Kids Company - two sides of the coin and the changing landscape of the charity sector


11 August 2015

The travails of Kids Company and the associated media maelstrom over recent weeks serve to illustrate how the Charity sector has changed over recent years.

The travails of Kids Company and the associated media maelstrom over recent weeks serve to illustrate how the Charity sector has changed over recent years.

While, arguably, the real story about Kids Company is yet to be known (as both sides strongly advocate their opposing positions), it highlights a perennial tension for charities: be criticised for spending too much money on administration and not on the service users/beneficiaries versus for spending too much money on service users/beneficiaries and not enough on administration. The latter being an allegation levelled against Kids Company.

On the one hand - you have the camp that advance the bravery of a founder prepared to stand up to the Government’s funding cuts. To others it is a textbook case of many of the concerns encountered in the modern-day charity setting. These include ‘founder's syndrome’ - someone who loses the ability to stand back and view things objectively; perhaps unable to cut the apron strings as the bird fledges and wants to leave the nest and explore new territories. In Kids Company’s case, the founder appeared to admit on Radio 4 that the charity did not have any reserves and lived hand to mouth, seemingly relying on ‘cups of tea’ with stakeholders and potential funders - all of which for a charity that size was unsustainable. Strong financial planning and securing income streams should have been a core part of its strategy and operations. 

Many mainstream charities have significant incomes, even comparable to large corporates, that need managing in a business-like and efficient way. Gone are the days of a CEO being entitled to say their organisation does not have a strategic business plan because it is a ‘charity’. Moreover, the senior management team and board should expect scrutiny of their actions and be in a position to justify those actions, especially if in receipt of public money. Those charities with a unilateral ‘board knows best’ mentality may struggle; successful charities are those that engage with their stakeholders and think about issues from different perspectives. User and, indeed, non-user surveys need to be more commonplace. Risk management needs to permeate all aspects of a charity's strategy and operations. 

The changing landscape of the charity sector 

Sector 

The boundaries between Government, the private sector and the voluntary sector are increasingly blurred. The charity sector has grown, due to less state provision and the promotion of the “big society”. Charities are simultaneously experiencing both funding challenges and greater competition as they bid against each other for funding and contracts and as charities both commission and procure to deliver services. Contracts demand more for less or, at least, more for the same money. 

Beneficiaries 

Beneficiaries are on the sharp end of realising there is less state provision. Society's demographics constantly evolve; we have a greater number of older people, we are more disparately distributed and the older generations tend to live distances from families and traditional support structures. Studies evidence the epidemic of loneliness plaguing all ages but especially the elderly - hence the emergence of charities such as Silver Line.

Supporters and donors 

Individuals are giving differently. While individual donations are increasing, there is also a shift from ‘cash to kind’ - people giving resource more than money. In addition to the altruism of old, is the concept of an ‘exchange relationship’ where the donor receives something in return. On an individual level, the millennial generation are lending and not just giving time and money. On an institutional and corporate level, we have seen the advent of the corporate social responsibility culture, through to the materialisation of social impact and the measuring of outcomes and KPIs. The way supporters give their time is also changing. People may give shorter and less regular amounts of time through formal programmes such as Timebank or via informal ‘pop up’ giving mechanisms, such as, Twitter campaigns.

Structurally and operationally 

The sector has changed on a number of fronts. There is now an emphasis on early intervention and the targeting of resource to influence lifestyles and behaviours to avert the onset of illness or disease. 

Formal structures and institutional relationships can be bypassed. The disruptive power of the internet and social media means that there is now a 24/7 media landscape with the consequent increased scrutiny to be managed. Two-way dialogue means that the charity does not have the last word, but needs to respond to comments and interact with people who have elected to engage with it. 

Internet campaigns run by 38 Degrees deluge MP's offices with automated emails but these still need answering. Petition sites can have a mass impact, including, Care2 which garnered more than a million global signatures in under a week influencing Zimbabwe’s (seemingly temporary) decision to suspend hunting around its biggest game reserve after the slaughter of Cecil the Lion.

