News analysis: Guiding light or a misleading star?

As GuideStar UK goes live to the public, the sector wonders what its fate will be, writes Stephen Cook.

As with any new enterprise, two fundamental questions face the charity website GuideStar UK as it becomes available to the public this week: is there a demand for its services, and will it survive?

It began with some nifty footwork, publishing YouGov research suggesting people would give more to local charities if they had more information - which GuideStar provides with a quick geographical search.

But it will take more than switched-on PR to guarantee a future for the site, which puts a clever 'front-end' on a financial database of all 167,000 registered charities in England and Wales, and allows them to add their own information.

Mountain to climb

Even those in the sector who wish it well admit that GuideStar has a mountain to climb. Who will use it, and what for? And where will it get the £1.4m a year it will cost to run?

In the coming weeks, it will be seeking more Home Office support and trying to sell licences for advanced use of its database. The Charity Commission, meanwhile, is considering how it could pick up the pieces if things go wrong (Third Sector, 30 November).

Some predictions are brutal. "I think it's a waste of time and will probably go bust," says one seasoned sector accountant. But it would be wrong to underestimate the resourcefulness of the GuideStar team, who persuaded the Treasury and other funders to put up £4.7m for start-up costs.

At least GuideStar has overcome the early suspicions of people who thought it was going to be a set of league tables that would prompt funders to make inappropriate comparisons and favour organisations with the 'best' figures.

It did this by working in consultation with charities and emphasising the site's facility for them to add and update information to their entries - a facility that is perhaps its best hope of establishing its usefulness.

Stephen Lee of Henley Management College and Adrian Sargeant of Bristol Business School remain unconvinced that even this aspect of the site will make a meaningful contribution to attempts to assess and compare the performance of charities.

"There are economies of scale, major differences between causes, major differences in the performance of different fundraising techniques and the critical issue of how to handle legacies, all of which combine to make such attempts nonsensical," they have written.

Erica Roberts, the chief executive of GuideStar, says 10,000 charities, most with an annual income of less than £10,000, have already added information in this way. But a quick experiment by Third Sector this week indicated that not all charities have been so quick off the mark.

The entry for a charity dealing mainly with refugees, for example, offers no explanation of why its fundraising costs are 35 pence in the pound.

An animal charity with a 15 per cent ratio also offers no extra information.

Not rocket science

The ImpACT coalition, which is working for greater transparency and public knowledge about the sector, welcomes GuideStar. One of its leaders, Shelter fundraising director Alan Gosschalk, says it would be sensible for charities to make sure they add information about their activities and policies.

"It's hardly rocket science, is it?" he says.

Luke FitzHerbert, leading light of the Directory of Social Change and a pioneer of sector transparency, is also a fan. "Concern about opening up the information has definitely eased off," he says. "At best, GuideStar will provide people with detailed, up-to-date information about charities, not just raw data. If you include an explanation of your fundraising costs, for example, then it will be difficult for anyone to quote the raw figures without mentioning the explanation.

"At worst, charities failing to use the opportunity to explain what the figures are and what they do will remain vulnerable to misinterpretation."

Ken Hoffman, a consultant specialising in helping British charities raise funds in the US, says the experience of GuideStar in the States demonstrates the importance of charities presenting and explaining their figures on the website in the best possible light.

"It comes down to simple things," he says. "Let's say you have a chief executive with a salary of £100,000, which is a third of your budget.

This doesn't look too good, until you say that 80 per cent of his time is spent on programme delivery.

"I wonder how many charities in the UK have actually thought about how they might be perceived by potential donors looking at their information on this website? I doubt whether they are really ready for it. My advice is to think carefully about this - don't just leave the figures to the accountants."

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