In this article, Special Advisor to CFG Pesh Framjee, discusses the Charity Commission's recent report into public trust. He outlines how simply looking at 'how much money goes to the cause' is a fallacy and that the real driver of trust is delivering on your purpose.
The Charity Commission’s latest Public Trust in Charities report (July 2025) reveals that three factors matter most to the public when deciding whether to trust a charity:
- That most of the money raised is spent directly on the causes the charity supports (53%)
- That the charity makes a real difference to people and communities by achieving its stated purpose (45%)
- It is easy to see how much the charity has raised, and how this money has been spent (39%)
I have been following these surveys for years and the findings are predictable and self-evidently true – but they also present a challenge. While it is entirely reasonable for the public to want their support to be used effectively, we must question the assumption that how much is "spent on the cause" is a reliable or even meaningful indicator of a charity's value. I prefer to see more focus on the second of the three factors.
The "how much goes to the cause" fallacy
The belief that the cost ratio of direct charitable expenditure to other expenditure can be used as a shorthand for effectiveness is one of the most persistent myths in the sector. This thinking is not just flawed, it is dangerous. Charities start underinvesting in essential functions simply to present a more appealing ratio. That is not good stewardship, it is a disservice to those we seek to support.
It is understandable that donors want their money to make a difference. However, the idea that you can draw a clear line between "money to the cause" and "money wasted on overheads" is really misleading. This false dichotomy implies that staff, infrastructure, safeguarding, technology, and fundraising are somehow optional. In reality, they are essential. Charities cannot deliver without skilled people and robust systems.
Overheads are not the opposite of impact. They are what make impact sustainable.
This message is not new. In 2013, the CEOs of GuideStar , Charity Navigator and BBB Wise Giving Alliance published open letters to donors and non-profits titled ‘The Overhead Myth’. These influential organisations had for long been using cost ratios to measure effectiveness. They later recognised that this was a flawed approach and denounced the use of overhead ratios as a primary measure of nonprofit performance and instead urged for a focus on transparency, governance, leadership, and results. That campaign marked a pivotal moment in the fight against reductive thinking in the sector. Yet, more than a decade later, the myth persists.
Discussions about transparency, accountability and the need for charities to demonstrate effectiveness and impact have moved centre stage. Regrettably, there continues to be a spurious belief that charities can be measured by looking at expenditure in the financial statements and trying to measure performance by seeing how much “goes to the cause”.
The Charity SORP is trying to raise the bar on better reporting of achievements and performance and there are no stereotyped solutions or yardsticks that would work for all charities and all circumstances. The task of setting spending priorities for charities will remain as difficult as ever: matching the demands to satisfy short-term needs against pressure for the resources required to achieve long-term solutions.
It is in this context that charity boards and management have to make difficult decisions and transparently explain their thinking. For too long some of these decisions, biased by concerns about cost ratios, have been suboptimal and boards and management have shied away from making good choices simply because they believe it would impact on how their cost ratios are perceived.
This has often led to an under investment in vital infrastructure and in areas considered ‘overheads’ such as information technology, human resources, skills training, good fundraising processes and effective governance and management. This in turn leads to a vicious cycle that exacerbates the problem. The press and other commentators and, through their reporting, donors and others have unrealistic expectations about what it takes to run an effective charity. Charity boards often react to these unrealistic expectations and fail to invest in vital infrastructure. This in turn leads to increasing the unrealistic expectations of doing more and more with less and less.
Charities are also to blame, although we understand that cost/overhead ratios are not a measure of efficiency or effectiveness, charities continue to use them in marketing materials. As long as we do this, commentators will continue to try and make superficial and misleading comparisons, further perpetuating the unrealistic expectations and poor understanding by highlighting financial ratios as a measure of effectiveness. This is because reports such as this one indicate that this is what donors want to see, and as a result the more difficult reporting on performance falls by the wayside.
The narrative needs to move on and the vicious cycle needs to be broken. We need to be bolder in our messaging – explaining operating realities, costs and what our organisations are really achieving. We need to stop talking about good and bad expenditure and focus instead on performance.
The real driver of trust: purpose delivered
If we want to maintain and build public trust and foster more effective decision making by charities and their donors we must reframe the conversation. The second most cited factor in the Trust Repot (whether the charity achieves its stated purpose and makes a real difference) is the one we should focus on.
We must:
- talk boldly about outcomes and impact not just inputs
- demonstrate how infrastructure and investment enable mission delivery
- explain why overheads are not waste, but a sign of strong stewardship
- push back against reductive rankings that rely on cost ratios
A call to action
We have an opportunity to lead a better conversation with the public. We must educate and advocate for a more nuanced, honest understanding of effectiveness. Let’s be clear: Charity effectiveness is about what is achieved, not just what is spent. If we continue to focus on cost ratios, we risk incentivising exactly the wrong behaviours.
We must keep challenging the myths – and to champion integrity, impact, and transparency as the true cornerstones of public trust. Let’s really try and change the narrative!
This article was originally posted on LinkedIn. See Pesh's full post.