Interview: Nick Brooks

The charity specialist at accountancy firm Kingston Smith believes that the sector is ill-prepared to respond to criticism

Nick Brooks
Nick Brooks

The recent furore over senior executive pay has ruffled a few feathers in the charity sector, but Nick Brooks views the debate as a distraction. He believes the sector should address the question of transparency in general.

"There's a large gap between the perception of the general public and stakeholders about how charities are run and how they are actually run," says Brooks, a partner at the accountancy firm Kingston Smith and chair of the charity and voluntary sector group at the Institute of Chartered Accountants in England and Wales. "The public often doesn't understand the mechanics of running charities.

"I think we have to move down the transparency route and close the gap between perception and reality. Executive pay is a symptom, not the cause."

In October it was announced that Brooks would sit on the National Council for Voluntary Organisations' inquiry into executive pay. He welcomes the formation of the panel, which has been tasked with drawing up guidelines on setting salaries, but he says he also considers it to be "a knee-jerk reaction to something that has been out there a long time".

For many years, he says, charities have been required to include in their annual accounts the salary bandings of employees who earn more than £60,000 a year: if donors thought this was important, they could find that information. "I just wonder whether someone who donates to charity is really interested in the numbers or is just giving to the cause," he says.

Under attack

For Brooks, one issue that the debate on executive pay has raised is the charity sector's inability to defend itself when under attack. "When the sector gets bad press, there's no way of counteracting that," he says. "There's no organisation that represents the whole sector. The NCVO and the chief executives body Acevo, for example, have their own membership bases and remits, but they don't do the PR bit. In the US there is the Charity Defense Council - we need something like that in the UK."

He points out that in the late 1980s and early 1990s the charity sector was frequently accused of not being professional or commercial enough. But now it is acting in a more commercial way and paying salaries similar to those in the private sector - and is facing accusations that it pays too much.

"Part of this is driven by government passing the running of services on to charities and insisting that the sector should act in a commercial way or it won't get the contracts," he says. "When charities are run in this way, you need to be able to attract people to run them." He is especially opposed to the introduction of a cap on salaries, arguing that such a measure would mean that charities "would lose some good people".

Reputation of charities

Another case in which the reputation of charities has been brought into question has been the Cup Trust, the charity currently subject to a statutory inquiry by the Charity Commission after it was accused of being a tax-avoidance vehicle. Brooks says that the case raises issues about the duties of auditors and other professional advisers in instances where they suspect something might not be quite right.

"I don't know what the auditors thought about the Cup Trust, but my gut feeling is that the trust would have taken some advice before signing off the audit report," he says.

"The difficulty in this case is that it doesn't appear that anything has been done illegally. You're more into a moral situation in which somehow it doesn't smell right, but actually nothing is wrong technically. We might think that it's not in the spirit of charity, but it may well be legal - in which case, it puts the professional advisers in a difficult position."

But he points out that accountants and other professional advisers should be encouraging charities to blow the whistle to the Charity Commission if they suspect something might be wrong and, in instances where they don't or won't, the professional advisers themselves should contact the commission.

Financial skills

The recruitment of volunteers and trustees with financial skills has been a perennial problem for many charities and, as chair of the charity and voluntary sector group at the ICAEW, Brooks has been trying to attract more people who have financial expertise.

In the summer, ICAEW and the Chartered Accountants' Benevolent Association launched a free service to connect accountants who want to volunteer with charities that offer such opportunities. Brooks says the service allows charities to upload any volunteering opportunity, but aims specifically to help them to fill the financial skills void that many of them face.

"There's still a lack of financial expertise on charity boards," he says. "The idea is to encourage those in commercial organisations, or who might be retired but have a wealth of knowledge, to give to not-for-profit organisations. What is bread and butter in terms of knowledge for an accountant can be life-saving to a charity or community organisation."

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