Can we trust our charities?

Charities take our cash – as both donors and taxpayers. But who scrutinises what they spend it on? Simon Wilson reports on the scandal surrounding children’s charity Kids Company

What is Kids Company accused of?

Nothing sinister or corrupt but a lack of proper financial oversight, some exaggeration of the numbers of young people it helps, and some unorthodox means of distributing funds. Last week, concerns over the management of the high-profile charity, which had been rumbling behind the scenes in Whitehall for several years, came out into the open: it emerged that ministers had decided to withdraw government funding unless the charity's high-profile boss, Camila Batmanghelidjh, agreed to step down. Officials had investigated the charity, which gets about £4m of state money a year, and raised concerns about its financial management and cash flow.

What are the specific worries?

First, that it has been standard practice at Kids Company to give children cash handouts in return for attending sessions. According to Miles Goslett, who questioned some of the charity's claims in a detailed piece for The Spectator in February, the weekly handouts in some cases amount to hundreds of pounds and went to young people who were not in fact "vulnerable". Second, that Batmanghelidjh, for all her charisma and skill at fundraising, may not be competent to run an organisation with £25m in revenues and hundreds of staff. Third, that a claim to help 36,000 young people just doesn't stack up; and that the bulk of its resources go on paying staff rather than feeding and supporting children. Whatever the truth, the claims come at a tricky moment for charitable giving in the UK, and add to a sense of a sector that that could benefit from more scrutiny.

Why a tricky moment?

In May, 92-year-old Olive Cooke from Bristol killed herself in a desperately sad case that has provided a stark focus for concerns about charities' fund-raising methods. According to her friends, Cooke, the country's oldest poppy seller, had felt overwhelmed by constant requests from exploitative charities. This was not mentioned as a factor at the inquest into her death, but the case unleashed a wave of unfavourable media coverage of charities, and their increasingly aggressive, high-pressure fundraising tactics. The problem, says Julian Baggini in The Guardian, is "that the public image of charities has become dominated by their means, not their ends... direct mailings, cold calls and preternaturally chirpy young fundraisers accosting" passers-by.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

How many UK charities are there?

According to campaigner David Craig, there are more than 195,289 registered charities in the UK, raising and spending close to £80bn a year. Together, they employ more than a million staff and make 13 billion requests for money each year, the equivalent of 200 for each of us in the UK. The problem, according to critics, is that the huge amount of duplication (354 different bird charities, 581 fighting cancer, says Craig) means that far too much of what we donate goes on staff and administration, not on good causes. As a positive counter-example, Craig cites the Prostate Cancer Research Foundation, Prostate Action and Prostate Cancer UK; these three similar charities decided to merge, with the result that their spending on charitable work and scientific grants doubled from £8.2m to £16.5m.

Surely all that's their business?

If charities derived their income from the taxed income of private individuals, then how they choose to operate, and whether or not to consolidate, would be their own concern. But in fact a Centre for Policy Studies report found last year that nearly a quarter of the income of the 50 biggest charities comes from the taxpayer. And this is increasing as more government services are taken on by the charity sector. Already, as David Craig notes in a recent book, 27,000 British charities rely on the government for 75% or more of their money. Also, charities benefit from all manner of tax relief (including Gift Aid), so their activities are a legitimate area of public interest especially, say critics, as many charities are treading a fine line between charitable work and political lobbying.

What's wrong with lobbying?

Nothing. Action on Smoking and Health (ASH), for example, is a highly effective anti-smoking charity. In 2013 it drew the vast bulk of its funding from the government and other charities, rather than from individual donations. That's fine; there's nothing wrong (and lots right) about campaigning on health issues. The same goes for poverty, global development, protecting birds, and so on. But the issue is whether an organisation that focuses mainly on campaigning deserves to be allowed to promote its agenda as a "charity" while using its charitable status to avoid paying tax on its income.

How to complain about a charity

You can complain about a charity to the Fundraising Standards Board, the sector's body for self-regulation, which received about 48,000 complaints in 2013 (the latest figures available). If you think your personal details are being passed between charities without your consent, you should approach the Information Commissioner's Office. In addition, you can register your landline phone number with the Telephone Preference Service to stop it being used by marketing firms. Mobile-phone numbers can also be registered, but the TPS can only attempt to stop phone calls, not text messages.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.