My Reflection on the Panorama Programme Last Week 'All in a Good Cause'

As an investment manager and a passionate campaigner for transparency in both the financial services sector and the third sector, I am disheartened by the lack of transparency in some organisations.

BBC Panorama's 'All in a Good Cause,' which exposed how donations made to Comic Relief were invested via leading fund management companies, rather than going straight to worthy recipients will have surprised many donors, but it did not surprise me.

As an investment manager and a passionate campaigner for transparency in both the financial services sector and the third sector, I am disheartened by the lack of transparency in some organisations.

Many large charities make great play of the amount of money raised but not the costs associated with it and indeed where they "invest" money before giving it to those most in need. Little attention is given to the analysis of their accounts which would give some insight into the "profitability" of their activities.

Via our True and Fair Campaign, I have been calling for all funds to be legally required to publish ALL their holdings online, quarterly; so that all stakeholders can see exactly where their money is invested. What was very telling was that Comic Relief had changed the way it shows its investments in its annual accounts since 2009 and refused to supply Panorama with any up-to-date investment information. Instead the charity fell back on the caveat that they were not doing anything illegal or contrary to the Charity Commission's guidelines.

Perhaps equally worrying is that trustees within many of the charity investment committees we've come across have low levels of investment knowledge. For example I recently met with a large international charity who said their investments were giving them a guaranteed income, until I explained that it was impossible to guarantee income unless it is coming from their original investment pot.

Of course charities should be screening investments to ensure they do not conflict with the causes they support, but the amount invested in bad stocks pales in significance compared with the amount wasted on inefficiencies, fees, overstaffed marketing and operations departments and huge salaries; all you could argue as a result of poor governance.

For example 30 of the top 100 earners in the charitable sector were paid over £200,000 a year and nine are paid more than £300,000. The mean average pay across the top 100 was £208,000 - £216,000 a year.

Also the top 1% of charities (who have an income of over £5 million) absorb 68.9% of the funding for the entire sector. As a result, the sector is in danger of becoming a dysfunctional one where dynamic local charities dealing with growing social problems are not getting the chance to scale up, and reach more people. There is no denying it is also a very powerful sector, connected with powerful influential people who directly or indirectly assist these huge organisations in stifling the smaller, more dynamic and potential transformational community charities.

The big and little charity ships do differ, but they are all sailing in the same sea - they can both be effective but as they grow there needs to be greater scrutiny to ensure the funds generated are not redirected away from the primary cause and towards unwieldiness, inefficiencies and senior pay packets.

Instead of being defensive in the face of growing public cynicism, big charities should be promoting openness between donors and their organisations, and taking part in this debate from a proactive stance or face more difficult times ahead.

Is it really beyond the charity sector to have a common code along the lines of a 'Give and Good Label' which shows for every £100 donated, £X will be spent within the next 12 months on the end cause? And which would force charities to look at their often grossly inefficient cost structures

Irrespective of size, all charities should be scrutinised in terms of governance, costs and transparency. There needs to be a uniform way of reporting what they do, how they do it and how much it is costing.

From a donor perspective we all need to become smarter givers and look beyond the gloss, egos and celebrity of these large charities to the many daring and dynamic organisations really addressing the root causes of poverty and deprivation in our society; often operating with a more vocational and efficient approach to charity finance and administration.

One of Britain's greatest assets is its voluntary and community sector but it is clear that there needs to be greater collaboration, rationalisation and professionalism across the third sector to truly unlock its potential and make a transformational difference to those who need it most.


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