The charity data provider GuideStar UK was established in 2003 with a £2.9m grant from the Treasury. It was based on a successful model by US-based GuideStar International, which sets up websites, then sells them to organisations in the host countries that make the site sustainable by selling data.
The GuideStar UK website, which went live in 2005, was intended to shine a light on the finances of the voluntary sector and encourage greater transparency. It takes its raw data from the Charity Commission's register of charities, then refines and repackages it to meet clients' needs.
But the model has struggled to work in the UK. In March, GuideStar International transferred the website, its database of information about charities and Guidestar Data Services to the training and information provider the Directory of Social Change. The terms of the deal were confidential, but it is understood no money changed hands.
The arrangement proved short-lived. Last month, GuideStar International reacquired the website and its database, and GuideStar Data Services went into administration. Nobody at GuideStar UK or the Directory of Social Change would discuss the matter on the grounds that it might prejudice the outcome for creditors.
Why has GuideStar UK failed to thrive? Tinsley Goad, the chief executive of GuideStar International, wrote in his organisation's annual report for 2009 - before the transfer to the DSC - that the UK site had not been "spared the pain of the economic downturn".
He added: "Over the first half of the year, we reduced staff in both the charity and its wholly-owned community interest company, GuideStar Data Services, by more than 50 per cent through both attrition and redundancies."
The report says the redundancies included both the chief executive and the business operations director, and that the organisation's programmes generated £628,000 of income in 2009, but cost £809,000 to run.
One source says GuideStar had a feasible business model. "But GuideStar UK's execution was bad," he says. "Service was poor and there were delays in delivering the product. Some customers were unhappy."
Technological advances threatened the business model, he says. "At the moment it works by employing people in Sri Lanka to read charities' annual reports and enter the data on computers so it can be manipulated digitally," he says. "But it's likely that in future this information will be submitted to the commission in a more accessible digital form."
The result would be that other organisations could use the publicly available commission data to compete with GuideStar. The register of charities has also improved, partly in response to the launch of GuideStar. One source speculates that the Treasury funded GuideStar instead of helping the commission to improve its website so that the latter would be forced to improve quickly.