Regulating Small and Medium Charities: Does It Improve Transparency and Accountability?

Internationally, there has been a steady increase in the number of countries instigating charity regulation. Public interest theory suggests that regulation increases organisational transparency through reducing information asymmetry, protects (or encourages) a competitive market, and leads to a distribution of resources which is in the public interest. While these arguments may explain charity regulation, the cost of compliance can be an issue for small- and medium-sized charities. Therefore, regulators tend to take a light-handed approach to small and medium charities’ information provision. This paper ascertains the impact of a light-handed enforcement regime on small and medium charities’ reporting, analysing the financial reporting practices of a selection of 300 small- and medium-sized charities registered with the former New Zealand Charities Commission against the Charities Act 2005 requirements and hence the rationale for this regulator. It uses this analysis to predict how the regulator’s activities might impact future reporting practices of charities.     

Reassessing Charity Trusteeship in Britain? Toward Conservatism, Not Change

The growing prominence given to charity trustees' strategy-making roles and responsibilities is encouraging reassessment of the values and purposes of trusteeship in Britain. This occurs against a background of an increasingly professionalized and managerialist charity sector. Trustees are seen, in public policy terms, as a homogeneous and leadership-oriented group, while some charity managers aspire to or are already fulfilling leadership roles. This research note reviews these developments, considering trustees' strategy-making and controlling functions, and the nature of the relations between charity staffs and trustees. It describes the development of a tentative typology by the authors, characterizing trustees' approaches to their roles, as a means of illustrating the heterogeneous rather than homogeneous nature of the overall charity trustee body. The research process, leading toward the typology's development, is outlined and critiqued. Reflections on the value of the typology are given and possible future developments in trusteeship are considered. The authors consider that those trustees willing to remain in role are likely to adopt custodial rather than entrepreneurial approaches to their trusteeship. Such a role is likely to be increasingly at odds with the role sought or adopted by senior managers in some charities, and also with the proactive model of trusteeship that is being encouraged by the regulatory systems for British charities.     

Effects of Corporate Support of a Charity on Public Perceptions of the Charity

A quasi-experimental design (N = 517) was used to investigate the effect on audience response to a supported charity if corporate support is featured in an advertisement. The results indicate that corporate support of a charity appears not to influence audience attitudes and donation intentions for the charity. A small portion of the audience may be motivated to donate when learning of a large corporate donation to the charity. The level of individuals’ favorability for the charity was the strongest predictor of their attitudes and intentions. Gender was also a predictor of more positive charity attitudes, with females reporting more positive attitudes than males for three of four charities. Managerial implications and areas for future research are discussed.     

The Disclosure Panacea: A Comparative Perspective on Charity Financial Reporting

This article examines the charity financial reporting regimes of three common law jurisdictions: Ireland, the UK and the US. It assesses whether these respective disclosure models improve either nonprofit behaviour or enforcement odds. Three core aspects of the regimes are reviewed: the reliability of the disclosed information, the consistency of such information and its ability to facilitate comparison between charities, and the level of enforcement arising from disclosure. Particular attention is paid to oversight mechanisms, including audits, and their rates of effectiveness in the regulation of charities. The article examines ongoing efforts to reform broader international accounting standards and considers the impact such moves are likely to have at both regional and national level for charity accountability. It concludes that given the markedly different spheres in which for-profits and nonprofits operate, care should be taken in modelling charity disclosure regimes on those developed for for-profit entities.     

Conversion Ratios, Efficiency and Obfuscation: A Study of the Impact of Changed UK Charity Accounting Requirements on External Stakeholders

Key stakeholders in the UK charity sector have, in recent years, advocated greater accountability for charity performance. Part of that debate has focussed on the use of conversion ratios as indicators of efficiency, with importance to stakeholders being contrasted with charities’ apparent reluctance to report such measures. Whilst, before 2005, conversion ratios could have been computed from financial statements, changes in the UK charity SORP have radically altered the ability of users to do this. This article explores the impact on the visibility of such information through an analysis of the financial statements of large UK charities before and after the 2005 changes. Overall, the findings suggest that, despite the stated intention of increasing transparency in respect of charity costs, the application of the changes has resulted in charities ‘managing’ the numbers and limiting their disclosures, possibly to the detriment of external stakeholders.     

