Over the last week there has been another wave of stories about how charities choose to spend money, and in particular what CEOs get paid.

Sadly, when it comes to judging how charities, most people still seem to be obsessed with certain aspects of expenditure. How much is spent on fundraising? How much does the CEO get paid? How many pennies in each pound does the charity spend on tea bags and paper clips?

At NPC, when analysing charities, we take a different view. Of course looking at how a charity uses its funds is an essential part of analysis (and forms a key part of our investigations). Accounts provide a good overall view of the financial health of an organisation, reveal any major risks and can expose any abuse of charitable funds. But scrutinising income and expenditure or pouring over the balance sheet does not tell half the story.

Regular readers of this blog will know what I am about to say. It is measures of impact that will tell you how effective a charity is, not anything as simple as cost of administration or what the CEO gets paid. How many people with mental health problems find long-term, sustainable work? How many terminally ill patients die at home where they want to die, rather than in hospital? By how much do children’s reading scores improve?

The obsession with expenditure is understandable. Looking at a charity’s books is easy; assessing qualitative impacts on people’s lives is not.

Charities need to do more to get this message across about what they choose to spend their money on. Too often we let unsubstantiated criticism blow over, only to return again. This partly our fault for not addressing it. Charities must get better at articulating their impact, justifying how they do it, and making a clear case that they are providing value for money.

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