviting the kind of unthinking condemnation of them that makes it harder for them to build independent funding for that work.
I am a former non-profit analyst turned strategy consultant. I know a good deal about the charitable sector and how it works, especially financially, and I’d invite questions in the comments section of this post if anything is unclear.
Very rationally and finely argued case, Alex. You didn’t resort to snide name-calling like I did in mine! ;)
A fan of Ben Goldacre’s, I am really disappointed that that he a) drew attention to this misleading and ignorant website and b) he seems to find it fun. Like you, I have worked in – and with – the third sector / charities for years, and you are spot on with your argument. Taking a topline look at a few annual reports is very different to looking long and hard at the issue of restricted funding and specifics around service provision. Nice one.
Thanks, Rob. In fairness to Ben Goldacre, he wasn’t uncritical of it in the end (see some of his later tweets), and it’s easy to get led astray by fakecharities’ kind of thinking if you don’t know the sector.
My wife works (voluntarily) for a charity that receives money to provide specific services. That is fine, it is far more efficient than the government providing the service directly. But such funding and such charities are not the target of fakecharities.org. They are after those charities who take taxpayers money and then use it to advocate for policy changes that many of taxpayers would not agree with.
You do not address this issue. You state that charities do not do enough lobbying, but for some of us, not all lobbying is good lobbying. Far from it, we believe that some lobbying is very harmful. It seems only fair to me that, if a charity wishes to advocate, it should only do so with the money of those who support its advocacy aims. I find the notion that the government should take my money and hand it to an organisation to advocate for something to which I am opposed as truly bizarre.
Flicking through fakecharities.org I find “charities” that I’d be more inclined to give money to campaign against, e.g. Campaign for Better Transport Charitable Trust, Internet Watch Foundation, Alcohol Concern and Sustain: The Alliance for Better Food & Farming.
We used to be members of the RSPB but cancelled our membership when it started advocating on global warming. Why should the government then give our money to this organisation which we’ve intentionally withheld it from?
Two-sentence version: Fakecharities.org thinks government funding makes charities mouthpieces of the state. It is wrong.
If you’re implying your ‘two-sentence version’ is wrong, you’d be right ;)
‘Charities’ that take taxpayers’ money AND lobby government are joining two incompatible activities. Would you not agree that there is a conflict of interest where organisations ‘lobby’ the organisation that provides them with not-insubstantial amounts of money?
This is not a view I expect libertarians to share
You do understand that most libertarians believe in a smaller state – not a non-existent one – don’t you?
Most charities do not lobby.
Ohhh, hi Mr Straw Man! Who has stated that most charities do lobby?
I suspect what BG meant by fun was that it is written in an engaging, entertaining tone. That could be powerful and persuasive for people not familiar with charities and how they work.
Thanks very much for your comments, DocBud. To clarify slightly: if you look at a set of charity accounts you’ll see that income is divided into ‘restricted’ and ‘unrestricted’. The vast majority (I’ll admit, not all) of statutory income is restricted – charities can only use it for defined purposes. This very seldom includes lobbying. (Before I make any stronger claims about that, I’ll need to do some more research!) Lobbying is a campaigning activity, and campaigning nearly always comes from a charity’s unrestricted funds – made up of grants from private donations, giving from donors, fundraising income, etc.
There are some government funds which give unrestricted grants to charities, though of course it’s up to the individual grant-making committees for those funds to decide which organisations they fund and to do ‘due diligence’ (looking at the charity’s activities, management, finances, results, etc.) to see if it fits with their funding criteria. So it may be that there are some funds giving unrestricted money to charities which use that money to do lobbying, and so there may be a legitimate taxpayer grievance there. However, fakecharities.org has taken a really broad approach and spoken aganist charities that it knows receive government money and that it thinks have a large campaigning profile, without (it seems) looking too closely at their funding arrangements. What it could be doing, more productively, is some serious hard work to find out if there are any statutory funds which give unrestricted tax-derived funds to charities which campaign, and engaging with them in an intelligent debate. I hope they will do this.
Thanks for your comments, Not Quite Hayek.
Charities’ that take taxpayers’ money AND lobby government are joining two incompatible activities. Would you not agree that there is a conflict of interest where organisations ‘lobby’ the organisation that provides them with not-insubstantial amounts of money?
Campaigning activities are on the whole funded by unrestricted non-statutory income (see my reply to DocBud, above), but if the point is about overall conflict of interest, that’s valid and interesting. Should a charity that gets government money to provide reading lessons in schools lobby government to allocate more funding to school literacy programmes, for example?
I think this is mitigated quite effectively by the Charities Act 2006 and the ongoing work of the Charity Commission. Registered charities must have a defined statement of charitable purpose which the Charities Commission must approve, and any ‘political activity’ (i.e. lobbying) must be in furtherance of that purpose. A charity’s purpose cannot be to oppose government policy or to achieve any objective which requires a change in law. It can only lobby for changes in law or policy if those changes would further (but not on their own fulfill) that aproved purpose. The CC are very tight about this sort of thing and will de-register charities that breach their purpose. They have a helpful guide to campaigning at http://www.charity-commission.gov.uk/publications/cc9.asp.
Of course, this doesn’t rule out our hypothetical school-literacy example. However, with these restrictions in force it severely weakens any charity’s ability to use the system to cash in. Charity lobbying has an almost prohibitive cost-benefit ratio much of the time, part of the reason it’s not used substantially by many charities as a means of furthering their charitable purposes. This is a normative rather than an absolute defence, but it’s simply not a powerful enough income-generating tool for a formal check to be imposed. Charities have a hard time attributing furtherance of charitable purpose to lobbying, let alone claiming any benefits to statutory income. Government pretty much holds all the cards in this game.