Shining Light on Charities or Looking in the Wrong Place? Regulation-by-Transparency in Canada

The nature of charity reporting and transparency is changing significantly; while the longstanding focus on financial reporting remains, there is much greater emphasis on illuminating governance systems and impacts. Regulatory regimes are becoming more polycentric with the expansion of third party watchdogs and emergence of new self-regulatory bodies. With more open access to data, transparency has become an independent force in these regimes. The article outlines a conceptual model of charity regulatory regimes and applies this to analyze recent developments of regulation-by-transparency in Canada. Although the intent of encouraging greater transparency is seldom questioned, this Canadian case study demonstrates how transparency can become politicized, damaging the relationship between the regulator and the charitable sector. In addition, the open data movement means that charities now operate in a world in which neither they nor state regulators control access and use of information.     

Charity Transgressions, Trust and Accountability

This research demonstrates how sustained charity fraud is supported when organisations do not develop strong accountability links to salient stakeholders. Whilst increased regulation is one response to reduce charity fraud and to increase organisational accountability, regulators seldom recognise the myriad heterogeneous needs of stakeholders. This research explores the tactics employed by beneficiaries and the donating public to escalate their accountability demands on such charities. By preferring the most powerful stakeholders, charities miss the opportunity to design effective processes to discharge accountability to meet their moral obligations to legitimate stakeholders. This article calls for increased ??stakeholder understanding?? by charity governors as a policy to recognise the moral rights of these stakeholders and to reduce charity transgressions.     

Charity,Volunteering Type and Subjective Wellbeing

We examine the impact of volunteering and charitable donations on subjective wellbeing. We further consider if the model of the volunteering work (formal vs. informal) and the geographical location of the charity organisation (local vs. international) people donate to has any impact on subjective wellbeing. Using UK’s Community Life Survey data, we find that volunteering and engagement in charity are positively associated with subjective wellbeing, measured by individual life satisfaction. We show that while there is a positive effect of volunteering and charity on life satisfaction, the level of utility gained depends on the type of charity or volunteering organisation engaged with (i.e. local or international). Specifically, donating to local (neighbourhood) charities as opposed to international/national charities is associated with higher wellbeing. Similarly, engaging in informal volunteering, compared to formal volunteering, is associated with higher wellbeing. To explain our results, we use the construal-level theory of psychological distance, which suggests that people think more concretely of actions and objects that they find spatially and socially close.

     

FUNDRAISING INTERMEDIARIES INHIBIT QUALITY‐DRIVEN CHARITABLE DONATIONS

Charitable donations are frequently raised by an intermediary, which accepts donations and subsequently sends the proceeds to the chairty—for example, a workplace campaign for United Way, a 5‐km walk for Susan G. Komen, or buying cookies from a local troop for the Girl Scouts. These fundraisers can greatly increase donations received by a given charity, but how do they affect what types of charities we support? This article shows intermediary fundraisers can make donors insensitive to differences in charity quality: Unattractive charities can receive the same financial support as an attractive charity. In a series of across‐subject experiments, when donations are framed as going directly to the charity, unattractive charities receive fewer and smaller contributions relative to attractive charities; however, when donations for the same charities are collected by (meaningless) intermediary fundraising campaigns, donations become indistinguishable across charities. The fundraising campaign does not affect donor recall of charity identity or evaluation of charity quality; it simply precludes donors from using these data in the donation decision. Follow‐up experiments suggest the results are driven by information overload. (JEL A13, C91, C93, D61, D64, H41)     

