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10 Oct 2012

Acu-men on a mission; why we need a simple way for the public to know what a charity spends on its cause

It’s time the sector stopped huffing and puffing and bit the bullet. The public has no easy way of knowing whether a charity is spending enough of its income on its mission, nor whether that money is doing a good job.

This matters because the evidence is overwhelming; the biggest worry from nfpSynergy’s research with the public is whether too little money goes to the actual cause. People’s second largest concern is being unclear on how donations are spent. Much research, including our own, has also flagged whether donations are well spent as a major concern for the public.

Yet we as a sector do nothing to make it easier, except wring our collective hands and say ‘how complicated it is’, ‘what is admin?’ and ‘it should be impact that is measured’.

My conversion to the cause of simple metrics came about a month ago. A charity rang me and asked me to buy some of their raffle tickets. As the charming woman tried to sweet talk me into giving, I looked them up on the Charity Commission website. Their finances were shocking. Out of an income of £1.6 million, they spent only £800k. Out of the £800k, just £105k was spent on ‘charitable activities’. So, less than 7% of their income went on the ‘cause’. Do I know that because the Commission’s website flashed up the warning bells when I looked at their summary data? Not at all. I had to download their full accounts and finally found the data on page 7. I didn’t donate to them.

My question is this. Are we really happy as a sector for charities to put in such a poor financial performance? Will we collude through inaction and allow it to be very, very difficult to find that out? How many other charities are there whose conversion of donations into cause is equally poor?

I don’t propose anything too radical to start with. Just a few icons on the Commission website, so that if I want to look at the financial details I could see how much money is spent on charitable activities at a glance. Perhaps a big tick on that front page indicating that a charity has spent more than half of its income on charitable activities and a big cross if it hasn’t. That would be a start.

The apologists for opaqueness have all sorts of reasons why this isn’t a good idea. Their strongest argument is that charities are about impact, not trite percentages. That’s true. A simple metric that indicated that a charity had a real impact would be amazing. Is there a single charity with a measure of impact you can remember? Think hard and name one. The impact reports that many charities produce are as impenetrable and unread as their annual reports. Any message on impact needs to be put across in 15 words or 15 seconds in today’s multi-tasking, multi-message world.

The problem with the ‘it’s all too complicated’ justification for non-disclosure is that it helps no one. Doing nothing reassures no one that their donation is well spent. Indeed, it almost certainly does the opposite. Our research at nfpSynergy shows that the public think charities spend around 39% of their income on admin, while they see an acceptable amount as more like 17%. The public doesn’t assume everything is rosy with how charities spend their money when left to their own devices; quite the opposite.

We need to help the public understand how their donations are spent. Easily. Quickly. We could do nothing, but that doesn’t treat the public, donors or beneficiaries with the respect they deserve, nor build their trust in charities and what they do.

Joe Saxton

Want charities to be an open book? Or do you a rebel against this cause? Leave a comment below.

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Open book PLEASE.

Open book PLEASE.
I have direct debits giving smallish monthly payments to five charities.

Previously,I contacted the five to enquire exactly what percentage of donations went to the good cause.
I can't quote the exact replies but,bar one,they all seemed OK to me and I continued with the DDs.However,they may have been fibbing or been economical with the verite.
Unlike you,I am not prepared to scour through annual accounts.
Perhaps your organisation could compile these statistics!
Thr "bar one" org. was Amnesty International and I accept that it is very difficult to quantify exactly what goes in "charity".Most would obviously go on "Admin" in their case.
regards,
Bernie

I contacted www

I contacted www.standup2cancer.org asking if they have a position on funding research using live animals, as I will not fund such archaic research. As expected they will not give me a straight answer so I will not support them. Charities funding animal research are commonly less than open about their willingness to fund painful animal experiments.

Absolutely agree, Joe.

Absolutely agree, Joe. Without open book, we are allowing the expectations to be set erroneously, as your data suggests. What surprises me is that the FR departments of many charities reject putting simple 'percent of income spent on charitable activities' declarations on their material today, when they are so much lower than the 39% - or even the 17% - you state above! Yes, it is complicated to create a perfect solution, particularly on a sector wide basis; but 'fit for purpose' solutions at an individual organization level can and should be deployed NOW. It may not be the reason why donors will support your sector, but it could certainly be powerful in ensuring they support/continue to support a specific charity.

First define Admin! SORP has

First define Admin! SORP has been helping us argue for years that unless our costs are related to Governance or Fundraising they are Charitable Activities. So is Admin the same as Governance or is it the same as Support Costs allocated to Charitable Activities.

I'm not arguing here for Opaqueness, my approach when teaching (having written the guidance in Inputs Matter in 2003) is to be clear and enable the track from functional expenditure to SOFA category to be capable of following by most people.

When I'm asked what my charity's admin costs are, my reply is "define admin". In most cases what people mean is Governance costs, usually costs which are externally imposed, so then the answer comes to "about 5%".

From a common sense point of

From a common sense point of view, transparency has to help. But so will a level playing field... For example (as far as I'm aware) Comic Relief still communicates that 100% of the money it raises goes to support its causes but I know people who work there so who pays their salaries if it receives no other external funding?

Powerful and persuasive marketing from the big boys and girls isn't helping us all to be transparent (if transparent means honest too...)

That's an easy one. Comib

That's an easy one. Comib Relief pays all of its costs from the interest it earns on the money raised. They invest that until it is drawn down by recipients. That is easily seen from their accounts.

Great info about Comic relief

Great info about Comic relief, thanks for sharing... but if interest earned is from donations in the first place, shouldn't this - in the spirit of the claim that all money donated goes to the causes - also be used to support projects?

Is it a question of the spirit versus the letter?

I'm not decrying the work, just pointing out that as in all walks of life, reporting via external communications can and does imply one set of circumstances when readers may perceive it to be something else...

I wonder if a definition of overheads for marketing and communications purposes would help?

Acu-men on a mission; why we need a simple way for the public to know what a charity spends on its cause

Acu-men on a mission; why we need a simple way for the public to know what a charity spends on its cause

Joe Saxton

Want charities to be an open book? Or do you a rebel against this cause? Leave a comment below.

Open book PLEASE.

I contacted www

Absolutely agree, Joe.

First define Admin! SORP has

From a common sense point of

That's an easy one. Comib

Great info about Comic relief

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