Guidance has been issued outlining the top ten myths surrounding charities and how the sector can tackle such misconceptions.

These myths largely focus on misconceptions around charities finances’ and how much they spend on their organisation, including spending on senior staff and fundraising.

The most common myths, which have been revealed in guidance from the Institute of Chartered Accountants in England and Wales (ICAEW), are:

1. Charities spend too much on fundraising.
2. They should not make a surplus or build up cash reserves.
3. Too much is spent on highly paid executives.
4. They should not undertake commercial activities.
5. Charities should be run and staffed [for free] by volunteers.
6. Too much is spent on overheads.
7. Charities don’t pay taxes, so need less money.
8. Professional qualifications are needed to become a charity trustee.
9. Charities are less vulnerable to fraud than other organisations.
10. Charities should not engage in campaigning and political activity.

The guidance has been issued by the accountancy body to provide counter arguments that charities can use to dispel misconceptions so that “pubic and donor confidence in the sector” can be built, said ICAEW.

For example, the myth that too much of charity money is spent on overheads can be dispelled by using latest figures from the NCVO’s UK Civil Society Almanac that show 86% of charity sector spending is on activities directly linked to a charity’s purpose, such as its services.

“Charities should be able to explain how administration and other related costs will increase efficiency and improve impact, transparency, governance, and leadership, to understand where savings or investment could be made”, adds the guidance.

Similarly, charities are urged to counter the myth that they do not pay tax. While they qualify for some exemptions they do make tax contributions, for example payroll taxes and business rates.

“The guide advises charities that they should explain their tax contributions and the relevant tax reliefs and exemptions they have been granted,” states the guidance.

“They should also review their tax strategy to ensure they are claiming relevant tax reliefs and exemptions so they can maximise the funds available for their work. This is a complex area and charities may need to seek professional tax advice to optimise their tax affairs.”

Myths around charity CEO pay

The guidance also raises concern over a “narrative that charity executives are overpaid and that this diverts funds from the causes charities set out to help”. Research published last month by NfpResearch found that half the general public do not think charity chief executives should be paid at all.

The ICAEW guidance points out that most charity bosses’ salaries are “modest”.

According to ACEVO’s pay and equalities survey the median basic salary for charity CEOs in the UK was £56,000 in 2022, £4,000 down on figures for 2013, when the survey began.

Even when large salaries, of around £175,000 for major charities, are reported, more needs to be done to explain how these leaders often run complex operations within income levels of hundreds of millions of pounds.

“What is often overlooked when CEO salaries come under scrutiny is how broad and demanding their roles can be. Some charities are as complex, if not more so, as corporate organisations,” states the ICAEW guidance.

It states that charities can further help dispel myths around CEO salaries by ensuring that executive pay is proportionate by benchmarking remuneration against similar roles in organisations that are comparable in size, sector, and location”.

“Context is important, so charities should highlight how the senior management team have contributed to the positive impact of their work. Charities may also choose to communicate their commitment to paying all employees a fair wage, for example, if they are accredited by the Living Wage Foundation,” it adds.

ICAEW charity and voluntary sector head Kristina Kopic said: “Charities are value-led organisations that care deeply about the causes they serve, but they must operate professionally, or they might not survive. Donors want to know that the charity they support financially is sustainable and accomplishing its mission.

“In helping to put these common myths to bed once and for all, charities gain more time to focus on delivering their important work and reaching their strategic aims.”

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