The Effects of the Facial Expression of Beneficiaries in Charity Appeals and Psychological Involvement on Donation Intentions

To increase the effectiveness of fundraising campaigns, many human‐need charities include pictures of beneficiaries in their ads. However, it is unclear when and why the facial expression of these beneficiaries (sad versus happy) may influence the effectiveness of charity ads. To answer these questions, an experiment was conducted to investigate the effect of the facial expression on donation intentions, while considering the moderating role of psychological involvement with charities. It found that psychological involvement with charities moderated the impact of the facial expression on donation intentions in that seeing a picture of a sad versus happy person increased intentions to give among participants with lower levels of psychological involvement, whereas the reverse was true for highly involved participants. The moderating effect of psychological involvement was fully explained by the perceived efficacy of one's donation. The findings not only contribute to our understanding of the effect of the facial expression of people pictured in charity appeals on donation behavior, but also suggest that nonprofits should tailor their ads to target potential donors with various levels of psychological involvement with charities.     

Surviving mission drift: How charities can turn dependence on government contract funding to their own advantage

The widespread contracting out to British charities of welfare services previously furnished by the state has resulted in many charities operating in fields well outside those specified by their original missions. Challenges connected with charity mission drift have received a great deal of (mainly negative and critical) attention in the nonprofit practitioner literature in recent years, yet no academic research has been completed into exactly how charities respond managerially and operationally to government‐induced mission drift. This empirical study attempted to fill this important gap in knowledge about charity management through in‐depth case studies of three charities known to have experienced substantial mission drift during the last decade, focusing on the styles and types of approach the organizations had adopted in their dealings with government funding agencies. It emerged that the three charities accepted mission drift as a fact of life. Rather than simply supplying contract services to government bodies, the charities were highly proactive in seeking to initiate, direct, control, and assume overall strategic responsibility for state‐funded activities.     

Images and narratives of autism within charity discourses

This research explores awareness of issues and debates concerning images and narratives about disability amongst autism charity brand-management professionals and their counterparts in the creative industries. These include the role of charities in service provision, the social model of disability, and disability stigma. It describes and analyses past and recent charity advertisements in both the United Kingdom and the United States, with attention to the historical context of these and the views and practices of charity and advertising professionals and autistic self-advocates, using David Hevey’s three-stage framework for disability representation by charities. The research concludes by considering emerging counter-narratives, which suggest ways charities may escape the perceived need to produce pathos or fear as part of such campaigns.     

Charity Appeals Using Celebrity Endorsers: Celebrity Attributes Most Predictive of Audience Donation Intentions

We compare the relative influence of different celebrity endorser attributes on respondents’ intentions to donate to a fictitious charity. The celebrity endorser attributes we modeled are expertise, admirability, likeability, trustworthiness, and attractiveness. We examine the moderating effects of audience sex, and general attitudes toward charities. Finally, we examined the mediating effects of perceived endorser fit with the endorsed charity. Our results find that endorser expertise and admirability are significant predictors of audience donation intentions. Audience general attitudes toward charities are a significant moderator of the influence of endorser expertise and admirability on donation intentions. We discuss the implications of our findings for researchers and practitioners.

     

Charity law and pressure politics in Britain: after the Oxfam inquiry

The Charity Commissioners' report of inquiry into Oxfam in 1991 was heralded as having major significance for Britain's charities and their legal position with respect to political activity. The verdict was critical of the charity, and publicly threatened trustees with sanctions in the event of a recurrence of political abuse. However, the outcome cannot be claimed as an important victory for right-wing political forces in their campaign to end what in their view is an unacceptable left-wing political bias in some of the country's leading charitable agencies. Organisations like Oxfam will be able to continue to participate in the political arena. Nevertheless, they face awkward dilemmas concerning their relationships with government, at a time when their own understanding of third world problems and increasing pressure from their overseas partners urge them to take on the mantle of a pressure group.The author wishes to thank two referees of an earlier version of this paper for their exceptionally thorough and helpful comments. Any errors of fact or interpretation are, of course, the responsibility of the author.     

