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18 October 2020 | 5 min read

What are charities? How big is a small charity? What do charities do? If you are working in the sector, you might think these are trivial questions. Having spent more than four years researching on charities, I can tell you that there are no easy answers.

It’s not unusual to have different understandings of social concepts like charities, so this is not a problem per se. For research, however, shared definitions are useful when comparing data sets or making assumptions about different parts of the sector. If more researchers adopted the same definitions, the evidence base on the sector would grow immensely and, with it, the ability to demonstrate impact. This blog summarises some of the key issues when defining the sector.

Voluntary sector, charity sector, non-profit sector, third sector – there are many, often interchangeable names for the sector. For example, at NCVO many of my research outputs use the term ‘voluntary organisations’. However, when talking to the media or public, I often switch to ‘charities’ as it’s more commonly understood. This isn’t perfect, but it’s the best compromise.

Similarly, it’s often unclear what kinds of organisations are included in ‘the sector’. NCVO’s annual sector report – the UK Civil Society Almanac – refers to the ‘voluntary sector’, but mostly focuses on registered charities, as that is where most data is available. And even then, only certain kinds, for example, it excludes universities with charitable registration. NCVO accepts social enterprises as being voluntary organisations and hundreds of its members are social enterprises. It’s unclear whether most people would include, or are thinking of, social enterprises when thinking about ‘voluntary organisations’ – or whether they refer mainly to registered charities and unregistered community groups. I’ve often seen research projects in or about the sector that seem to be unclear about what kinds of organisations they are referring to or aiming at.

How big is a small charity? It’s a surprisingly contested question.

Most often, income is used to determine size of organisations but even then, different groupings exist. For example, the Small Charities Coalition defines ‘small’ charities as those with an income under £1m. While the NCVO Almanac uses a more granular approach and distinguishes between six different income bands. For example, ‘micro and small’ charities are those with an income under £100,000. There are a number of different groupings used by other infrastructure bodies.

Aside from these groupings, all approaches that rely on fixed figures have a similar issue. For instance, an organisation with an income of £90,000 in 2000/01 would have an income of about £148,000 in 2017/18, assuming their income has grown with inflation. As a result, they move from one income band to another as income classifications are not changing. On an individual level this doesn’t matter too much. However, it makes it seem there is growth in the number of larger charities when some of this is linked to inflation.

Charities work across many different sectors. When charities register with the Charity Commission in England and Wales, they are classified based on three questions.

1. What does your charity do? (its purpose, eg. health, environment)
2. Who does your charity help? (its beneficiaries, eg. children, older people)
3. How does your charity operate? (its specific activities, eg. grant-making, service delivery)

One of the main problems is that charities self-select their own categories and can pick as many as they wish. Some categories are very broad (‘general charitable purposes’), while more specific activities such as food banks or homelessness services are not included. As a result, these categories are not very helpful for exploring how different sectors are doing or how many charities are active, for example, in mental health. The Charity Commission is currently rethinking their classification system, but it will take years until new categories are available for all charities.

NCVO uses a slightly amended version of the International Classification of Non Profit Organisations (ICNPO), which puts organisations into one single category based on their main activity. This is somewhat more helpful for looking at different subsectors. But some of the categories are still very broad, eg. ‘social services’, and often do not reflect the reality of many organisations that operate in more than one sector. For example, a community centre that also runs a sports club. Official surveys will often use other classification systems, such as the Standard Industrial Classification (SIC), while many other projects apply their own categories depending on their needs. This is particularly true for funders who might be interested in specific areas and therefore use their own subsector frameworks.

For many of these issues, there is no one size fits all. However, when collecting data on the sector, researchers should be clear themselves of the definitions they are using and why. Making use of existing frameworks allows for better comparisons while custom definitions might be more appropriate for very specific audiences. The more data can be brought together and matched up, the stronger the evidence base is for charities to make their case.