Common myths surrounding charities are explored in new guidance published by the chartered accountancy body the ICAEW. The guidance, called Dispelling common myths about charities, covers how charities are run, carry out their work, are funded and staffed, and whether they are liable for tax or their vulnerability to fraud, among other issues. The guide offers recommendations to help dispel them and so keep public and donor confidence.
It covers why stakeholders, including donors, should understand not only what charities do, but to shine a light on how they operate. A working group behind the guide included charity practitioners from the accountancy firms BDO, Crowe and RSM. It was chaired by Pesh Framjee, who has led several not-for-profit teams within accountancy firms. He said: “There are many negative misconceptions created by the myths that abound about charities. As someone that has worked with and for charities for over 35 years, I too often see the negative consequences that impact on charities. It is incumbent on all of us who recognise the important work that charities do to actively try and dispel these myths and ensure that the popular narrative focuses on the facts and reality.”
Kristina Kopic, ICAEW Head of Charity and Voluntary Sector, ICAEW added: “People’s goodwill and generosity remain the lifeblood of the sector, but this is at risk if the public misunderstand what charities do and how they operate. We hope that by tackling the 10 most common myths about how the voluntary sector operates, we will encourage charity trustees, staff, and advisers to be transparent, in areas where misconceptions are prevalent.
The guidance considers ten myths surrounding charities and their operations:
Charities spend too much on fundraising.
They should not make a surplus or build up cash reserves.
Too much is spent on highly paid executives.
They should not undertake commercial activities.
Charities should be run and staffed [for free] by volunteers.
Too much is spent on overheads.
Charities don’t pay taxes, so need less money.
Professional qualifications are needed to become a charity trustee.
Charities are less vulnerable to fraud than other organisations.
Charities should not engage in campaigning and political activity.
On fraud, trustees need to recognise their charities can be vulnerable to different types of fraud and develop an effective culture of prevention, the guidance says. Every dimension of fighting fraud – deterrence, detection, and response – requires an effective anti-fraud culture at its foundation.
Fraud awareness does remain low among charities, the document admits. Nearly half believe they are not at risk of fraud, according to an October 2019 report by the sector regulator Charity Commission and the Fraud Advisory Panel (itself a charity). For more on countering fraud against charities, visit the Panel’s website.
