Charity running costs - statement
You may be aware of recent media coverage about the salaries of senior staff in charities, and charity ‘running costs’. We think that it would be helpful to set out what we, as Regulator, expect from charities regarding these issues, and to provide some perspective on how charities operate in Scotland.
The charity sector in Scotland is very diverse, from small local charities run by volunteers, to multi-million pound educational establishments and aid organisations that operate across the UK and internationally.
Clearly, some charities will cost more to run than others – for example, some charities’ services may be labour intensive, or their services may be expensive to deliver. Some may operate across a wide geographical area while others are focused on a single, local project. Some may provide healthcare services or education and employ numerous staff, while others operate with large numbers of volunteers. This makes it difficult to apply any simple rule of thumb or ratio to what a charity’s running costs should be.
The same is true of salaries. Many charities are very large organisations employing hundreds of people and responsible for charity assets worth millions of pounds. This clearly requires senior staff with the skills and experience they need to properly carry out this function. In other words, trustees need to consider what level of reward is necessary to attract and keep the people that a particular charity needs.
This is why we, as Regulator, require the charity trustees – those in charge of the charity – to show that they are making decisions on expenditure and salaries properly. The law requires them to:
- act in the best interests of the charity
- act in a manner consistent with the charity’s purposes
- act with care and diligence, and
- ensure that they comply with charity law and other legislation.
They must be able to show that they have taken decisions on salaries and other issues in line with their duties. As Regulator, we are there to check that they do so.
There is no set threshold for ‘running’ or ‘administration’ costs. This is because, as mentioned above, the charity sector is very diverse and some charities, by the nature of their services, will cost more to run than others. But we monitor the returns and accounts that charities submit to us annually, and where we identify an apparent issue we will undertake a more detailed review of the information supplied to us. In the great majority of cases, charity trustees are able to show that they are acting in the interests of the charity, but we have powers to take action where we find that they are not doing so.
In addition, we remain committed to transparency and we welcome measures already taken in this direction by charities. Charities’ accounts are publicly available documents, available on request from the charity direct. The Scottish Charity Register, updated daily, provides some financial information about individual charities, and we have plans to publish charity accounts on Register entries in the course of this year.
We also encourage charities to make sure that the information set out in their Trustees’ Annual Reports properly explains the charity’s activities, impact, and financial priorities. This is the way to give donors, funders and the public generally, the information they need to make up their own minds about how well a charity is using the money it’s entrusted with.