Disclosure Does Not Equal Donations

The Australian public is more motivated to donate to a charity that communicates its intention to do good work through brand marketing, rather than to charities that discloses proof of their activities, a new study has found.

Australian charities that reveal more information or spend more on their programs year on year are not rewarded with higher household donations, according to the Macquarie Graduate School of Management report.

In contrast, the study found that charities that increased their marketing and advertising spend each year received more donations from households.

For every 1 per cent more of total donations spent on marketing and fundraising annually, a charity could experience a 3.24 per cent increase in total donations.

Authors of report, Associate Professor Debbie Haski-Leventhal and Christine Foot, said the results of the study were surprising.

“This study implies that improved disclosure practices on their own are unlikely to generate a significant financial return for charities because donors are not incorporating this type of information into their donating decisions” Foot said.

“We would like to see donors pay more attention to the outcomes achieved by the charities they donate to. Perhaps there is a role for an education campaign to inform donors of the availability of information and how to incorporate it into their donating decisions.”

The report provided several possible reasons for why disclosure did not lead to household donations.

“It may be that there is actually no relationship because donors do not care about disclosure information when they make a donation,” the report said.

“The ‘warm glow’ that one receives when making a donation is enough for many people, and information about the performance of the nonprofit does not affect the decision to give.

“Another possible reason is that donors do not know that information is available, or that the ‘signal visibility’ is low. This is also implied by a survey that found that 87 per cent of respondents would like to know more about how their donation was spent.”

The report, called The Relationship Between Disclosure and Household Donations to Nonprofit Organizations in Australia, reviewed the quantity of information charities disclosed.

Among the charities reviewed, disclosure was between 46 per cent and 66 per cent, which the authors said suggested room for significant improvement when it comes to the extent of disclosure among charities in Australia.