Charities that give poorly… should they be more transparent?

We all know how important it is for those who are fortunate to give to those who are less fortunate, especially at Christmastime, but have you ever stopped to consider how much or how little of what you donate is getting through? Sadly, charity isn’t always what it looks like, and today it is timely to talk about the difference between good and bad charities and how we can tell the difference, or even if we can tell the difference. Have you done any research about the charities you donate to?

We’re a generous lot here in Australia, according to ATO statistics, about 4.6 million Australians donate to charity every year. But have you ever stopped to consider where your money might be going?

When we donate, we all think altruistically that the funds are going to get to the end-goal – the people and organisations that really need it, whether they be charities for children or those in worldwide need.  We know in our logical centre that some of the money will be poured into administration and management costs. But do you ever stop and wonder how much of our money reaches the end goal?  We’re going to  take a look. So I ask you to consider how would it make you feel if you found out only a portion was getting to the right people in some charities?

According to one news report, in the USA, The Kanye West Foundation, founded to support teen dropouts, spent $553,826 in 2009 on salaries, travel, and other administrative expenses. Only $573 actually went to charity. The charity closed mysteriously in 2011.

Choice did a study in 2014 that showed almost nine in 10 Australians give to charity annually. But one of their surveys found 81% of respondents didn’t know how much of their donation reached a charity’s beneficiaries after fundraising costs and overheads were subtracted.

It is a tough piece of information to get your hands on, but one many people are interested to understand.

According to Choice, in some cases charities receive as low as 10% of money raised at fundraising events after total costs are taken into account. In contrast, they have found examples where close to 100% of money donated made its way to the cause and it is often because the charity’s fundraising costs are being subsidised by another part of its operations or business.

Research company Givewell estimates fundraising costs take 19% of any money raised. The Australian Council for International Development (ACFID) says its members spend about 10% on fundraising, plus a similar amount on things like admin costs. A further chunk of money can also be used on overseas admin costs.

Our research found inconsistencies in the cost breakdowns given to charity donors. That is, if they’re communicated at all. Sometimes the stats simply aren’t available, and there has only fairly recently become a set of comparable and evidence-set information on which people can gain faith in the honesty of the sector, with the establishment of the Australian Charities and Not-for-Profits Commission who now oversee the sector’s integrity.

Its powers might make you cringe when you hear what these rather corporatised vehicles can do with funds, and how little of it gets to some of the pledged causes.

World Vision

According to a recent CHOICE report, in 2010 World Vision delivered $271.6 million to its causes around the world, and spent around $37.7 million on fundraising. This is roughly in line with the charity’s publicly-disclosed financial breakdown, which reveals that they spend around 78.8 per cent of funds on direct charity work, 11.5 per cent on fundraising, and 9.7 per cent on administration.

Total funds directed to core charitable work: 78.8 per cent

Surf Life Saving

The Daily Telegraph did some sleuthing and found that Surf Life Saving Foundation Incorporated is one of the worst offenders when it comes to frittering away donations. It spent a whopping 62 per cent of its $23.8 million gross fundraising revenue on administration costs, leaving just 38 per cent of donations to go towards the costs of keeping our beaches safe.

Total funds directed to core charitable work: 38 per cent

RSPCA

Animal welfare charity RSPCA is comprised of a national organisation, with individual hubs in each state or territory. So, depending on where you live, you may be donating to head office or one of the state-wide affiliates. The specifics of how your donations are spent may change slightly as a result, but we can look at the NSW breakdown as a guide: Here, funds are sliced with 9 per cent spent on admin, 18 per cent spent on marketing and fundraising, and 73 per cent on direct animal welfare work.

Total funds directed to core charitable work: 73 per cent

The Daily Telegraph provided this research in 2013/14 year:

In contrast some of the less scrutinised charitable vehicles out there have plenty of good intent, but perhaps too many overheads to allow the funds to reach their community. And I suspect if there were a database like MySchools where we could compare every Australian charity in terms of the CEO’s salary as a percentage of total turnover it might make us all sit up and reconsider.

In one report, a charitable trust which donates to Melbourne’s Royal Children’s Hospital has lost tens of millions of dollars last year while still paying its corporate trustee millions in fees, according to a charities lobby group.

The US Government has stepped into what seems to be some considerable rorting of the charitable system in their country, and named and shamed the 50 worst charities in the USA last year.

Ultimately, if you give to charity, there is four bold rules:

1. give directly to your charity of choice, not via an intermediary. “If you want to make a difference, don’t wait to be asked and don’t wait for the charity to spend money on fundraising. Give, and give as generously as you can,” says the FIA.
2. Give by giving your time as a volunteer. More than 30% of Australia’s adult population volunteers with various non-profit organisations, including charities. They each give an average of 56 hours of their time per year.
3. Resist giving as less financially efficient events like charity events, dinners and balls where catering can mean that less than half your ticket price goes to charity, or possibly a lot more.
4. Avoid telemarketers, street hustlers and other sales persons. These people are often hired by commercial agencies and not by the charity so may not have the best interests of the charity at heart.

Do you donate to charity?  Are you skeptical of where your money is going?