The Charity Commission report into Oxfam is damning – the third sector is now fighting for its own survival

The public increasingly see charities as less trustworthy with fewer people giving as a result. But there are important reforms that could turn things around

When it comes to a decreasing lack of public trust it’s politicians who first spring to mind. But today’s release of the Charity Commission’s report into Oxfam’s sex scandal in Haiti points to another group fast falling from grace: the third sector.

Today’s report found that the charity had a “culture of tolerating poor behaviour” and had “repeatedly fallen below standards expected”. It highlights the failings of a sector still recovering from the Save the Children furore last year and hit again just last week with the allegations that the George Galloway-fronted Viva Palestina delivered no aid despite receiving £1m in donations.

Scandals are rife in every sector but their impact is different. The ongoing Huawei crisis is of course sparking concerns around tech security – yet no one is ditching their iPhone X because of the criticism of Huawei’s phones. However charities of every size are feeling the aftershocks of the abuses of power seen within the sector’s largest players.

This ripple effect isn’t just in the minds of concerned charity CEOs. Research from the Charities Aid Foundation published just last month revealed that both trust and donor numbers suffered a marked decrease between 2016 and 2018. The proportion of people giving money to charity either directly or via sponsorship dropped from 69 per cent to 65 per cent and now less than half – 48 per cent – of people believe that charities are trustworthy.

Whilst the Foundation identified that the reduction in donors was offset by an increase in the total amount of money donated, it’s incredibly worrying to discover that the majority of people don’t think charities are trustworthy.

In addition to being battered by scandals and the resultant drop in public confidence, the third sector is facing competition from a new source: businesses. Brands and for-profit companies are increasingly winning the hearts of consumers through new social initiatives and campaigns, as social consciousness becomes commodified.

Last year’s Edelman earned brand study found that globally 63 per cent of consumers now buy on belief, and as a result businesses are hurrying to update their corporate social responsibility campaigns. Though in itself, this shift is positive – it’s good to see companies putting profit to public service – the knock-on effect is that charities are having to work harder than ever to secure donations. Why would an individual donate to a charity they don’t trust when they believe the money from their latest purchase will have some worthwhile impact anyway?

So, how can charities rebuild public trust and what does the third sector need to do to in order to thrive?

Increased “transparency” is usually the first answer given – remove the veil of bureaucracy masking your activities and openly share income and expenditure to demonstrate how donations are used. But it shouldn’t be the conclusive one – it’s only a superficial solution. Only an overhaul of our thinking and of every charity’s structure, though potentially painful, would be able to reverse this downward trend.

What’s needed is a shift in the balance of power and resource allocation towards those delivering projects on the front line. This is particularly the case with international aid, as delivered by the recently scandal-hit large charities, because elaborate theoretical ideas mean nothing without the input of lived experience and a nuanced knowledge of the reality on the ground.

The third sector needs to be selecting the best people to work at grassroots level and then letting their experiences and knowledge lead the strategy. A head office is of course crucial for effective governance, smooth facilitation and fundraising but charities need to structure themselves so that more weight is given to the outreach itself.

At Kidasha, we practice what we preach. Whilst we have a couple of staff in London, the vast majority of our team are in Nepal as that’s the country where we work. And we recruit from local communities wherever possible. In fact, many of our team members delivering aid are those who first benefitted from Kidasha’s support themselves.

Charities also need to rethink the way they measure and communicate the success and impact of their work. All too often we and our donors become overly focussed on cost ratios and whilst of course we have a responsibility to ensure donations are used to the greatest effect, our focus needs to be on maximising impact, rather than reducing costs.

Social investment is no different from investment in the private sector; investors need to have confidence in how their investment is managed and the return it is making. So, in addition to employing the best people at the grassroots level, charities need to behave and be run as professional businesses and that means investing in professional leadership and sound financial management rather than relying on well-meaning inexperienced volunteers.

As the media and public chew over the Charity Commission’s findings today and in the coming week, charities of every size and shape need to sit up and take note. The Oxfam scandal isn’t just a sharp reminder for big charities to thoroughly investigate all claims of wrongdoing, but a message to the whole third sector to wake up to the low ebb of trust before it’s too late.

Janice Miller is CEO of Kidasha, a children’s charity working with those in extreme urban poverty in Nepal