Impact reports - sales pitch or honest evaluation?

People are constantly calling for greater transparency and better impact reporting in the sector but this can lead to less honest evaluations, writes specialist auditor Kate Sayer

Kate Sayer
Kate Sayer

I remember Estelle Morris, education minister in the first Blair government, standing up in the Commons and saying, in effect: "We have spent millions on tackling truancy. The number of children absent from school has not changed." She then left the government. Too much honesty clearly does not pay in the corridors of Westminster.

In the charity sector, such examples of honesty are equally rare. People are constantly calling for greater transparency and better impact reporting. But the reality is that we have to keep saying that what we are doing is working, even when we know that might not be the whole truth, because otherwise we lose funding. So impact reports become sales documents rather than honest evaluations.

If a funded organisation is being truly innovative, it will not be able to guarantee outcomes; in effect, it is experimenting. So it should have a hypothesis that it wishes to test. A potential funder can assess whether it considers the experiment worth funding and the two organisations will, in effect, share the risk. This is the charity sector's version of research and development. Of course, some of the time we will learn that the new idea does not work as well as we had hoped. This is still a useful outcome and does not represent a waste of the funder's money.

On the other hand, established services should be programmes for which we are able to plan with greater certainty, knowing that if we do a particular thing we should get a particular result. In such cases, it is appropriate to put in place outcome measures and monitor delivery against those outcomes. We can also aim for efficiencies in the delivery of the service, set quality standards, write procedures manuals and train people to deliver to a standard.

We need the right form of funding for these two very different situations. R&D needs the equivalent of equity - risk capital where funders know that they might not get a return on their money, but there is a potential social return. Typically, grants provide the best source of risk funding.

For an established service, the funder is buying the service and buying outcomes. This is a commercial model and, as such, contracts are appropriate. In the third sector, however, too many arrangements appear to fall halfway between experimental and established models. Funders expect detailed budgets and accountability for how the funding has been spent when they should be focusing on results. Charities also confuse the two models at times, claiming other positive outcomes when the agreed objectives of a contract-funded programme have not been met.

So we need greater honesty, but this must start with setting the right objectives for funding. What sort of funding do you need? If you are experimenting, you need R&D-type funding and it's OK to fail. If you are selling services, you had better make sure you can deliver the promised outcomes.

Kate Sayer is a partner at specialist auditors Sayer Vincent

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