FINANCE NEWS: Sector must rate volunteer value

The financial impact of volunteers should be included in charity accounts, according to a controversial new report from the Charity Finance Directors' Group, published yesterday.

A cross-sector standard like the national minimum wage should be established for valuing volunteer hours, and be used by all charities in their annual Statement of Financial Accounts, according to the report.

Initial models on the effect of the change suggest that it could add tens of millions of pounds to the expenditure of some charities as represented in their accounts.

But this would be balanced by an equivalent estimate of the contribution made by volunteers to the income of the charity.

"We are aware that the proposal to value volunteer time is controversial," the Inputs Matter report states.

The fear is that the change could increase fundraising costs as a proportion of expenditure and make charities appear wealthier than they actually are.

Mark Astarita, director of fundraising at the British Red Cross, said: "Income and expenditure will increase dramatically. It's important to make donors understand that the charity hasn't suddenly become a lot richer, but that this is volunteer time and not real income. But I agree it is important to put a value on the contribution of volunteers."

Helen Verney, finance director with the MS Society and chair of the volunteer inputs working group, said the change was necessary to enable comparisons between different charities' accounts.

"At the moment, we have an inability to compare accounts between a charity that has tens of thousands of volunteers and one that doesn't have any. Logic tells us we have to go this way." But she added that she expected a backlash from fundraisers.

The report recommends that volunteers should be valued at a uniform rate such as the national minimum wage. But where a charity uses a qualified or skilled person such as a doctor to do work for which they are qualified, a different rate should be applied, sometimes 500 per cent higher.

The report says that volunteer hours should be estimated and that volunteers should not be required to fill in timesheets.

"This is not a perfect solution," said Verney. "But you have to ask how distorted accounts are without a value for volunteers and how distorted they are with a value. You are closer to reality than if you use nothing at all."

The report also recommends that there should be a clearer definition of income from fundraising, and more detailed disclosure of fundraising costs.

Last year, the Charity Commission threatened to tighten up the Statement of Recommended Practice because some charities were deliberately allocating fundraising costs as charitable expenditure in their accounts as a way of improving their fundraising ratios.

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