Third sector can't run on goodwill alone

Charity consultancy New Philanthropy Capital launches its new manifesto and argues for a standard framework to measure what the third sector does

Few subjects are likely to turn off and bore the average reader than the administrative burden placed on charities funded by local authorities and other government bodies. But few subjects are as likely to make the average charity chief executive's blood boil.

Simultaneously, it is widely recognised that charities need to improve the way they measure, demonstrate and communicate impact. Much is expected from the third sector by all political parties and the sector is keen to deliver, but the evidence base to support expectations and aspiration is limited, to say the least.

New Philanthropy Capital (NPC) combines these two observations to propose in its new manifesto for social impact [] the development of standardised reporting frameworks for impact measurement, which we are launching today.

By setting common parameters and indicators for evaluating the outcomes of organisations that are using the same interventions or working towards similar objectives, results will be easier to compare and the government can ensure it is investing in the organisations that are achieving the greatest impact.

Shared approaches to measurement

NPC is working with a group of charities that support prisoners' families (and, thereby, hopefully reduce re-offending) to establish shared approaches to measurement. A collaborative approach has also been used to good effect in homelessness with the development of the 'outcomes star' and with the Supporting People programme.

But how would these new frameworks be paid for? It is unrealistic to expect more money in the future; proposals must use existing funding or produce savings.

In 2008 research for the Cabinet Office, NPC found that, on average, 8% of each statutory contract in our research was spent on reporting back to funders. There is clearly huge potential for efficiency savings.

Based on this research, we estimate that £600m a year (8% of total third sector contracts) is spent on charities reporting back to government. Having standardised frameworks across government could reduce reporting by at least a quarter, saving the public purse over £150m a year.

This is 50% more than the entire budget for the National Audit Office, and would more than cover the costs of developing the frameworks as well as publishing the data collected to encourage better standards and performance.

Standardised reporting of results would actually save money and also help make a success of outcomes-based commissioning.

For charities there are also clear benefits. A streamlined reporting process would reduce the time spent by charities on tedious bureaucracy, give greater evidence of their impact, and increase the likelihood of more commissions.

Evidence gap

But we think even more needs to be done to address the evidence gap and help charities. In NPC's manifesto, we also propose that government diverts 20% of the funding currently invested in Capacitybuilders into an 'Impact Fund', which would offer funding to help charities measure their impact.

There is much goodwill to charities from within government, but there are still serious problems from bureaucracy and nonsensical reporting requirements, as well as a need for better and more robust evidence.

The sector's cheerleaders acknowledge the former but rarely take the latter seriously. NPC's proposals would start fixing these important problems, and help the sector truly realise its potential in public service delivery.

Martin Brookes is chief executive of New Philanthropy Capital, a charity consultancy and thinktank for charities and funders

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