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Guidestar UK Debacle

Howard Lake | 25 November 2010 | Blogs

So after many years of struggling Guidestar UK is finally going into liquidation. What an utter farce! Those involved in promoting this project from the outset (and you know who you are !) should hang their heads in shame. They managed to help squander an enormous investment of public funds, even though it was clear from the outset that the business plan proffered for the project was fundamentally flawed. In my view HM Treasury was derelict in its duty of care, failing to ‘test’ the business plan by putting the project out to tender. This was a fundamental error, particularly as there were so many senior folk at the time expressing their concerns. For my part I can recall a conversation with a very smug official who took great delight in telling me that although they could have put the project out to tender, they were under no obligation to do so and in this case did not feel the need. £2,885,000 was therefore pumped in from the now rather ironically titled ‘Invest to Save’ budget.
At the time many of us expressed surprise at the scale of the Treasury support, for what was after all only a database with a web front end. Others expressed surprise that this funding was ultimately insufficient and that private philanthropy appears to have been necessary to bring the site to launch. The details remain unclear but I estimated at the time that circa £5 million was spent in total and the figure was never publically challenged. Many in the sector felt that the reliance on private philanthropy to kick start the project was disgraceful as there was little precedent for private philanthropy ever having been used to make available government owned data to the general public. The well meaning organisations who offered this philanthropy deserved so much more.
I felt in 2003 and feel even more strongly now that we have a right to know the exact expenditure involved in bringing this site to launch and to see a breakdown of how exactly how the money was allocated. To be clear, I’m not accusing anyone of any wrong doing, but as these were (at least in part) public monies I’m curious about the sums that were paid out for consultancy at the conception of the project and particularly the costs of the six-month exploratory effort led by Buzz Schmidt, chairman and founder of GuideStar in the United States. Schmidt’s engagement was conducted under what their US website (http://www.guidestar.org/about/press/032003.jsp) refers to as ‘the auspices of the Institute for Philanthropy’ in London, but no further details are provided. Given that Guidestar International appears to be one of the largest creditors of the now defunct Guidestar UK, claiming a total of £230,000 from the Administrator, I think this is a timely and legitimate question (http://www.civilsociety.co.uk/finance/news/content/7835/guidestar_administrator_publishes_details_of_sums_owed). Personally, I’d rather see the remaining monies refunded to the Directory of Social Change who took on the project at the last moment and do an immense amount of good for our sector.
In 2003 Schmidt is reported as saying, “The HM Treasury grant is enormously gratifying because it resulted entirely from the achievements of GuideStar in the United States and proves the universal utility of our model.” (http://www.guidestar.org/about/press/032003.jsp) Well of course the utility is a lot clearer today than it was in 2003, but putting aside the obvious, in my view the initial approach to the Treasury was based on the erroneous assumption that the Guidestar UK initiative would help bolster the public’s trust. Opening up access to detailed information about UK charities based on their financial accounts it was said would be a major step forward. There were however three major flaws to this argument. Firstly, key financial information was already available, both online and in hard copy. Secondly, published accounts are no basis whatsoever for assessing the performance of a charity. There are economies of scale, major differences between causes, major differences in the performance of different fundraising techniques etc. which combine to make such attempts nonsensical. Finally, while there are a handful of sophisticated donors looking for detailed information, we know from research that there simply are not hundreds of thousands of individuals eagerly waiting to download a pdf of their favourite charity’s annual report. The public need for information is much more basic, to understand what charities do and why and how they do it.
So was Guidestar in any sense helpful? While, it was never going to provide a service to the overwhelming majority of the public, it DOES provide very valuable data for academic researchers, for charities looking to research potential funders and for funders conducting aspects of their due diligence. There is also value for government and those seeking to make or influence public policy because of the aggregate data it supplies in respect of the sector or sub-sectors as a whole. There is substantive value there – but the nature of that value was never properly recognised and an appropriate cost-benefit analysis conducted.
If the goal was truly to build public trust and confidence in the sector, there were and are, much better ways of accomplishing this. With circa £5 million to invest we might actually have invested in some of these projects and seen philanthropy in this country grow as a consequence. Alas, this was not meant to be.
Adrian Sargeant
November 2010

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