Charities take chunk of funding
The public expects shoestring budgets but the reality is different. Susan Edmunds reports.
only country that imposes g for nd it is only on smetics.’ around a lot of g their cosmetics they were classed ured products, but possible, he said. d cosmetics e small and the caution when it e market. pportunities across e to go straight into r size and strength at China a little d. Some charities’ fundraising efforts cost as much to run as they raise, it has been revealed.
If you’ve ever given to a charity, you’ve probably wondered – how much of this is actually getting to the children in need, the people affected by the earthquake, or the medical researchers who need more funding?
In fact, a large chunk of money donated to charities – in some cases, almost 100 per cent – goes simply to paying for the cost of fundraising. Inperson fundraising is some of the most expensive, while grants and major gifts are the cheapest for charities to get.
New Zealand charities’ annual income is more than $18 billion – about the same as Fonterra and representing 6.7 per cent of New Zealand’s gross domestic product. New Zealanders donate about $3 billion a year.
All charities make their financial statements available each year, which shows where their money goes.
ChildFund spends about a quarter of what it gets in on fundraising and administration, while Plunket is about 15 per cent. Oxfam spends up to $20 to raise $100 from donations. Greenpeace hovers around $30.
Sheridan Bruce, acting chief executive of the Fundraising Institute of New Zealand, an organisation that represents charities, said there was a public misconception that charity fundraising could be done on a shoe-string budget.
‘‘Raffles and sausage sizzles with donated goods and prizes were once the only way to go. Unfortunately, these forms of fundraising will never raise the funding necessary for the charitable sector to meet client requirements. Professional techniques are required,’’ she said.
‘‘In any industry, whether it be large corporations or charities, the need to gain new customers or donors is essential to ensure success, let alone survival. In a competitive world, with so many options and choices, to put one’s product or charity in the best possible light requires extensive marketing, branding, sales and customer interactions.’’
Luke Edwards, Greenpeace fundraising director, said he would consider 30 per cent to 35 per cent an acceptable amount to be reinvested out of donations.
‘‘We are always looking for ways that will achieve the best return on investment because that investment is from donations from people, we want to make sure that money is going as far as it can.’’
Greenpeace’s model is different to some because it does not accept corporate or government grants, which are cheaper to get.
‘‘I can understand people are concerned about the levels of administration and so on that they perceive in an organisation but from my observations, the industry is quite careful about it.’’
Barry Coates, a former executive director of Oxfam New Zealand and now promoting sustainability at the University of Auckland, said how much had to be spent on raising money would depend on the charity’s model.
‘‘You get ridiculous arguments that charities should be spending 5 per cent on raising money and you simply ‘You get ridiculous arguments that charities should be spending 5 per cent on raising money and you simply cannot do it.’ cannot do it. It needs some mature discussion around how much does it cost to get money in.
‘‘Some organisations spend 90 per cent of the money they earn on getting the money in – there are some silly behaviours. But the object of the exercise shouldn’t be to have zero cost of fundraising.’’
People working on commission in the street, trying to sign passers-by up to direct debit deals to an organisation, might receive a payment equivalent to the entire first year’s donations, he said.
But the person could then be expected to continue contributing for four or five years, so the overall cost of getting the money in was only 20 per cent.
Jamie Newth, chief executive of Soul Capital, a non-profit organisation that invests in social enterprises, said it was more helpful for potential donors to consider how much impact a charity was having with the money they were given.
‘‘It’s a much harder question to answer, but a more important one.’’
He said digital platforms and the rise of crowdfunding were making it easier for people to give directly to causes they wanted to support, without the need for a charity to act as a conduit.