It’s that time of year…

By: Sarah Davies

As we race towards 30 June and the end of a tax year, lots of charities are busy seeking the final donations and gifts for the year, and many philanthropists are making the final distributions from trusts and foundations. It is an important time, and significant amounts of charitable money are granted to pursue the visions, plans and opportunities we share for social, cultural, environmental and community benefit and change.

So it’s no wonder that it is also common to see media stories about fundraising and giving: our attention has been raised, we are aware and thinking about how we might support the causes we care about.

Many of these media stories are constructive and helpful: tips and suggestions on how to make good decisions, ideas on innovative and effective change-making solutions. There are also the scare stories: beware of the rip-offs, stories of fraudulent or misleading behaviour and increasingly common reports of fundraising dramas.

As a sector that employs 10% of Australia’s workforce, representing about 7% of the GDP, it’s disappointing, but not unexpected, that some of those workers will behave unprofessionally or seek to feather their own nests at the expense of others. The community and not-for-profit sector will (unfortunately) have its share of the bad apples. Good, strong regulation, governance and compliance systems coupled with appropriate penalties and consequences are what’s need to mitigate and manage this risk. As are good education and regular reminders about what’s needed and expected.

Where these media stories create damage is when they are plain wrong and misleading. There have been enough examples now to urge caution about believing what you read. A recent article in Brisbane’s Courier Mail, headlined that charities spend 83% of their revenue on fundraising. It was a 2 month investigation of 45 charities and drew some adamant conclusions about fundraising practice. One of these conclusions, for example, was that a particular charity spent 10% more on fundraising costs than it actually received in total donations. On checking this claim, the organisation’s publicly available audited accounts reported the actual cost of fundraising at 22% of gross fundraising revenue. The journalist did not appear to be able to read and interpret financial statements accurately (quoting a revenue figure that was in fact an expenses figure; citing a cost of fundraising figure that was in fact the organisation’s total community program expenditure, etc).

This is not new. A few years ago both the Victorian Age and Herald Sun ripped into a charity for excessive fundraising costs. When challenged, both papers withdrew their articles and issued formal apologies, saying the errors were “due to a misreading of the financial accounts” (i.e. excluding over $10 million in income from fundraising from their analysis).

Fundraising is hard, good reputations are hard to earn and trust is critical. Charities rely on a ‘social license to operate’ which means that if trust and legitimacy are lost, then so are their donations. Inaccurate reporting causes untold damage in a sector which relies on trust and generosity to build its supporters. This is in no way to condone organisations and people who do the wrong things – they should be held accountable. Transparency and accountability are critical: and now we have the ACNC we can easily check their register, check compliance and read financial statements for ourselves. Whilst organisations which do the wrong thing must be held to account, it’s increasingly apparent that the media must also be more responsible in terms of reporting on charities – sloppy research which leads to flawed league tables full of errors can destroy the reputation of charities which have worked hard to build them up.

The push to agree national accounting and reporting standards continues and will only result in better reporting and analysis – we must persist. We need better measures of impact, to take the focus off crude and simplistic ratios, but measuring and reporting on impact is not easy and we’re yet to find the ‘holy grail’ there. The Australian Accounting Standards Board (AASB) made an attempt at this in Exposure Draft 270Reporting Service Performance Information (ED270) (AASB 2015), and although they’ve pulled back from introducing a new accounting standard at this stage, they are doing further work to look at possible approaches and options.

In the meanwhile, media reports that are inaccurate and serve to create confusion and distrust (either deliberately or because of poor reporting) cause untold damage and take time, resources and energy from good organisations to address – they don’t serve the public interest and they harm giving. And in the run up to 30 June, it’s that time of year…

Jun. 21, 2017

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