How much government aid does a charity like Oxfam actually get?

The international development secretary has warned the government could cut Oxfam’s funding as a response to a scandal in Haiti. 

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Generally, charities enjoy a lot of trust. In fact, at the end of last year, they were the fifth most trusted public institution, after the NHS, armed forces, police, and schools. But public confidence has wavered in recent years, in part down to distrust about how charities spend donations and a lack of knowledge about where donations go.

The recent allegations against Oxfam and its staff will do nothing to help that public trust, and will only serve to open up more scrutiny on the sector. Last Friday, The Times reported that a number of aid workers were sacked or allowed to resign in 2011 after an internal inquiry into alleged sexual exploitation. According to the leaked report, one of the men, Roland van Hauwermeiren, admitted to using prostitutes in Haiti, during post-earthquake relief efforts. The revelations have triggered a public debate about the conduct of aid workers, and how exactly charities should be monitored and funded. 

Unlike profit-making companies, which may suffer from a bad reputation and still rake in cash (arms dealers, anyone?) charities rely on their reputations to attract funding and donations. Now, Oxfam’s looks in jeopardy. International development secretary Penny Mordaunt reiterated her warning that the government could cut Oxfam’s funding as a response to the scandal. But what would that mean for the charity’s future?

As is frequently complained about by the Jacob Rees Moggs of this world, the government spends 0.7 per cent of its national income on foreign aid. That equates to £13.4bn. The UK first hit this target in 2013 and enshrined the spending requirement in law two years later.

Foreign aid money is either earmarked for specific projects and goes directly to the country involved or is pooled into larger budgets of multilateral organisations like the European Commission. Last year, the top recipients of bilateral aid were Pakistan, Syria and Ethiopia.

Only a tiny amount of Department for International Development’s overall international aid budget is given straight to Oxfam – the charity doesn’t even make it in on the list of top 20 recipients of multilateral aid. Last year DFid gave £31.7m to the charity, less than a quarter of a percent of its overall foreign aid budget. So from the government’s perspective, just a drop in the ocean.

But if Mordaunt were to carry out her threat and cut all of Oxfam’s government funding, what effect would that have on the charity? 

Well... Oxfam would definitely notice. Of its £409m income last year, 7 per cent came from the UK government. That's in comparison to donations and legacies which accounted for 26 per cent of funding and trading sales which make up just over a fifth.

The charity itself spends about three quarters on charitable activities, and a quarter on wages and running costs. Last year, it spent £303.5m on charitable activities, mainly involving humanitarian response work and development work. A tiny fraction was spent on campaigning. The countries that benefited the most included Yemen, Nepal, South Sudan, Ethiopia, Jordan, Democratic Republic of Congo, and Iraq.

While Oxfam gives reasonably detailed explanations of its work in each country it aids, it doesn’t publicly account for every penny spent in frontline operations (after all, which organisation does make such intricate details public?) It’s no surprise that it's here where things get less transparent.

In the wider sector, concerns have been raised about money being spent in countries known for corruption, but there are no good estimates as to how much money is lost because of this. Anecdotal evidence also suggests efforts to protect budgets can also make things worse. While donors may have good intentions to spend their money wisely, bureaucratic spending rules can end up delaying urgent projects on the ground. Most employees who receive salaries don’t expect to have to account for how they spend it to their boss. Aid workers, too, receive salaries – but in disaster areas, their comparative wealth may give them a clout that few ordinary employees enjoy. 

Transparency and trust-building can take many forms. The solution to the Oxfam scandal is unlikely to lie in forensic accounting alone. Instead, the answer may be better character vetting for aid workers and closer information sharing between organisations in the sector. After all, the charity that subsequently employed van Hauwermeiren said it was never told of the allegations. In the case of the Oxfam aid workers in Haiti, for all the focus on the charity’s funds, the scandal has focused on the behaviour of the workers and how they allegedly abused the legitimate structures of aid relief. 

An examination of the huge power imbalance between rich Western aid workers and those in urgent need could also help the sector answer questions about why this has happened. This could lead to more tangible solutions and safeguards like whistleblower networks or “humanitarian passports” that detail an aid workers’ previous conduct. Oxfam itself has said that it will look carefully at how it recruits and manages its aid workers, especially in situations where the urgent need for aid may increase pressure to find frontline workers. It has also introduced a new code of conduct since 2011 which stipulates: “I will also not exchange money, offers of employment, employment, goods or services for sex or sexual favours.”

While on the face of it, giving money to charity should be fairly easy for a government to defend, in practice it actually requires having quite a sophisticated conversation about the realities of charity funding. It is yet to be seen whether Oxfam’s turmoil will produce such discussions within government, or only further entrench the current ideological divides.


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