The Times on Monday announced the launch by the Charities Aid Foundation (CAF) of two themed charity funds, which invest in a portfolio of voluntary sector organisations, rather like a unit trust invests in a portfolio of shares. In actual fact, the funds were launched earlier in the year, but the publicity will presumably be welcome. The charities selected for the funds are being audited by New Philanthropy Capital (NPC), which advises donors on how to give more effectively. As an increasing number of organisations engage in this kind of auditing – Guidestar provides an apparatus for scrutinising charities and the Centre for Social Justice runs a list of recommended charities on its Effective Giving website – the CAF-NPC venture points up a revolution in what Rockefeller called the ‘business of beneficence.’
A significant aspect of NPC’s mission is to increase the financial injection from the private sector into the voluntary and charity sector. Its website carries a series of excellent articles in The Economist that surveyed the changes in the voluntary and charity sector in Britain and America. These articles considered the vibrancy of the sector in America – giving per capita is, for instance, twice what it is here – and focused on social enterprise, the accountability and performance of charities, and on how better accountability is needed to make philanthropy better.
Demanding the kind of efficiency and professionalism that shareholders might expect of the private sector undoubtedly carries risks. For a start, financial efficiency may not actually reflect the extent to which a charity changes lives. It is very difficult, for example, to quantify the good done by the Samaritans, or to define the value added by a small charity such as Honeypot which gives deprived children holidays in the countryside. In a similar manner, small charities are usually more responsive to specific needs, and workers in an inner city soup kitchen don’t need an MBA in order to be effective. Fortunately, NPC takes all of these issues, and more, into account in its evaluations.
Greater accountability in the sector is welcome, especially if it means that big charities, which are increasingly coming to resemble civil service departments, and often receive similar amounts of statutory funding, will be forced to be more transparent. No one doubts that a charity in receipt of 100 per cent of its funding from the private sector is no freer than one getting 100 per cent from the government, but there are very many more charities edging towards the latter position than the former. Independence is important for freedom, to stay true to the mission, so it is wise to diversify funding sources. Bringing in more individual and business donations by helping donors decide from the bewildering morass of more than 160,000 charities is an important step towards making this possible.