The internet easily facilitates crowdfunding. This is being used for funding medical treatments, social enterprise, stand-up comics at the Edinburgh fringe and community challenges to planning decisions to name a few examples. 

Charity Commission

At a time when there is a societal urge and imperative to do things differently, the traditional source of guidance and friend to the charity sector, the Charity Commission, has seen its funding cut significantly. Accordingly, the Charity Commission has had to restructure and has moved from being a friend, to what the CEO, Paula Sussex, describes as an "enabler". Others would say it is more of an enforcer and regulator. The Charity Commission admits a renewed emphasis on compliance, including a role to deal with mismanagement, and monitoring of charities, in a period when trust issues have come to the fore. Trust and conduct rose to the top of the media agenda in the wake of the death of the fundraiser Olive Cooke and the ensuing investigations into fundraising practices. When coupled with the unmasking of abuse by some of charitable status the charity sector can be said to be experiencing one of its toughest tests in public confidence. 

Trustees

The Charity Commission has also focused on getting charity trustees in better shape. It has encouraged a move away from typical ‘pale, male and (some would say) stale’ trustees, to a board that reflects the diversity of a charity's service users and beneficiaries. Ideally it would include some of the latter on the board. A skills and cultural change amongst charity trustees is advocated so that boards cover the various disciplines a strong board needs. These range from HR, to governance, legal, fundraising, finance, to marketing and business development.
This helps with the Commission’s desire to ‘enable’ trustees so that they perform a role of scrutiny, imbued with a mind-set of challenge and ideas. Trustees should not be there simply to just rubber stamp the decisions of a charity's management team. This change of approach, arguably, helps to counterbalance the Commission’s loss of resource and may also be construed as a manifestation of the big society in action; the empowering of communities and self-regulation.

At the same time, conflicts of interest (a recurring theme in Charity Commission case reports) are on the agenda. Conflicting interests are not necessarily eliminated but, instead, are registered and dealt with in a far more transparent and accountable way than in the past. 

Overall, charity trustees should be the stewards of the charity, focusing on strategic issues rather than operational concerns (on which the staff should lead), to help charities survive choppy waters and be in better shape for the future. 

Summary and conclusion

A long hard look needs to be taken at the Kids Company case to see what lessons can be learned. Governance issues, strategic and financial plans and the viability and transparency of those plans need to be examined including in the context of the role of charity trustees. Everything a charity does should come back to whether it fulfils the charity's objects: the very reason why it exists. An assessment should be carried out as to whether a proposed decision/action makes life better for the charity's service users and beneficiaries. This requires a sound strategic and financial plan to ensure that the charity survives and prospers, to provide for its beneficiaries and service users, both now and in the future.
 
Finally, let's not lose sight of the fact that a huge number of people are doing good work in the charitable sector; paid and unpaid. As the American anthropologist, Margaret Mead, said in the 1960s: "Never doubt that a small group of thoughtful, committed citizens can change the world; indeed it's the only thing that ever has." Giving it the benefit of the doubt, Kids Company, as its name implies, was set up for ‘the kids’. Its founder argues that it served a purpose and bridged the gap between state provision and user need at a time when support was required more than ever. Now charities and other services are going to have to step in and plug the gaps unless service users are to be just left to fend for themselves. The situation could, perhaps, have been managed earlier by the adoption of more efficient business and financial practices. Potentially, greater collaboration with like-minded organisations could have resulted in the use of shared services, thereby reducing costs. Such an approach is not at the expense of, but for the benefit of, the children. This is because it may mean a charity remains sustainable while providing a structure through which immediate problems can be addressed. 

The content of this article is for general information only. To discuss the changing landscape of the charity sector further please contact Sara Sayer, head of Birketts’ charities and social enterprise team and trustee of a charity engaged in music, culture and the arts in Cambridgeshire. Law covered as at August 2015.

Author

Sara Sayer

Senior Associate, Solicitor-Advocate, FRSA

+44 (0)1223 326763

+44 (0)7983 385840