Will You Trust Me?: How Individual American Donors Respond to Informational Signals Regarding Local and Global Humanitarian Charities

When making charitable donations, individuals would like to have some assurance that their resources will be used appropriately, but they do not necessarily have the time to research charities thoroughly. Charities have thus joined voluntary regulatory programs to signal trustworthiness and good governance. We conduct a survey experiment to explore if individual donors in the United States are more willing to give to a charity participating in a voluntary regulatory program. Because voluntary programs vary in their institutional design, we further test whether the provision of third-party auditing (to ensure that charities abide by program rules and obligations) enhances donor confidence in the voluntary program. Finally, we explore whether individuals seek to circumvent information problems by donating to local charities as opposed to overseas charities. We find that charity membership in a voluntary program does not influence people’s willingness to donate significantly, but that location of operations is significant.     

International Charity: For the Poor?

We show how international charity leads to reduced self-help, exacerbated internal income inequality, and less charity for needy countries when international funds transfer is costly and there are information asymmetries. Mechanism design techniques are used to analyze international income transfer programs in the context of moral hazard, principal-agent, and adverse selection problems. We show that the burden of information asymmetry is borne by the most needy even when charities design incentive contracts which limit informational rents.     

Learning as a process of personal-social transformation: volunteering activity in health and social care charities

This paper explores how people learn about global societal challenges as they work towards them in collaborative activity. It focuses on the activity of volunteering within UK health and social charities and draws upon the approach of Transformative Activist Stance to conceptualize learning in this environment as a form of individual and social transformation. The study is a multiple qualitative case study, which includes three charities that address complex health and social challenges. By exploring how volunteers learn about and address complex societal challenges findings show the transformative opportunities this process offers for volunteers, the charity, and the wider community.     

Moral responsibilities of trustees: some first thoughts

The role of a trustee is unclear to most people, including many trustees. The author proposes a view of trustees as persons who have public responsibility for private or independent provision of a public good. This is a moral definition of trusteeship; without trusteeship a pluralist society would be in trouble. The author argues that trustees should be constrained by fiduciary duties, the common good, an interpretative responsibility, and some procedural norms.     

Were UK Culture, Sport and Recreation Charities Prepared for the 2008 Economic Downturn? An Application of Tuckman and Chang’s Measures of Financial Vulnerability

UK charities experienced rapid growth during the middle years of the first decade of the new millennium. The issue investigated in this study is whether the charities took the opportunity to strengthen their financial positions before the economic recession of 2008–2009. Having evaluated, and established the empirical robustness of, Tuckman and Chang’s measures of financial vulnerability, they are used as the basis for constructing a Charities Financial Exposure Index (CFEI). Variants of the index are applied to a panel of more than 300 large UK charities in the Culture, Sport and Recreation sector for the period 2002–2007. The findings are that by 2008 these charities were in a stronger financial position than they had been in 2002 and were therefore better prepared to face the onset of the so-called credit crunch recession.     

Phrasing the Charitable Bequest Inquiry

This paper reports interest levels associated with twenty-three different phrasings of a request to leave a gift to charity in a will among 9964 survey respondents. Previous research suggests that a review of one’s life story may be an important component of bequest decision-making. Other findings suggest that mortality reminders may increase support for social norms and the pursuit of symbolic immortality. The attempts to reference symbolic immortality tested here were not effective. However, results supported avoiding extraneous death terms (“that will take effect at my death”) and using social norms (“many people like to leave a gift to charity in their wills”). The strongest support arose for the addition of the phrase “to support causes that have been important in their/your life/lives” to explain either the respondent’s or the social norm exemplars’ intent in making such a gift. Among common terms, “a gift to charity in your will” generated greater interest than substitute terms such as “bequest,” “leave a legacy” or “remember your favorite charities.”