Transparency: The Guidestar Effect

The launch of the GuideStar UK website has brought an extra level of transparency to the nation's voluntary sector. Kenneth Hoffman assesses the likely impacts of the site on both charities and grant-makers, and Mike Hudson reveals his tips on how voluntary organisations can add to and improve their GuideStar entries.


The arrival in the UK of GuideStar will be a significant shock to the system for charities, writes Kenneth Hoffman.

GuideStar UK, modelled on its US predecessor, has arrived. As a result, most charities' annual returns and accompanying financial accounts, as submitted to the Charity Commission, will be available online at

This has happened before, in the US. But the charity world has changed, with radical transparency affecting both operating charities and grant-making foundations. Figures once safely sequestered in the Charity Commission's offices or available only in hard copy will now be only a click away.


The most dramatic impact will be on operating charities - those that raise funds from the public and from foundations and trusts. Although it will remain difficult to winkle out the precise compensation of a UK chief executive, the wider implication of general, annual accounts appearing online is that charities must now consider not only what they do, but also how this is presented in the numbers.

In the US, the annual return for charities, Form 990, has a standardised income-and-expense statement. It requires that all expenditure be characterised in one of three categories - programme, management and general, or fundraising.

These figures are scrutinised most often by the wealthiest donors, who know where to look and what to look for.

However, I often see charities making no effort to allocate their expenses among the three categories. They leave it to their accountants, who might have neither fundraising nor marketing experience.

This choice can be catastrophic. Even though staff duties often overlap between the programme, management and fundraising categories, many accountants drop all salary expenses into 'management', leaving an embarrassingly small figure for 'programme' and an unrealistically small one for 'fundraising'.

The donors see the amount disproportionately spent on management and conclude the charity is spending its money on itself.

However, this can be avoided with just a little care in allocating salaries among the three categories. In a small charity, for example, a reallocation of just the chief executive's salary can change the entire cast of the annual return.

In cumulative financial reporting, as with balance sheets, online accounting will punish those charities that have bad habits, such as borrowing operating funds from permanent endowments or making generous loans to employees.

In the past, if a charity's board failed to take action, it was unlikely that anyone would. Now, however, these practices are revealed.

Those who are ultimately responsible will be identified - half the pages in the 2005 annual report required by the Charity Commission are devoted to listing information about trustees. And even if the Charity Commissioners keep their promise to suppress birth dates, the British obsession with privacy is about to suffer a grave shock. If this gets out, I predict a sharp drop in trustee recruitment.

The chief lesson for the operating charities seems plain - accounts are too important to be left to the accountants. It is essential to present the figures in the light of fundraising and marketing realities. That does not mean being deceitful. Rather, it requires a new-found sophistication.


On the other side of the desk, philanthropoids are facing a challenge on a scale they have never seen before. Suddenly, there is light flooding into their private world.

In the US, private foundations file a Form 990 annually. Amidst much turgid detail about endowment investments lie several veins of gold for grant-seekers. First, there is a comprehensive list of every grant, both during the current year and authorised for future payment. This alone would justify GuideStar's existence because it applies the essential corrective to foundation websites. Consider a choice between learning what the foundation says it is interested in and who actually got the dosh - which is the more reliable indicator of foundation interest? Guidelines exist principally as a reason to turn down applicants. They are much less useful in predicting who will be funded.

Next, foundations will have to live with a public list of their trustees.

This could lead to those trustees being lobbied for their support. In the US, where trustees often authorise five and even six-figure annual fees to themselves, one begins to cringe at the hypocrisy of application guidelines that strictly forbid any contact with the trustees.

In my many years of reading foundation returns, the current record holder is the Boston trust whose board members paid themselves $80,000 (£50,000) a year to attend four quarterly meetings to vote on grants. They also hired a private philanthropic administrative firm, for another £66,000 a year, to do all the work - except vote.

At the same time, one must read foundation accounts with realistic expectations.

Many US foundations spend up to a third of their income on administration, some hire consultants and some pay themselves. But foundation trustees will now be identified with certainty and will have to accept all the responsibility their power confers, no longer able to operate in secrecy.

