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Accounting and reporting

Why The Times is (mostly) wrong about charity reserves

By David Ainsworth, Sector Specialist, Charity Finance Group

Last week, The Times newspaper launched an attack on military charities for holding too much money in reserve. It claimed that the £275m held by the ten largest military charities was excessive, and accused them of "hoarding" cash.

Post by CFG

The Times has a track record of critical articles about charities, most notably the Oxfam articles last year, which highlighted issues with safeguarding in the sector. Some of its pieces have raised valid criticisms, but others have been rather far off the mark.

This time, the article feels slight. It feels as if the paper’s reporters have licked a finger and held it to the wind. The root of the article seems to be simply that £275m feels like a lot of money.

But the article doesn’t really offer much proof for its assertion. It’s not at all clear that these charities are holding onto too much money. These are organisations with wide-ranging, expensive and long-term commitments to current and former military personnel. It’s a requirement to hold cash reserves to make sure they can meet obligations when they fall due. Given the scale of the commitments, the figures mentioned seem, at first glance, to be fairly reasonable. The Times has made no attempt to establish what a correct figure might look like, or asked why charities, en masse, might be hoarding cash in the first place.

Still, charities may want to look at themselves in this scenario. If we’re facing this criticism, maybe we haven’t been clear in our accounts about why we hold onto the money, or how we calculate what we need to put by.

The message, for me, is twofold. We must push back rigorously against The Times’ narrative, but also up our game when communicating why we do what we do. Otherwise, there will be more such criticism in the future.

The Times piece feels like part of a wider, rather problematic public narrative, which expects contradictory things of charities. The paper is criticising charities for not getting the money to the front line as quickly as possible. But it’s previously criticised charities for not sinking cash into back-office functions, such as governance, fundraising and safeguarding.

The public, politicians and the press demand that charities have high-quality technology, HR, compliance, governance, risk assurance, safeguarding, third party monitoring, impact measurement, customer service and fraud control systems. But they also want all the money spent on beneficiaries, as soon as it’s given.

It’s part of the same system which has led to fundraising ratios, and “82p of every £1 given goes on the cause” and so on and so forth. It resonates instinctively with the public, who don’t know much about charities, so it makes a good story, but clearly, they’re asking the impossible. If charities are to be run well, we need to spend money on core functions, and probably more than we do at the moment.

This is the argument we’ve been making at CFG for years and will continue to make. We need to spend the proper amount on core costs, and we need to make the case for doing so.

The issue for me is that we have a communications challenge on our hands. There is clearly some suspicion about charities in the minds of the general public, otherwise people wouldn’t carry on reading these stories, and journalists would stop writing them.

I don’t buy the narrative peddled by the Charity Commission that charities are facing a significant and permanent fall in public trust. But I do feel it’s essential that we look at how to engage with public criticism about accountability, particularly with the hundred largest household name charities, who face the bulk of the scrutiny.

We need to do more to explain the public benefit we deliver, and to explain why we spend money as we do. It’s not enough to say “The press and the public don’t understand us”. We need to ask why they don’t understand, and what can be done to ensure that it doesn’t continue. They aren’t suddenly going to figure out on their own that we’ve been right and they’ve been wrong all along.

The press is often viewed – especially by journalists themselves – as the regulator of last resort, intervening when standard accountability loops have failed. A couple of years ago, I spoke to a national radio journalist about this subject. “I want to get charities,” he told me. “I think there’s something ropy going on. I want to get under the bonnet and really find out what it is.”

If writers at The Times and elsewhere see themselves in this crusading guise with regard to charities, we can expect more stories in this ilk.

Charities often say that they do not exist to help the wider public, they exist only for their beneficiaries, but I think this misses the point. Charitable status is given by the public via parliament, and we need the support of both those groups.

So we have to engage proactively on this score. Otherwise, we will continue to be subject to back-of-a-fag packet analyses in national newspapers. And eventually, if it goes on long enough, we risk parliamentary intervention.

 

Read next 'Are charity reserves policies really clear enough?'

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