Accountants Now Able to Assess Social Impact of Charitable Work

It’s quite remarkable that, with the warm glow of economic recovery still to reach vast swathes of the UK population, just two charitable causes managed to raise a staggering total of over £60 million in little more than a week. The fact that neither the Philippines typhoon appeal nor Children in Need suffered from charitable overload is testament both to the amazing generosity of the British people and perhaps also to the power of television in transmitting such graphic and realistic images to our front rooms.

uk aid in tacloban philippine
photo credit: DFID

There may well be lessons here for a raft of other charities which would not appear to be faring quite so well according to a timely survey by leading charity accountants Baker Tilly. It seems that well over a quarter of respondents (28%) are reporting a decrease in income of up to 10% over the last 12 months. Considering that nearly half (47%) have suffered a reduction in government funding as the result of austerity measures, this figure perhaps looks fairly respectable even though it may not seem like it to the charities concerned.

One item that emerges loud and clear from the survey is the implied difference in approach by institutional as opposed to individual donors. We all know that the man or woman in the street will always drop a pound or two into a tin where he or she thinks that the cause is particularly worthwhile. However, public sector bodies and major donors like charitable trusts who have millions to distribute tend to be rather more discriminating and will be much more focused on outcomes and cold statistics.

This probably explains why nearly a third of charities who responded to the survey are now having their social impact independently measured by specialist charity accountants using a yardstick known as the Social Return On Investment (SROI).

If, for example, you are a charity that deals with rehabilitating drug addicts, it is possible to have the impact of your work measured in monetary terms so that public bodies and donors can see in simple basic terms how much bang they are getting for their buck.

In arriving at an SROI that is applicable in this instance, the accountants will first calculate the total economic benefit created by the charity’s work. An addict who is dependent on benefits but is subsequently enabled to return to paid employment will clearly create an economic benefit which comprises such factors as the amount of welfare benefits saved plus the amount of Income Tax and National Insurance paid.

There are also financial benefits which are not so obvious and difficult for the layman to calculate. These might include the cost of social services, health treatment and police intervention if crimes have been committed.

Finally, the accountants will consider any real or potential savings achieved by the charity’s intervention where it directly replaces another more expensive one (e.g. where successful drug rehabilitation is achieved more cheaply than it could be done by another service provider).

About the Author: This article is written by Jason Tucker