Have charities responded to the changing expectations?

In light of the heavily-publicised charity scandals of the last few years, Eddie Finch, a Partner in our Charity and Not-for-profit team, discusses how charities are taking the exposure of poor practice seriously and implementing changes.

About the author

+44 (0)20 7556 1411

In 2018, a number of significant incidents within the charity sector hit the news agenda. These occurrences have led to a tightening up of the fundraising, safeguarding and serious incident reporting requirements. In addition, a number of major players in the aid sector lost their access to new funding from the Department for International Development (DFID), some because they were barred, others self-suspended before they could be.

Given the miserable state of public sector outsourcing – from the Carillion collapse to East Coast mainline – the not-for-profit sector is still a valued contributor to the wider community and the public sector needs to work better with charities.

Charities and not-for-profits are invaluable in society, providing essential public services. In fact, many modern charities began as providers of public services in health, social care and education, before the development of the welfare state. 

In their turn, charities must be able to show they have integrity and values and that they deliver what they promise effectively and efficiently. Expectations have got higher and will get higher still.

How have charities responded to changing expectations?

In order to regain public trust and enable donors to resume funding, charities have invested in considerable enhancement of governance and operational oversight.  During a recent review of leading organisations in the international development sector, our team saw a significant number of newly rewritten policies, enhanced whistleblowing facilities and expanded codes of conduct. It is noticeable that considerable talent and resources have been devoted to this.

The sector was well aware of the risks connected with abusive relationships with beneficiary communities before the scandals but believed they had mechanisms in place that addressed these. It is now clear that having policies “available on our intranet”, even when supplemented by internal audit and donor compliance audits, does not prevent endemic disregard for ethical considerations.

Policies and procedures must be part of an engrained culture with clear values and ethics, in which individuals feel confident that their voices are heard. On the ground, we have seen an increase in training that emphasises the ethical platform of the organisation, reinforced by prominent visual reminders of codes of practice.

At a governance level, trustees are acutely aware that much of the press criticism has focused not on the failure to prevent serious incidents but the response to these by senior corporate management and trustees. 

The main results of this to date include additional reporting to trustees by compliance and internal audit functions and increased adherence to principles of zero tolerance where sexual abuse or harassment is identified. There has also been a considerable tightening of policy and practice in recruitment and procurement.

Procurement and logistics are areas in which prioritising values and ethics has a massive preventative impact. This also applies in the area in which due diligence was found most wanting – the recruitment of personnel with employment records littered with previous incidents of beneficiary abuse. Organisations are beginning to adopt a “no exceptions” approach to taking up references as well as asking for specific confirmation that an individual was not found to have breached policies around safeguarding or financial irregularity. 

All of this activity is beginning to reassure donors that charities have adequate governance and operational oversight to manage serious incidents properly, and reduce their incidence to the lowest levels possible. Some have been restored to funded status and others are still negotiating, but the sector as a whole has significantly “upped its game”.  All of this, however, led to a not insignificant increase in the cost base of many charities.

How charities can measure their social impact and prove they are achieving their aims to donors and fundraisers

Alongside this, there has been an increasing trend among charity stakeholders, to ask for additional evidence of the social value or impact that an intervention delivers. This is in part driven by value for money considerations but it is also part of evaluating which programmes deliver the greatest change.  Parallel to this, trustees and management increasingly wish to evaluate the impact of their charities’ interventions to best allocate resources and make the case for further funding for “what works”. Of the various sub sectors among UK charities, overseas development can probably claim to do the most monitoring, evaluation and learning (often called “MEAL”).  This is a sector wide phenomenon, driven by global donors. This ability to provide evidence that charities can deliver what donors want is a key success factor in the overseas aid and development world.

What types of issues can Buzzacott help clients with?

Buzzacott has been close to many of these developments. We have worked with our clients’ audit committees to understand how changes in procurement and monitoring might affect the speed of responses to emergencies. We have considered the impact on audit risk of increasing volumes of whistleblowing (actually usually more reassuring than not) and considered the benefits of including statements about social value and impact in annual reports.

The issues highlighted above are the result of a small number of high profile failings across a sector that operates across every continent of the world. There is a real risk that the seriousness of such incidents detracts from the overwhelmingly positive work these organisations do every day for the benefit of millions of people. Similar concerns also affect charities engaged in providing services to the most vulnerable people in the UK. However, through transparent and demonstrably ethical governance, and clear evidence of social value creation, charities can maintain the right to be trusted with these great responsibilities. 

Article taken from issue 7 of Beyond the Numbers