In the last week, from two very different sources, we’ve had proposals that the charity sector should keep itself to a minimum level of administration costs.
The first came from the philanthropist Gina Miller, who’s said the sector should keep its admin spending to below 25 per cent. The second, a bit more worryingly, came from the MPs of the powerful Public Accounts Committee, whose chairwoman Margaret Hodge, said that Oxfam spends only 3 per cent of its income on administration, and whose committee members later suggested that other charities should be made to follow suit.
In general, like most people in the sector, I think judging charities on their admin costs is a bad idea, and capping their admin costs is a very bad idea.
I’m presuming most people reading this are charity sector workers, and agree this is a bad idea, so I won’t spend long explaining why. But for those who don’t agree, here’s a quick canter through the problem.
Firstly, there’s no real definition of an admin cost. Is transporting aid workers to war zones an admin cost? Is hiring an office? Is having a proper IT system?
Secondly, admin is a handy thing to do, and efficient organisations tend to do a lot of it because it saves money down the road. We could cut admin costs by sacking the receptionist and going back to writing with a quill pen. But would this make us more efficient?
Lastly, charities often raise money in one year to spend in another. You can spend three years raising money, then buy a rescue helicopter or a hospice. In the first two years your fundraising ratio is a minus number, and you’d be in trouble with the Public Accounts Committee.
By and large, charity supporters should accept that charities know what they are doing. If supporters are worried about whether their organisation is effective, have a look at its outcomes, not its processes.
So far, this is pretty much the standard view in the sector. But what can we do to change this unhappy status quo?
Firstly, it might be worth accepting that the doubters aren’t totally wrong. I’m not sure the Charity Commission shouldn’t be monitoring charity administration costs through annual returns. Because in some rare cases, when charities spend far too much on admin, it ought to be flagged up.
Surely if charitable expenditure is less than 50 per cent of income, it’s worth at least looking at why. If it’s spending only two per cent of its income on charitable endeavours, there could well be something dodgy going on.
(There’s still more likely to be a good explanation. After the Cup Trust case first appeared, Third Sector took a look at the charities with the mostly wildly divergent income-to-expenditure ratios and found they were all legit. But it’s still worth having that list to hand.)
That caveat aside, this is such a bad idea, it’s repeated so commonly by the public and their political representatives. And something needs to be done to change their minds.
It’s all very well standing around and muttering to one another about the stupidity of politicians and the public, but they aren’t going to find out they’re wrong unless we tell them.
It seems to be deeply lodged in the public consciousness that charities should spend nothing on admin costs and that charity workers can live on nothing but air. It will take some determined work to change this view.
Up until now the charity sector has done little but complain that people get it wrong. The time has come to try and help them get it right.