Handouts become a serious business

( FT )- The City is giving more than ever before to education - but it is also demanding more than ever, from charities expected to demonstrate value for money.

JP Morgan, the investment bank, typifies the thinking. "We don't just sit back and write cheques," says Carol Lake, head of CSR at JP Morgan in London, whose charitable foundations give heavily to education. "We get involved in what outcomes we should expect to see, for example, and where the money should be targeted."

The City takes giving so seriously that it uses many of the same tools employed by fund managers and bankers to make decisions in their everyday working lives. New Philanthropy Capital, a charity that advises on giving, sends out analyst notes recommending individual charities. There is even a self-styled "venture philanthropy" organisation, Impetus, providing support to charities pondering big moves such as steep growth or merger.

But NPC warns that effectiveness cannot always be measured by a number. Nigel Harris, chief executive and an ex- Schroders man, says: "A charity wanting to improve literacy rates may well have more quantifiable metrics." But numerical criteria such as value-added "wouldn't be an appropriate measure for a charity involved in schools doing work on children's self-esteem."

City donors are professionally aware of the limitations of analysis based on numbers - just as traders at investment banks rely in part on maths and in part on gut feeling when making decisions. Ms Lake of JP Morgan concludes: "Right now, I think qualitative judgment plays the greater part."

But their language still shows a City way of thinking. Ark Schools, the education arm of Ark, the children's charity founded by City investment managers that gave ?9.1m to UK education and children's charities in the year to August, plans to sponsor more than 10 academies - state schools independent of local authorities. Lucy Heller, managing director of Ark Schools, says academy sponsorship is attractive to City donors because "it leverages substantial additional investment". The maximum of ?2m which donors contribute is more than matched by government spending on building a new school. Sponsors also gain the right to appoint the majority of governors - which allows them, for example, to choose the head teacher.

But academies are the most controversial part of the City's involvement in education. Critics say business people know little about how to run schools.

One solution is for the City to finance academies through experienced intermediaries such as Ark. Another solution - favoured by firms such as KPMG, which has co-sponsored the City of London KPMG Academy - is to recognise their limits and stick to them.

Ian Barlow, senior partner at KPMG's London office, says: "We've approached this with humility. We're not in the business of running schools." KPMG estimates "at least half" the ?4.4m it gave to UK charities last year - a combination of money and costed staff hours - was to education.

But KPMG insisted on a key role in appointing the academy's head. In common with other City firms that give money to education, it feels it has an eye for spotting talent - whether accountants, bankers or school principals.

What, in return, do City firms get out of funding education? Even the top-flight international banks say it is in their own interest to boost the London talent pool through better education. A programme of philanthropy can also give an institution an edge over the competition in attracting the best and the brightest. Esther Oxenbury , head of investment banking graduate recruitment at JP Morgan in London, says candidates sometimes ask about the bank's charitable activities. "I think it does make a difference to people's career choices."

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