Understandability and Transparency of the Financial Statements of ...

more effectively in order to increase their donor base (Radio New Zealand, 27 August
2009). Her view is supported by Lumley (2009, p. 1), who states:
In order to demonstrate that it does deliver benefit to the people it‟s supposed to,
and crucially to demonstrate that as much benefit as possible is being delivered,
the charity must measure its outcomes for those beneficiaries.
Thus, it is essential that outcome reporting emphasises the changes a charity has made
to its beneficiaries‟ lives. There is an assumption that these changes are positive, but
this is not necessarily the case. Therefore, outcome measures need to be evaluated to
ensure that appropriate information is reported and that charities are not trying to
improve their results inappropriately, which will be discussed next.
8.3.1.2 The need to evaluate performance measures
Charities need to evaluate the effect that they are having on their beneficiaries to ensure
this is positive. Some charities rather arrogantly consider that they know the effect is
positive so there is no need for any evaluation, as Ken Berger, CEO of Charity
Navigator highlighted in an interview:
One of the things that we hear [from charities] is “We know that we‟re having an
effect, what do you mean that you want us to have to go through all of that
craziness with collecting data and stuff?” (Social Solutions, 2009)
Pendlebury, Jones and Karbhari (1994) felt that any independent verification of
charities‟ performance indicators, no matter what form it takes or who undertakes it, is
going to add costs for limited benefits. They also thought there would be an inevitable
emphasis given to measuring what is immediately measurable, rather than on what
should be measured. This view was supported by Connolly and Hyndman (2004) who
noted that if no verification of the outcomes is required there may be a temptation to
present outcomes in a manner which is perceived as more acceptable to the reader, for
example, by exaggerating good performance, regardless of its accuracy.
Although some charities may be able to deliver the best services without evaluating
their results, the potential for harm to the beneficiaries is too great to risk not evaluating
(Lumley, 2009; Natenshon, 2009). Charity Navigator finds that many charities consider
tracking outcomes “a burdensome drag on charities, diverting resources and attention
away from the real work” of charities and thus less than 10% of the charities they
evaluate measure outcomes (Berger, 2009, 1 June, p. 1).
The need for evaluation can be clearly seen internationally. Even though international
charities have spent over USD196 billion trying to improve the health of people in poor
countries, there has been minimal evaluation done on the impact, so it is not clear what
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