Following some workshops I ran in Tasmania last year, I was asked to write an article for a community newspaper in northern Tasmania called the Meander Valley Gazette. They wanted me to discuss the ‘charities and overheads’ topic that all-too-often rears its ugly head and help their community understand more about it. I thought I’d share the article in today’s blog post and hopefully we can spread it far and wide in our non-profit networks and get more people talking positively about charities and their expenditure.
Many people believe that charities waste money. As someone that has worked in the non-profit sector over the past decade I can whole-heartedly say that that belief is senseless. Non-profit organisations have some of the most frugal expense budgets around. Every dollar spent is analysed and screened by management and Board members, and often new expense items go through strict proposal processes before they are considered and approved. Charities work so hard to get the money in; they are certainly going to be cautious about spending it.
Naturally, there are costs involved in running a charity, so money needs to be spent. Things like rent, office expenses, marketing and salaries are just a few of the administration costs of any organisation – whether for-profit or not.
Nowadays, when charities spend money on administration and fundraising costs, they are criticised. People start asking questions about what percentage of their donation reaches the cause and judgements about the success of the charity are made on the response. This leaves non-profits trying to reduce their expenses rather than investing in their growth and future; minimising effectiveness, rather than improving efficiency.
As highlighted in a fact sheet produced by the Australian Charities and Non-Profit Commission, “the main problem with using administrative costs to inform decisions about which charities to support (including how ‘worthy’ particular charities are) is that the information is an unreliable indicator of the extent to which actual donations make a difference in the community”.
The fact sheet goes on with the example of, “a charity that spends money on evaluating its programs to improve them may make a bigger difference in the long run than a charity that does not assess its programs”.
Sure, we should be interested in how our donations are making a difference, but we cannot reasonably expect to have all monies go directly to the cause. There need to be systems in place for the charity to operate and there need to be people to run it. Without these things, charities wouldn’t be able to make the slightest difference in the world.
For instance, investing in fundraising and marketing is a necessity for charities to be successful. For the majority of charities, these are the only areas that actually make growth possible, so wouldn’t it make sense to encourage spend there?
Passionate humanitarian activist, Dan Pallotta, emphasises this point in his iconic TED Talk, The Way We Think About Charity Is Dead Wrong (and if you haven’t seen it, I highly advise you google it and have a watch).
In the talk Dan highlights the fact that people don’t like to see their donations spent on advertising. “Our attitude is, ‘Well, look, if you can get the advertising donated, I’m okay with that. But I don’t want my donation spent on advertising, I want it to go to the needy.’ As if the money invested in advertising could not bring in dramatically greater sums of money to serve the needy.”
So perhaps, we need to stop asking our favourite charities ‘How much of my donation goes to the cause?’. The question we, as socially-minded individuals, should be asking is ‘What positive impact are you having?’ or ‘How are you investing to grow your impact?’.
As a community, we need to be more supportive of our favourite charities. We need to be encouraging them to scale their success. That’s how we’ll be able to make a real difference in the world.
See you in the pond,
The Fish Chick
P.S A HUGE thanks goes to Joanne Eisemann, General Manager of the Meander Valley Gazette, for having the initiative to talk about this challenge for charities in her publication. I hope it will go a long way in encouraging change in your community.