A highly-critical report claiming charities spend a minority of their income on charitable purposes has been widely dismissed as inaccurate and misleading by sector figures.

The report from The True and Fair Foundation covered the public accounts of 5,543 charities with income over £0.5m. Its conclusions included that 292 charities, with a combined income of £2.4bn, spent 10 per cent or less on their charitable activities.

However, Acevo, NCVO, and a number of individual charities have panned the report after it received extensive coverage in the weekend press. The study was also widely criticised by sector figures on social media.

A hornet’s nest claimed 1,020 charities, with a combined income of £6bn, spent 50 per cent or less on their charitable activities.

The study focused in particular on 17 charities with over £50m in income, concluding the charities spent between 1 and 65 per cent of income on charitable activities at an average of 43 per cent.

But NCVO director of public policy Karl Wilding wrote in a blog post that the report is deliberately misleading. Wilding highlighted that charity accounts are not like company accounts, drawing particular attention to the costs associated with generating charitable funds through activities like trading and the distinction between this income and public donations.

Wilding also said the figures can be complicated by endowments that charities are often required to spend over long time periods, and large one-off donations in any given year.

Guide Dogs was one of the 17 large charities singled out by the report. In a statement, the charity said the figures are “inaccurate and misleading”. As a charity that does not receive government funding there are costs associated with generating income and the charity will continue to “carefully monitor” its financial position.

“What the report has deemed as non-charitable expenditure can be linked to trading, fundraising, sales of assets or building reserves, which generate additional income and help donations to go further. Naturally there are expenses involved in running a charity, but they make additional money for Guide Dogs and without their contribution, we would have less to spend on our life-changing work.”

Sue Ryder was another large charity singled out. A hornets’ nest claimed that the charity spends 46 per cent of its income on charitable activity. The charity said it generates income from a range of sources making comparison across charities difficult.

Excluding two extraordinary projects Sue Ryder spent £3.5m to raise £12.3m last year, the charity said, spending 72p in every pound raised on charitable aims. Sue Ryder is one of the country’s largest trading charities, and generated £14m through retail last year. The charity said it cost £45.6m to raise this income.

Acevo chief executive Sir Stephen Bubb said the True and Fair Foundation’s “flawed and simplistic analysis” does not include campaigning and fundraising as charitable activity, when these are “the lifeblood of the great British charitable tradition”.

“It is bizarre that people who worked in the sophisticated world of finance have overlooked the lesson of the Kids Company collapse. Namely, that to spend every penny on the frontline and neglect other essential spending leads inevitably to the collapse of the frontline with tragic consequences. Kids Company taught us that it is vital that charities invest money in resilience, professionalism and for the long term.”

The Charity Commission was quoted by the Telegraph stating the analysis is flawed as it failed to consider basic information in the charities' accounts.

Responding to the criticism, True and Fair Foundation said it used the same methodology as the Charity Commission to determine the percentage of funds spent on charitable activities.

“The irony of the Charity Commission, the regulator, to be making such comments as they have on our research, means that they must have no confidence whatsoever in their own data, its reliability and substance,” the foundation said in a statement.

In a statement signed by True and Fair Foundation founder Gina Miller NCVO was criticised for seeking to deny the formula used in the report and dismissed as “no more than an industry lobby group that seeks to defend the indefensible”.

“It is a great shame that the industry bodies appear to have forgotten that the purpose of charities should be to fund deserving activities and programs, rather than grossly inefficient overhead structures and in many cases over paid executives and bloated fundraising departments,” the statement said.

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