Suspend your Scroogery – charities aren’t flush with cash, they pay for government failure

Charities are essential in todays Society and many are in dire need of sustained funding. When central and local government services are cut back it is the Charities that are there to fill the gap and maintain these services. When services are under threat the people using them are still there requiring the service.


Original post from NCVO

‘……….by Karl Wilding

Today, the Public Administration and Constitutional Affairs Select Committee (PACAC) is holding an evidence session for their inquiry into Kids Company and its relationship with government. Chair Alan Yentob and chief executive Camila Batmanghelidjh will have to defend their decisions about the governance and oversight of Kids Company and answer questions on the charity’s financial dealings with government. I have no doubt that whatever details emerge will be seized upon by the media, and wider conclusions about the charity sector may be drawn.

For all its flaws, many of which have been covered extensively, the closure of Kids Company was a sad event. However, after a summer of criticism of the voluntary sector, I think it’s worth explaining why Kids Company was atypical of the vast majority of charities.

In good company?

The PACAC inquiry will focus much of its energy on assessing whether the government’s funding of Kids Company was fair and appropriate. For a start, the sheer amount of funding that Kids Company received from successive governments – approximately £30m since 2008 – is practically unheard of among most charities.

The golden age of grant funding peaked 10 years ago, when grants from government were worth £6 billion; they are now at one-third of that level, having been largely replaced by contracts and fees. The majority of charities receive no statutory funding whatsoever.

The fact that Kids Company was in receipt of government grants even after concerns had been raised about its management is more a reflection of its founder’s relationship with Whitehall than a representation of the sector more generally.

The second way in which Kids Company was unlike other charities – particularly comparable large charities – was its hand-to-mouth nature. Despite receiving millions of pounds a year, it lacked reserves (three months’ worth of operating expenditure is generally recommended).

While it can be difficult for a charity to build up reserves – see my colleague Dave Kane’s blog post explaining why –and as tempting as it is to address needs in the here and now, boards have a duty to their staff and beneficiaries to ensure their organisation is sustainable. Despite tough times, many are taking the difficult decisions needed to adapt to the new funding environment.

Learning lessons

For all the ways in which Kids Company was a maverick among charities, it would be unwise to assume that means we can’t learn lessons from it. Good governance is key to running a charity successfully, and having a long term strategy means you can plan for the future – especially if, like Kids Company, you have an unpredictable income.

The perils of ‘founder syndrome’ are well-known, but many boards need the confidence to challenge where they see misdirection or mismanagement. Identifying skills shortages on boards is crucial, but so is making sure that your organisation has a culture where transparency and accountability reign.

For Kids Company, the aftermath of its closure was complicated by the fact that different reports circulated about how many young people they actually helped – the charity claimed to help 36,000 young people, but reportedly handed over records for only 1,692 clients in London and 175 in Bristol.

Being able to evidence your impact is crucial, not only in the spirit of accountability to funders, but also to assess whether or not you are actually making a difference.

Turning the corner

The story of Kids Company is unlikely to go away anytime soon. I think it’s a good thing that a spotlight has been shone on governance, and my hope is that boards will be more confident in examining their finances, reserves policy, and impact reports as a result of what happened.

But equally important, is to keep making the point that the vast majority of charities are not Kids Company – they are small, local and reliant on donations, not government grants. More importantly, in this context, they are also by and large financially salient, well governed and administratively sound.

As important as it is to acknowledge failings, we should also champion examples of good governance and high impact where we see them. NCVO has tools to help boards recognise what good governance looks like and address problems where they arise, and will soon be celebrating the winners of the Winifred Tumim prize for good governance.

There are more than 160,000 charities in the UK. Let’s be cheered by the good work and huge difference that the vast majority make every day.      ………..’

Councils have money in reserves

Local council spending

Although Local Councils believe they are run like business, in that each department has a budget, this is as far as it goes.  For as long as I can remember, councils have been unable to plan for the long term.  Just look at what some do, patch roads instead of resurfacing. This is a short term measure, as a patch will not last as long as a complete resurface, but is of course cheaper on costs in the short term. In Social Housing many councils will only do emergency repairs as and when required, when a full repair of required areas would be more cost effective over the longer term, but each individual emergency repair is cheaper. But how many emergency repairs are required over the long term and then totally are most expensive than the full repair.

Also in Sheffield there are a number of council run attractions, such as health centres, libraries, etc. Most people attending these attractions spend a good part of the day there, but do the council have any outlets for refreshments, in that they have to some extent a captive cliental. Just look at privately run outlets from DIY centres, garden nurseries and garden centres to large departmental stores and shopping centres, all have at least one refreshment outlet.

But to add to council expenses previous governments have increased staffing costs.

Local councillors were not paid expenses until 1970, by Edward Heath. But they did not gain access to Local Government Pensions until 2003, a luxury made possible by Tony Blair.  This is a perk which the current government are looking to stop.

Re paying expenses, surely this was good, as it enabled all eligible UK citizens to stand, not only the rich. To then offer pensions as well was totally overboard, but that is in keeping with Labour policies.

As to keeping reserves, where possible this should be encouraged, as it provides a safety net for lean times.  Are these lean times and should therefore some of the reserves be brought into the current spending calculation. If so, then only the part of the reserves not already earmarked for other projects could be used.

But remember when reserves have been exhausted, there are no more, should times become even leaner.