THE BLOG

Charities Must Be Transparent But Must Retain Independence - Freedom of Information Only for Public Contracts

14/01/2016 12:25 GMT | Updated 14/01/2017 10:12 GMT

Many charities receive public money and even more receive donations from individuals, corporations and foundations. Some undertake commercial activities to raise revenue. Often donations attract tax relief for the donor and/or financial benefit for the charity. Government and the wider public sector increasingly contracts with charities for the delivery of public services and public funds are transferred as well as some authority to act on behalf of the public sector.

Charities are subject to some beneficial tax policies and practices that differ from many commercial companies though they can be penalised by trapped unrecoverable VAT. Charities have particular legal privileges which are unavailable to the public sector and businesses.

Charities must have the confidence of their donors and funders if they are to secure long term financial support; and wider public confidence is important too. The public may not agree with a charity's aims and activities but can still respect that charity if it is operating in a transparent manner.

Therefore, transparency is essential for all charities. In my experience most charities understand this and seek to be transparent and open about their activities, funding and expenditure. They all have to publish annual accounts and reports and submit these to the Charity Commission.

There are indications that the Government may wish to extend the Freedom of Information Act (FoIA) to charities. There has been a mixed response to this from the charity sector and its national leaders. On balance much of their commentary has been in opposition to the Government's proposals.

It is interesting to note that the Government is proposing this extension of the FoIA at the very time that it is seeking to restrict its application in Whitehall. The Government needs to be clearer and honest on why it is making this proposal.

The proposal to extend FoIA to charities is perhaps to be expected given the continuous attacks on charities for campaigning, paying salaries to staff especially senior staff and in some cases for their charitable activities when these are not congruent with certain political views. These attacks have come from sections of the media and some politicians including some ministers. The sector also rightly wishes to maintain its independence.. Many charities are run by volunteers and all have volunteer trustee boards. Many have little money and tight finances and would not wish to have to bear the cost of frequent FoIA requests.

Above all charities are not public bodies and must never become or be perceived to be public bodies. In considering FoIA and charities this has be core to the argument and has to be understood and respected by government, the media and others.

However, I think that is very important to distinguish between a general application of the FoIA on charities and extending it when charities contract with the public sector and receive public money for this and undertake tasks which otherwise would be undertaken by state agencies. FoIA should apply to the activities, performance and other data and information relating to these contracts. Indeed last year Children England and the TUC jointly produced proposals to promote such an extension of the Act.

Such an extension should be applied on the same basis to businesses which the contract with the public sector especially those contracted to deliver public services.

The public sector client should not be relied on to handle and manage requests under the FoIA when the questions are aimed at the service provider. This can lead to distortion of data, potential conflicts given that performance and contract compliance are matters for both provider and public sector client, and in extremis distrust and a break down in relations between both parties. There are examples of this breakdown in relationships between provider and client when businesses contract with the public sector and performance is subject to FoIA requests.

Naturally providers including charities should build the cost of handling FoIA requests into their contracted costs as these should reasonably be deemed to be a genuine cost of service delivery. And the public sector should pay for this.

As I have already said the charity sector has to retain its independence from government and the wider public sector. Charities are not public bodies even when they receive public money. Grant aid should not automatically trigger the application of the FoIA as grants are different from contracts. Therefore, beyond contract related activity, there is no justifiable case in my opinion to extend the FoIA to charities. This is not to argue that charities should not be transparent and open - far from it.

I see no reason why the sector could and should not develop its own code of transparency. This could include publication - probably via an organisation's web site - of details of income (but in ways that do not undermine the ability to raise money and which could be discourage donors); supply chains information; contracts with related parties; trustee names and trustee benefits if any; senior salaries; salary ratios between the most highly paid and the lowest and the median (when charities employ staff); the charity's vision and objectives; current and planned activities; trading companies owned by the charity or any joint ventures it might be involved in; and impact and performance data; and other similar information.

This would provide funders, potential funders, service users, communities, staff and the wider public with a better understanding of the charity and hopefully build confidence in it.

Any system has to be proportionate to the size of the charity but the principles should apply equally to the largest and the smallest.

The Government's sledge hammer approach has to be resisted but, in my view, the best way of doing this is for sector itself to develop a set of sector specific standards and a code based on best practice across all sector in the UK and internationally. Too much pleading that the charity sector is a special case can look over defensive and could be perceived that the sector wants to hide itself beyond public sight and scrutiny, and wants to benefit from its privileges without accepting responsibilities. This is not the view and approach of the charity sector I know.

There is a real opportunity for the sector can lead by example so that it can be ahead of the public and business sectors - surely this is what the sector's values require and the public expects.