Donors and grant-makers can soon browse a charity's finances by going online with the launch of GuideStar. Patrick McCurry reports.
GuideStar, a web-based charity information system, has made a big difference to both donors and charities in the US. Now it's heading for these shores, with the help of the Charity Commission and government cash.
"In the US, GuideStar has become a major source of information and credibility for not-for-profits, as well as helping donors choose who they want to support," says Bente Strong, an account executive at investment company Capital Guardian Trust Company, who has advised wealthy Americans on donating to charity.
GuideStar is a free online database of information about the finances and activities of US charities and was launched in the US in 1994. It hopes to be up and running in the UK within a year, thanks to a Treasury grant of £2.9 million. It has the backing of the Charity Commission, the Home Office's Active Community Unit and the Institute for Philanthropy.
Strong says the resource could bring big benefits to the UK charity sector.
"In the US, being able to show audited and up-to-date information on GuideStar gives a charity credibility with potential donors or funders," she says. Wealthy donors also like it because it allows them to quickly vet charities they may be interested in supporting, she adds.
Rosie Chapman, policy director at the Charity Commission, compares GuideStar to "a free public library" that will be particularly useful for the public, journalists, researchers, grant-makers and government departments.
But not everyone has welcomed the idea. Adrian Sergeant, chair of the Centre for Voluntary Sector Management at Henley Management College, has said the database could be built more cheaply than GuideStar will do it.
Lindsay Boswell, chief executive of the Institute of Fundraising, also has reservations. He says GuideStar UK must go further than simply showing charities' accounts if it is to benefit the sector. "GuideStar should allow charities to talk about what they've done with their money, what the outcomes are, rather than getting bogged down in fundraising ratios," he says.
He adds that it is a curious time to launch GuideStar, given that there is still uncertainty about what the Standard Information Return, proposed by the Strategy Unit last year, will contain. The unit has recommended that large charities fill out a return containing additional information about their activities and focusing on their impact. "It's unclear what the return will require or who will disseminate it," says Boswell. "Will it be GuideStar?"
Buzz Schmidt, who launched GuideStar in the US, has been helping to get it off the ground.
He acknowledges that there are challenges, such as how to handle the different reporting systems for charities in England and Wales, Scotland and Northern Ireland.
Annual filings made by charities to the Charity Commission will form the basis of the database. But Schmidt accepts that inconsistencies in the way charities present their activities, particularly the impact of their work, poses another problem.
There may also be complaints, particularly from conservative trusts and foundations, at the prospect of seeing their report and accounts on a web site open to anyone.
"In the US, we had a lot of complaints from charities which thought the information they filed to our Internal Revenue Service was sacrosanct and should not be on a web site," says Schmidt, adding that now nearly all in the US not-for-profit sector welcome the increased transparency the web site has brought.
And the database is not just about financial information. "People investing in charities want to know the direction of the organisation, what its values are and the breadth of its work," says Schmidt. "Donors are looking for organisations whose work resonates with their own values."
The US GuideStar asks charities what they accomplished the previous year, their goals for the following year and what methodology they have used to assess their performance. There are likely to be similar questions for the UK web site, although it will be up to charities if they want to reply.
GuideStar has estimated it will provide benefits and savings worth £18 million in its first three years. Chapman says this will be due to a variety of factors, such as enabling charities to benchmark their activities more efficiently and enabling regulators, grant-makers and others to access information more quickly.
"Instead of having to attach a copy of its report and accounts with a grant application, a charity could simply refer the funder to GuideStar," she says.
She also believes the database could play a key role in helping charities identify potential partners and in identifying under-represented areas, whether by geographical area or activity. The tool will give charities a lot more knowledge about what is going on and who is doing what, she says.
However, she plays down its role in helping donors plan their giving.
While this is likely to be one of the web site's benefits, she believes there could be other web-based tools, such as one under development by the Charities Aid Foundation, which could play a bigger role in this area.
An assessment committee is being formed to steer GuideStar to its launch in the UK and make sure the Treasury money is spent wisely. This will include representatives from the Charity Commission, Active Community Unit, Charities Aid Foundation and from some charities that have supported the venture, such as Bridge House Estates Trust.
There is still more fundraising to do, says Schmidt, with another £1.8 million needed for the first three years. He hopes this can be raised from larger grant-makers.
In the longer term he expects that, if GuideStar UK is successful, it will be able to tap into funding from charitable trusts and foundations.
This would allow the main service to remain free while also seeking to raise income by charging for tailored information services.