Charity Bashing Unfair Says FIA CEO

Charities have been in the media this week, slammed over fundraising costs. Defending the sector, CEO of the Fundraising Institute of Australia, Rob Edwards says that without fundraising many charities would cease to exist.

In recent days several media outlets have raised some important issues regarding the charity sector, but it’s crucial some misconceptions about charities are dealt with at the outset.

There seems to be a general public belief that charities should have no administrative costs, and that every dollar should go to the cause. Inevitably there’s a cost to raising money.

The work that charities do – and the benefits it brings to Australia – can’t happen without fundraising. It’s hard to raise funds, so money needs to be spent on fundraising campaigns, events, special days etc to get a result.

Global fundraising thought leader and keynote speaker at the upcoming FIA International Conference, Dan Pallotta, is so concerned about this issue that, at the recent International Fundraising Congress, he urged charities to educate the public about the value of spending donated money on overheads such as advertising.

Why is fundraising necessary? Because charities are not businesses and, unless they are supported by government grants, they have no other income stream. They must rely on money from the public for the majority of their funding which, in Australia, is more than 60 per cent of all fundraising income.

Street fundraisers (sometimes referred to as 'chuggers' – short for 'charity muggers') draw a mixed response.  Some people see this expensive, aggressive form of fundraising as charities going to far — for others it is a necessary part of keeping organisations alive and able to carry out their work.  (Flickr Image:  Some rights reserved by HowardLake)

As the peak body representing professional fundraising, the FIA would be most concerned if organisations were raising money without administration, without proper planning, and without due process and oversight within the organisation. The FIA’s Code of Ethics and Professional Conduct requires members to undertake responsible collection and management of funds, and always to act in an open and professional manner that inspires public trust.

Australian donors should also be concerned if no such planning and oversight was in place for use of their hard-earned cash.

State and territory governments (except the Northern Territory) already have some checks and balances in place to help ensure donations are used wisely. For example, in NSW, at least 60 per cent of funds raised must go to charitable activities.

There are so many good causes, and there’s only so much money to go around. People don’t wake up one morning and suddenly decide to give to this or that charity. Fundraisers compete for a share of the public goodwill by promoting their particular endeavour.

Australians make a huge difference through their giving. According to Philanthropy Australia, in the 2007-08 income year, individual taxpayers donated $2.3 billion, an increase of 24.5 per cent from the previous year. It appears as a nation, our generosity is growing.

Other facts and figures of note from the Australian Government's independent research and advisory body – the Productivity Commission, are:

• There are 59,000 Not for Profits the government recognises as “economically significant”.
• Those organisations contribute $43 billion to Australia’s gross domestic product.
• They employ eight per cent of Australians.
• 4.6 million volunteers work with NFPs with a wage equivalent of $15 billion.

If charities did not exist, the cost to governments and to taxpayers of filling that void would be astronomical. If governments don’t fill that gap, without charities, no-one would – leading to unemployment, lack of medical and welfare services, and vastly increased hardship for many Australians.

The Institute has been calling for, and now endorses, the creation of a national regulator – the Australian Charities and Not for Profits Commission (ACNC), which will be operational from 1 July 2012. The ACNC will initially be responsible for deciding the legal status of a charity, including whether or not donations to it are tax deductible.

The FIA supports the Federal Government’s decision to establish a one-stop national reporting framework for charities, along with a national “public information portal” – or website – for charities by 1 July 2013. The proposed information portal will provide information to the public regarding charity names, status, legal structure and annual reports.

With the co-operation of the states, a new national reporting framework will greatly reduce the current enormous regulatory burden for charities – which will mean far better use of donor dollars. However, the states aren’t on board yet and there is a lot of work to be done.

Moreover, until there is a uniform accounting standard for Not for Profits – as recommended by the Senate Inquiry into Disclosure Regimes for Charities and Not for Profit Organisations, it is meaningless trying to compare charity’s financial statements. It’s like trying to compare apples with oranges.

What is included in each figure? How are administrative and fundraising costs shown?

According to size, brand recognition and nature, some charities more readily attract funds than others.

A well-established charity is more likely to have an established giver base, infrastructure and investments, while a new entrant has much higher start-up costs.

Annual figures alone aren’t the answer. What if a charity had a huge bequest that year or they’ve introduced a new model of fundraising? Charities, like commercial organisations, need to acquire new customers. Therefore, in some years there will be more spent on acquisition than others. A moving average is a better measure.

The FIA looks forward to the states and territories getting behind the national regulator, supporting the creation of a national reporting framework and public information portal, and establishment of a uniform accounting standard. It will be a winning situation for donors and charities, but more importantly, for the great causes those charities serve.

Further information about the ACNC and the Federal Government’s reform agenda for the Not for Profit sector can be found at the newly launched ACNC Implementation Taskforce website.