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Do Charities have a Trust Issue?

Russell Hooper looks at the findings from the Charity Commission’s recent survey.

For generations, charitable giving for causes both at both at home and abroad has been as much a part of being British as cream teas and Morris Dancing. It was just something us Brits did, eat cream teas and give to charity that is, Morris Dancing is clearly best left to the experts.

However, the 2018 edition of the Charity Commission Trust in Charities Survey indicates that public trust in charities has fallen sharply since 2014. This is understandable given the scandals and gross mismanagement that has beset some of our best known, and most loved, charities. The media has not hesitated to pour scorn on the individuals and organisations concerned and that, in turn, has cast a long shadow over the sector. These events have demonstrated that charities will be held to account just as rigorously, if not more so, than any other organisation when it comes to matters of ethics and breaches of trust.

The research, which was conducted by Populus, finds that, while public trust in charities has plateaued since 2016, it remains relatively low at 5.5 out of 10 versus 6.7 in 2014. The public now trust charities less than they trust the average person in the street. Charities were not alone in seeing a decline, the survey found that trust in other social institutions had also fallen.

If your charity is engaged in fund raising, you ignore the research at your peril. It clearly shows the level of trust the public has in a charity translates directly into pounds, shillings and pence, or not as the case may be. When it comes to donating behaviour, 52% of those whose trust has increased say they donate to charities more consequently, while 41% of those whose trust has decreased say they donate to charities less. Similarly, individuals who do trust charities are far more likely to have recently made repeat donations to a charity than those who do not (24% vs 11%). Those who do not trust charities are more likely to have never given to charities (9% vs 1%).

If that’s the bad news, the good news is the survey also gives us some great insights into how charities can build, and in some notable cases rebuild, trust. The research reveals that demonstrating high standards of conduct and behaviour (being ‘true to their values’) is as important to trustworthiness as making a positive difference to a charity’s cause.

It identifies the top 5 drivers of trust in charities as being:

- transparent about where money goes (8.8 of 10)

- true to their values (8.5)

- efficient in their use of resources (8.4)

- well-governed and well-managed (8.3)

- able to demonstrate making a positive difference (8.3)

The Charity Commission says these findings underline that organisational ethos and values in charities matter to the public, and that rebuilding trust depends on behaviour change, not just on better communication.

When it comes to managing a charities resources, having a well thought through and articulated reserves policy goes a long way towards building trust in how the finances of a charity are run. Part of this is demonstrating that all the reserves of the charity are working as effectively as possible. While trustees are naturally cautious, the logic for holding undesignated cash in a bank account earning interest well below the rate of inflation has to stand up to scrutiny from stakeholders and external observers. We at Brewin Dolphin would argue these funds either need to be put to work within the charity or invested prudently in order to mitigate inflation. Subject to sufficient liquid operational reserves being accessible, taking too little investment risk with reserves can be as big an error as taking too much. Both can lead to a charity operating below its potential.

Investment income also forms an important part of the funding of the sector. For those with mixed income sources, investment income can be a valuable way of showing the trusting public and other funders the charity is not totally dependent upon repeated requests to donors and funders.

One way to ensure that a thoughtful debate is held by Trustees and senior staff, is to crystallise the investment part of the wider financial plan in an Investment Policy Statement. This not only covers the purpose and parameters of the investments, it also shows how and when it will be reviewed and therefore conveys to all its stakeholders that the charity is managing its affairs purposefully and after all due consideration.

Charities remain a massive part of life in the UK. The country, quite literally, would not run without them and this is recognised in the survey. A majority (58%) think charities play an ‘essential’ or ‘very important’ role in society today.

Only 6% think they do not play an important role. It may not always feel like it but there remains a deep affection and respect for our charities.

Baroness Stowell, Chair of the Charity Commission, welcomed the findings and urged charities to respond to them. She said ‘This research shows that the public no longer give charities as institutions the benefit of the doubt. What the public expect is not unreasonable: they want charities to be guided by their ethos and purpose in everything they do, and they want charities to use their money efficiently and responsibly. The public have seen evidence of charities failing to demonstrate these behaviours. So, it is not surprising that trust has not recovered, and that the public are calling for greater transparency. This is proxy for a more profound issue: the public want evidence that charities are what they say they are.

But this research also contains good news for charities and those who care about trust in charities: it shows that the answer is not to impose more rules and procedures or to tick more boxes, it is about attitude, ethos and culture. If we together respond to these findings and ensure everything charities do is driven by their purpose, we can reverse the decline in trust. And more important than that: charities will improve as organisations, and as a result make a bigger impact on the lives of their beneficiaries, and in their communities and for society as a whole.’

Wise words indeed.

The information contained in this article is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.

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