For charities and foundations alike, the new age of GuideStar is upon us - all change.

Kenneth Hoffman is a consultant in fundraising and grant-making based in Boston, Massachusetts


Mike Hudson gives a step-by-step guide to how charities can make the most of their GuideStar entries.

A quiet revolution in the transparency of the sector is taking place in the form of GuideStar, the Summary Information Return and Sorp 2005.

GuideStar UK's website is the most public of these developments and is likely to become the first place journalists, funders and the public visit when they want information. However, most charities will want to improve the information presented because it is currently populated merely with boring information from regulatory returns.

The site is extraordinarily flexible, offering more than 40 fields in which charities can present themselves and upload reports, articles and newsletters. For many smaller charities, their GuideStar entries could initially be used as their own websites.

Here are eight steps to improve your entry:

1. Quick wins Make quick improvements - check that contact names, phone numbers, web and email addresses are correct. Include as many contact points as you like, including regional and branch offices. Upload your logo - it is easy to do and adds immediate impact to the summary page.

Tell donors what you want funding for and how to give, and tell volunteers how they can help and who to contact.

2. Correct errors Much of the material on the site has been taken from trustees' annual reports, which are often too long to read on screen and only partial. You can add a summary of activities to overcome this problem.

Make sure that the first paragraph of the summary is one punchy sentence, because this is what appears under the organisation name in the search results. Take the opportunity to update details of the services you provide.

3. Upload key documents You can upload your annual review, your governing document, policy statements, grant application packs and your latest newsletter.

WaterAid has put its bright Oasis magazine on the site, together with its annual review. Both make its GuideStar entry a more interesting visit.

4. Explain your finances Journalists and funders will look at your finances, so use the financial commentary field to explain unusual items, such as heavy investment in fundraising or significant changes in income or expenditure.

5. Present compelling achievements Tell viewers about your charity's achievements.

The recent accomplishments/ awards section should highlight the difference your organisation has made to people's lives or to the environment, and the policy changes that have resulted from your campaigns. For a good example of how to do this, look at the Sense entry.

6. Make sure the search engine finds your charity To get the best value from the search engine, add the charity's previous names, trading name, acronyms and the names of any charities that merged to form the current charity.

Make sure that any words visitors might enter to find your organisation are used in the summary of activities. This will help push your entry up the list of results when visitors search for charities in particular fields.

7. Look at other entries Many charities have updated their entries, but few have exploited the site's full capacity. Those that have made good progress include SightSavers, the RNIB, Help the Aged, Sense and WaterAid.

8. Final touches Further additions could include biographical details of your chief executive or chair, a brief history of the charity, the number of members and volunteers or a non-legal description of the charity's objectives.

Finally, many trustees' reports have been poorly scanned and many have date stamps, scratches and handwritten marks which give the type of scruffy and unprofessional appearance the sector wants to avoid. If you send or email it a copy, GuideStar will load up printed or clean versions.

People's expectations of charities are rising. They want to know what difference a charity has made, and the accomplishments section provides an ideal place to summarise achievements. Experience with our Shout About Success groups at the Compass Partnership has shown that it takes concerted efforts to produce a compelling articulation of the difference a charity is really making to people's lives, and to establish the systems to gather and summarise this information.

However, once organisations can express their achievements in a succinct and convincing way, a few simple messages can be conveyed in consistent ways through annual reports, fundraising applications, the Summary Information Return and, of course, on GuideStar.

Mike Hudson is director of the management consultancy Compass Partnership and a visiting fellow at the Cass Centre for Charity Effectiveness



Description of activities, services provided, charity category, beneficiary group, user involvement, recent accomplishments, summary of activities, fundraising review, future plans, future events, alternative and former names, history of the charity, financial commentary and how to help the charity


Grant-making policies, number and value of grants made and maximum and minimum grant sizes


Review of activities, official name and number, legal objects, structure and governance, trustee names, number of employees, staff costs, organisational policies, reserves, risk and investment, and financial results.

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