What is wrong with Wales’s third sector?

Bevan Foundation A woman collecting for charity
ViewsDecember 19th, 2014

A third sector organisation has hit the headlines again.

Not because of its excellent work, innovations in service delivery or efficiency, but because something has gone badly wrong.

This time it is Cyrenians in trouble – they have identified an ‘extensive fraud’, reported by BBC Wales to be around £800,000.  The Cyrenians are not alone – they follow several other high profile instances of charities in difficulty – such as YMCA Wales (now in administration), AWEMA and Mewn Cymru, as well as lesser known examples such as Newport’s Life Music Foundation, the Children’s Cancer and Leukaemia Fund and Cynon Valley Crime Prevention Association.  Fraud against the charity sector is estimated by the National Fraud Authority to cost registered charities across Great Britain £147.3 million – a pro-rata share for Wales would be £7.4 million a year.

What’s going on?

Doubtless there will be some quick to condemn the whole third sector – accusations of gravy trains, nepotism and self-enrichment are widespread. There are others who will claim these are ‘isolated instances’ caused by a few ‘rotten apples’.   Both are wrong.

Fraud, mismanagement and ‘self-enrichment’ are still relatively rare in the third sector, but there’s now enough instances to give the charity regulators and the so-called ‘infrastructure’ – i.e. WCVA and the county voluntary councils (CVCs) – pause for some deep thought.

What the recent cases reveal are huge risks around charity governance.  

The training and support offered by WCVA and most CVCs shows that the overriding concern is funding – how to get it and how to prove you’ve used it well (aka ‘impact’) and relatively little on the  ‘hard stuff’ like budgeting, VAT, cost control, cash-flow, handling disciplinary cases and – let’s face it – preventing and detecting fraud.  I suspect this reflects the ‘branch office’ structure of many of Wales’s medium sized charities – all this ‘hard stuff’ is either done by or with the advice of HQ elsewhere.

I am not blaming any of the third sector infrastructure.

However they do need to take action to address the tide of bad news about charities in Wales – it may not prevent ‘rotten apples’ but it could risks and increase early detection. This isn’t a luxury – already IPSOS Mori have found that public trust and confidence in charities is threatened by high pay, concern about fund-raising practices and – yes – fraud.

WCVA and the CVCs should carry out a health check of governance of the third sector in Wales – an honest appraisal of the risks, concerns and needs faced by charities of all sizes not just those with enough staff to have specialist roles or those with HQs elsewhere.

They need to introduce comprehensive, Wales-wide programme of training and support for Trustees. Participation in training in charity governance should be the norm not the exception.  The model of provision needs to change from ‘you come to us at the time that suits us’ to being based on what trustees need e.g. training at board meetings, online learning etc.

The third sector infrastructure also need to support new charity chief executives and senior staff in their obligations. and both trustees and charity managers should be regularly updated about developments in, for example charity regulation, taxation, employment law etc. At the moment I am sure I am not alone in getting more information about these issues from our accountant and English-based e-newsletters than from any one in Wales.

These are just a few ideas.

The real point is that the third sector in Wales needs to get its house in order, and fast, before its reputation is irredeemably damaged. 

Victoria Winckler is Director of the Bevan Foundation.

The Bevan Foundation’s Annual Review of 2013/14 is available in English and Gymraeg.

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