You do understand that most libertarians believe in a smaller state – not a non-existent one – don’t you?
Of course; and I know that libertarians differ in their levels of support to state-funded early intervention programmes (which was my point).
Ohhh, hi Mr Straw Man! Who has stated that most charities do lobby?
Not intended as a straw man, just a way of putting fakecharities.org into perspective for those not familiar with the scale of lobbying in the sector.
Should a charity that gets government money to provide reading lessons in schools lobby government to allocate more funding to school literacy programmes, for example?
No, it most likely shouldn’t.
I am minded of Dom Helda Camara, the Latin American Bishop: “When I give food to the poor, they call me a saint. When I ask why the poor have no food, they call me a communist.”
Giving books is ok, but asking why pupils cannot read……
Alex,
To get onto the fakecharities site, the charity must receive a certain proportion of its income from government and lobby that same government.
I take your point about unrestricted and restricted funds, and we should make clearer the difference between the two.
However, from the accounts that I have looked at — and even when a charity is submitted, my colleagues and I go and verify the accounts of every submission — the vast majority of funds are unrestricted.
This maybe because of the types of charity that we are looking at, but it is, nevertheless, the case.
I know that people are wondering who funds fakecharities.org. The simple answer is “no one” or, possibly, “me”. In real life, I am a web designer, and the site took less than four hours to design and put onto my server.
So, apart from the odd tenner that people have donated, there is no funding: my colleagues and I do it for free.
Finally, yes, of course it is written from a libertarian viewpoint; it was set up because I became increasingly annoyed to find that whenever a charity was cited in a news story — demanding yet more restrictions on freedom — that they were funded by taxpayers’ money.
None of us are anti-charity per se: in fact, as libertarians, we actively encourage (and indulge in) voluntary giving. But tax money is not given voluntarily: it is money stolen, through threat of force, from the workers of this country.
DK
The reason many libertarians oppose government funding to the third sector is because it is backed by tax. Therefore we have no say over how our money is directed.
This is made worse when we find out that government funded charities are lobbying the government to interfere further in our daily lives. Surely you can see there is a severe conflict of interest here.
For example — the other day I was approached by a British Heart Foundation representative. They asked me to support a campaign about taking fast food ads off the TV. I asked whether they received any money from the state. And the answer I was given was no. However later that day I checked and quickly found that they received over £4 million from the government.
Of course this annoyed me because an organisation that is funded by an interfering government is also lobbying the government to be more interfering.
Now, of course this could just be mere coincidence. But honestly, how likely do you think that is?
I imagine people would have few qualms about criticising a charity that promoted the ideas of a corporate backer. So why is the state any different?
Thanks for your comments, Rob W. Interestingly, this discussion seems to be going down two separate lines – one about whether statutory funding should go to non-statutory bodies (e.g. charities) at all, the other about whether charities receiving statutory income should engage in lobbying and whether there’s a conflict of interest. (For what it’s worth, I take the Charity Commission’s line – the conflict isn’t strong enough to be problematic if it’s managed carefully; and I’ve already given my views on statutory funding of charities.)
Interesting case study about the BHF. Face-to-face fundraisers (slightly unfairly known as ‘charity muggers’) are normally hired by charities from fundraiser agencies, so tend not to have an understanding of how the charities they are funding work financially – or in some cases even what they do. I wouldn’t want to badmouth face-to-face fundraisers, but in the case of your example it’s always better for them to admit what they don’t know rather than say things that aren’t true. (I’d also advise against giving to face-to-face fundraisers, and instead to do what you’ve done, which is go away and do your research as an intelligent donor.)
Re your final point, I think there’s a big difference between lobbying government and promoting its ideas. I know the education and health charity sectors best, and they tend to be highly critical of government policy. They do, of course, have vested interests, and may want to grow their organisations and their profiles as brands, but they are overwhelmingly driven by their charitable objectives in their lobbying work, from which they normaly do not see much benefit, and the Charity Commission keeps them on a pretty tight leash. Your opinion on that comes down to your judgement on whether there’s a clear conflict of interest, and I don’t think there’s enough of one to require a more sophisticated checks and balances system than currently exists.
Thanks for your post and clarifications, DK. When you say the vast majority of funds are unrestricted, do you mean the vast majority of funds from statutory sources, or of funds total? (That’s obviously the crucial distinction.)
It’s good to see your position expressed more moderately here. From the comments here and elsewhere I genuinely believe there are two interesting debates to be had around the legitimacy of statutory funding of charities as a whole, the other about potential conflicts of interest between statutory income and lobbying for charities. I happen to think the second is more interesting than the first, as I don’t fundamentally share the view that charities are most effective and desirable when entirely voluntary in nature and funding (so for me this comes back to a debate on the social role of the state, which is a much bigger question!). I don’t expect we’ll agree on this, which is fine.
On the second issue, the debate really is worth having; I’ve outlined my position here for long enough! My concern with fakecharities.org is that it’s not yet being conducted with the appropriate amount of rigour and that the language (of ‘fake charities’ and ‘theft’) is not going to be constructive. This doesn’t mean I think charities have some right not to be offended – quite the opposite: charities have no right to exist beyond the value of the impact they achieve – but some moderation is needed in order to find enough common ground to get the conversation going.