Friday October 21, 2005
Published on Guardian Unlimited
THE EASIEST WAY to find out how much your favourite charity spends on administration and support costs, and how much on the projects you want to support, is to go online. Since September, visitors to the Charity Commission's website have been able to download annual reports from 35,000 charities in England and Wales. From these you can tell how much a charity has received over the year and what it has spent it on.
Take for example the Donkey Breed society, based in Edenbridge, Kent (charity number 292268), a relatively small charity devoted to the good breeding of UK donkeys. Downloading its annual report reveals it had a total income of £111,665 in 2004, of which it spent £102,427. The report explains this £102,427 was spent in four ways: £20,454 was used to generate funds; £57,797 went on charitable objectives; £16,847 went on support costs associated with those charitable objectives; and management and administration cost £7,329.
From this it is clear that if you donated £1 to the Donkey Breed Society, roughly 20p would go towards raising the pound in the first place, 57p would go to the donkeys, 16p would be used for support costs and 7p for administration. This is known as a "fund-raising ratio" and is fairly typical according to charity-sector website Charityfacts.org. "Most UK charities find it costs between 15p and 25p to raise £1," it says. Administration costs tend to be around 15%.
Such basic figures can only ever be a guide, warns Charityfacts.org, but they can be one way of determining how well your chosen charity is performing. And the simplest way of finding out what they are is to ask the charity. "Any reputable charity will be happy to answer an enquiry of this nature and provide an explanation," says Charityfacts.org.
But beware of reading too much into the answer because many factors can skew the cost-per-pound-raised ratio. For example, it costs charities less to win a grant than to raise funds from the general public. "Chugging", for example, where street fundraisers are paid up to £8 an hour to sign up donors, can cost the charity more than it collects in the short term. But over five years, charities argue, they will see a return of £5 for every £1 spent.
The nature of the cause will also affect fundraising ratios - with pets and children proving attractive to donors - as will volunteer numbers. And of course the size of the organisation is a big factor because the UK charity sector is made up of many minnows and just a few big fish. At the end of June 2005 there were 167,022 registered charities in England and Wales with a combined income of £37,009bn. That sounds a lot, but 66% of those charities have an income of under £10,000. The likes of the Tate, Oxfam and Barnardo's got the lion's share of the money, as just 8% of charities received over 90% of the income. Indeed, the top 500 charities, just 0.3% of all those registered, get nearly half (46%) of the pot.
This is why it can be cost-effective for large charities to run high-profile and seemingly expensive advertising campaigns, while smaller charities have to make do with passing round the hat. It also means most charities will spend around 80% of their time working with existing supporters, says Charityfacts.org. Such donor development achieves very good returns - £4-£5 for every pound the charity spends.
New-donor recruitment on the other hand will see a typical return of 50p for every pound spent - it actually costs the charity money to get new donors, but they hope to see a return over the years. This is why once you have donated to a charity it will continue to ask you for more money.
So charities need to spend money to make money, but is there a time when you should be concerned about how much is being spent? Yes, says Charityfacts.org. "We would normally have concerns about a charity spending greater than 15% of its income on administration," it says. "Such charities we would ask to justify their level of expense."
And perhaps surprisingly the organisation has concerns about claims of low spending too, as good management and staff cost good money. "We would not wish to support an organisation spending less than 5% of its total expenditure on good management," it says.
The one exception to this is when agencies fundraise for a one-off cause, for example the Asian tsunami or the Pakistan earthquake. Then the big charities will channel all the money raised towards the project and their overheads will be met by other revenue streams.
In the end though, it is not cost-per-pound ratios that will determine whether a charity is doing a good job - it's whether it is making a difference and meeting its stated aims.
For information on the most effective ways to give cash and time to charity, click here. For more about national giving week, which runs from October 17 to 23, visit www.nationalgivingweek.org.
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