Donations to charities spent on administration

The Courier Mail in Brisbane has today released a report on ‘New website set to expose charities spending upwards of 60 percent of donations on administration costs.’

What amazes me is the theory that when you work for charities you should be doing it for nothing.  In order for charities to attract quality staff they need to pay for them – whether that is to provide a service to someone or the staff to administer things like fundraising.  It is not possible to have a situation where every dollar raised goes into directly helping someone, unless you have some other method for paying for staff and general administration.

Look at it from a business perspective, if you could guarantee that for every $60 you spent on someone or something it would generate an additional $40 in business you would not be unhappy with those guaranteed returns.  Even when the government gives a charity money there is a administration cost – you need the CEO, the finance staff, HR, IT, marketing services to support, report on and grow the finances you are given.  The question is here, not judging the costs on the basis they should all be returned to a charity, but how do you judge each charities success?  Surely the services they provide and the efficiency and transparency with which they are delivered must be a critical component.  Judging by finances alone is cold and lacks understanding of the individual cause.

Do you really think charities could survive if they had no administrative support?

Even when you decide to raise money for charities, there is a cost.  If you decide to participate in a fun run for a charity and try to get people to support you, there is a cost.  You might be willing to pay for the t-shirt and cap to run in with the charity name on it, but someone had to build the brand, generate the materials, provide a mechanism for the donations to be accounted for and distributed.   There are laws and responsibilities to be adhered to along the way to ensure the processes are legal.  If a percentage of your fundraising dollar raised is not going to support these people and processes, who is paying for it?

Charities employ staff who often earn less than they would be working for a business.  They often give way more of their time because they care about the cause.  These are not rich people who have made their millions and are doing it on the side – these are everyday Australians of all sorts of backgrounds and financial circumstances.  Take these dedicated people away and you have very few charities left.  There is a cost for fundraising.

This debate it seems to me is at the same stage as we were 20 or 30 years ago when everyone thought with the introduction of Medicare, doctors should not be allowed to charge any extra.  There was an unspoken sentiment that doctors are rich and should look after us all for nothing.  I think most people now understand that is simply not the case.

If we leave the sensationalism out of a story designed to grab headlines, the real question for donors is whether the return is reasonable.  Expect that there is a cost, but then examine the charity closer to see if the way they are going about their business is reasonable.  Think of yourself is an investor – it can’t be all about emotion, but equally it can’t all be about dollars.

It’s easy to insight an emotional response by raising the already emotive issue of the ‘My School‘ website as a benchmark for charities.  The reality is that the intent of this site is not just to judge schools on their academic performance, but also on their overall culture and methodology so you can decide as to whether it is the right school for your child.  Done correctly a site which encourages transparency in reporting from charities and encourages people to dig deeper and understand the methods and culture the investment supports is a system worth pursuing.

Let’s not get caught up in meaningless simplified comparisons designed to grab headlines.  Bottom line, if your chosen charity is doing a good job and you know this because they are being open in how they operate – then support them.  Whether they spend 1% or 61% on administrative costs needs to be given context.  Look at the overall picture and the end results before you judge where the money is going.  Without you supporting your charities administration costs the other services would not exist.  It’s not sexy to promote raising funds for charities administration, but it is a component of all fundraising we need to accept and move on.

The only question you have to ask yourself as you give, when examining all the details is the percentage being spent on administration justified in helping the work being done by your charity including maintaining and growing it.  Just remember without a percentage to administration in the end you are throwing your money away because there is no mechanism in place to support your donation without it.