cog
Neither true nor fair
Pesh Framjee, Global Head of Non Profits
17/01/2016
cog
A critique of the True and Fair Foundation’s Review of Charitable Spending by UK Charities

The report is based on a review of the accounts of a number of well-known charities and purports to show that not enough of the income is going on charitable expenditure.

Download [pdf] 

Focus

Summary of findings

  • Comparing the income of a multi-national trading group with the expenditure of a charitable foundation.
  • Failing to recognise charity and trust law requirements on income and capital.
  • Ignoring the impact of trading activities.
  • Failing to recognise that charitable expenditure includes amounts spent on fixed assets.
  • Ignoring the impact of donations in kind.

Foundations and corporate bodies

    • Percentage spend on charitable activity.
    • What do the LRF's accounts show?
    • So where do the T&F Report's figures come from?
    • What else has the T&F Report got wrong about the Lloyd's Register Foundation?
    • Understanding foundation structures.

Understanding the impact of endowments

  • How did the T&F Report fail to spot the inclusion of £50 million that was invested for the future?
  • Another £50 million that was to be retained and invested is ignored.
  • How misleading is the T&F Report's analysis

Charities with trading operations

  • Using the British Heart Foundation to demonstrate the point.

Charities that receive donations in kind

  • Comparing income with expenditure without taking into account that donations can be fixed assets, as done in the T&F Report, will produce a spurious result.


Expenditure on mission related fixed assets

  • Investing in a research institute is as much charitable expenditure as making research grants.
  • Expenditure on rehoming centres is charitable expenditure for the Dogs Trust.
  • Expenditure on lifeboats and lifeboat stations are charitable expenditure for the RNLI.

Why cost ratios just do not work and what are the alternatives

  • Unrealistic expectations about what it takes to run an effective charity force trustees and management to shy away from making good choices simply because they believe it would impact on how their cost ratios are perceived.

Contact us

Pesh Framjee
Pesh Framjee
Partner, Global Head of Non Profits
London