Guide to donating to charities

How much of your donation is gobbled up by fundraising fees and expenses?
 
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05.What's your donation worth?

A large majority of respondents to CHOICE’s survey believe that over 80% of their donation should reach the cause, after expenses. But only 53% of donors believe this actually happens.

There's a wide variation in the effectiveness of different charities' fundraising efforts. A few years ago, one charity was found to have given less than 10% of money raised at an event to its cause or beneficiary, after all the costs were taken into account.

On the other hand, we also found examples where close to 100% of the donation does reach the cause, often because the charity’s fundraising costs are being subsidised by another part of its operations or business (see Donating effectively).

Research company Givewell estimates the average fundraising cost ratio at 19%, while the Australian Council for International Development (ACFID) says its members spend about 10% on fundraising plus a similar amount on costs like administration (and a further chunk of the money sent overseas may be used for costs there).

Confusing figures

As a donor, you want to know where your favoured charity is placed in this wide range, but finding out isn’t easy.

Some charities, particularly the large ones we surveyed, make their annual reports and accounts publicly available, but many are less transparent. An analysis published in November 2007 by Givewell found that only 54% of the 448 charities it surveyed disclosed their fundraising costs.

Charities must comply with state legislation and complete statutory returns to regulators. The rules and requirements for charities in each state differ. Some have rules for fundraising cost ratios.

  • In NSW, for example, the maximum is 40%.
  • In Victoria registered fundraisers who donate less than 50% of proceeds to nominated beneficiaries may be subject to additional conditions or be asked to demonstrate how the fundraising is in the public interest.
  • In WA, the costs must be 'fair and reasonable'.

Ratios are published on the Consumer Affairs Victoria (CAV) website, but the figures relate to Victoria only, so won’t match the figures a national charity publishes.

According to CAV, fundraisers must report their revenue from appeals in Victoria during the previous twelve months, and the money that was actually distributed to beneficiaries, to aid disclosure and transparency for donors.

But several charities we contacted said their costs are much lower than what might be suggested by the CAV site. They gave plausible reasons for what appeared to be high cost ratios. For example, some money may have been held back for project costs in future years, or the figures only relate to particular fundraising appeals in Victoria. One charity said there was a mistake in its figures on the CAV site, which was subsequently corrected.

The problem is, reasons of this kind aren’t apparent to donors seeking information, so you’d have to ask questions, like we did. The problem is exacerbated by the different figures that are available from different sources, which cover different jurisdictions, different expenses and even different years.

 

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