- This story has been clarified: see final paragraph
The Charity Commission is considering changing its prototype online charity search tool after users criticised its use of cost ratios as a measure of charity effectiveness.
The beta search tool, which was launched publicly in March last year, was developed to make charity data easier to find and understand, and the commission encouraged user comments and suggestions for improvement.
The prototype site includes a figure for "charitable spending" that shows the percentage of total income a charity has attributed in its accounts to charitable activities.
The True and Fair Foundation, founded by the businesswoman and philanthropist Gina Miller, cited figures used in the beta search tool in its much-criticised report about expenditure on charitable activities, released last month. Many sector representatives and charities responded to the report by criticising the way some of the statistics were used.
In his response last month to the True and Fair Foundation’s report, Pesh Framjee, partner at the audit, tax and advisory firm Crowe Clark Whitehill, criticised the Charity Commission’s use of cost ratios on the beta search tool.
"There continues to be a spurious belief that charities can be measured by looking at expenditure such as fundraising costs or charitable expenditure and comparing it to the income raised," Framjee’s response said.
"Regrettably, the Charity Commission’s beta site compounds the problem by displaying simple cost ratios. Fortunately, this is a beta site and the commission has asked for views and the site may be changed.
"The fact is that any endorsement from the regulator of a cost ratio-based approach will be a retrograde step. This has been tried elsewhere and has been seen to be confusing, even damaging. There are just too many issues to factor in that can make such comparators unworkable. It is not possible for the commission to cater for all the nuances that would give credibility to the percentages shown."
A spokesman for the Charity Commission said: "The public test prototype of the online charity search tool displays the same figure that Ms Miller has used in her analysis. We have received considerable user feedback on this and other features of the beta version and will reflect that feedback in developing the new tool.
"In the meantime, we recommend anyone interested in how a particular charity spends its money makes their own judgement about the information it provides and the explanations it gives."
- Due to a misunderstanding, the story originally said the commission was going to change the cost ratio part of the beta site, as opposed to considering a change