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Adam Rothwell
- Monday, April 16, 2007
CHARITY WORKERS RARELY get more annoyed than when they're accused of 'wasting money on fundraising'.
Money spent this way isn't 'wasted', they say, it's invested. For every pound spent, many more pounds are brought in by way of donations, much of the time.
We generally agree - which is why we don't indulge in the naming and shaming of charities with big overheads like our counterparts in America do.
But we think it's interesting to compare how charities working in different fields operate - giving charity supporters a rough indication of the averages. We'd like to do this in a number of other ways - comparing, for example, how bosses' salaries match up - but the charity world's baffling accounting procedures mean such figures can't be worked out.
We can, however, measure fundraising costs. Below we reproduce our patented*, constantly-updating table, based on our database of 1,300+ charities. It shows the average proportions of annual expenditure invested in fundraising.
| Charity field | Fundraising costs [%] |
|---|---|
| Animals | 18.1 |
| Arts, culture & heritage | 13.5 |
| Cancer | 25.7 |
| Children & young people | 18.8 |
| Disability | 18.7 |
| Education & learning | 14.4 |
| Elderly | 17.0 |
| Environment | 16.2 |
| Health | 20.8 |
| Human rights & peace | 12.5 |
| International | 13.9 |
| Religious | 12.9 |
| Society & work | 17.0 |
As you might expect of such a novel work of analysis, it brings up some interesting points.
The figures suggest that in more crowded sectors – like cancer – fundraising costs are higher. But this doesn’t automatically mean that charities should merge to bring those costs down.
What it does show is that charities could think more seriously about joint fundraising campaigns. Fundraising expenses are a necessary evil – and charities could think collectively about how to bring them down.
It'll be interesting to hear what charities in the bigger-spending sectors have to say about this. We'd also like to hear justifications for fundraising costs which are much higher than average, as at the Cheshire Wildlife Trust.
*Pending, probably for some time
Of course, shops that don't make much money could be seen as a bad investment, but they can also provide that extra visibility, and help with awareness of the charity, (if done well). If you could calculate the cost of having a presence on the street, and getting your name and work seen by millions of people every day, reinforcing that you're a big successful charity doing important work, then even a poorly performing shop could be seen as a good investment.
Another snag for comparing costs is that a newsletter with a fundraising aspect to it for a charity that aims to educate, inform and change public opinion, (for example), is that all part of their mission (charitable expense), or is it mostly charitable and partly fundraising, or is it mostly fundraisng ans partly information and mission. Several charities have different views on that.
But having difficulty in analysing and measuring performance doesn't mean we shouldn't do it at all. We just need to look behind headline figures (something people seem to have difficulty doing, in all works of life)
As is becoming my usual habit, I agree with LMC on this. I think there are potentially some significant problems with charities which run inefficient charity shops, and if a piece of research like this can draw attention to it, then so much the better.
For many charities - some of them household names - their shops actually lose money. If fundraising can be called an 'investment', then shops are in many cases a bad one.
A statistician is someone who could sit with his head in a lighted oven and his feet in a freezer and say that on the whole he was feeling quite normal.
Cynic that I am, I must confess to surprise that the averages are lower than I expected. I would be *really* interested to see the same data for the highest turnover, say 10, charities in each field. I call "Higher".
I don't see that including trading costs is "unfair". If a charity trades to raise funds and these costs are transparent, then it's fair to include them - the only potential unfairness would be if a trading charity's trading costs were *not* included for whatever reason.
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... nearly Vlad the Impaler
Ian,
The expenditure referred to here is the "total resources expended" in the year and therefore includes everything mentioned in your post - "charitable activities", "cost of generating funds" and "governance".
Trading costs are included in the cost of generating funds. This means that charities which carry out low-margin trading activities will show up as having higher fundraising costs.
This doesn't make the table any less useful, but perhaps highlights that charity shops aren't necessarily an efficient means of fundraising.
Neill Ghosh, Intelligent Giving Lead Researcher
A very interesting analysis. But can I ask what items are included in "expenditure"? Is this just "charitable activities", or does it include "fundraising", "governance", "trading" etc. Does the "fundraising costs" include any "trading costs". As trading activities generally have higher operating costs than fundraising activities, this table might be comparing apples with pears. Cancer charities might appear to have a high figure simply because they have a high proportion of relatively low margin trading, whereas religious and human rights charities focus on the most cost-effective methods of fundraising.
Ian Clark
I'm afraid that tables such as this are generally unhelpful and actually grossly misleading. Putting aside the fact that published accounts CANNOT be used as the basis for comparison between charities - (for exactly the same reasons as you suggest that it is not possible to compare the costs of admin, you conduct no statistical analysis here. While there appear to be some differences between sectors you say nothing about whether these are 'real' differences or just due to the nature of your sample. More statistics are required before you can draw any conclusions.
There are many reasons why an organisation's fundraising cost might appear high in a given year or years. It may be investing heavily in donor recruitment which is an activity most charities lose money in conducting. It only pays off in the medium term as subsequent relationships with these donors are developed. It is not without reason that robust research into the costs of fundraising have shown that those organisations posting high costs of fundraising at one point on their existence then go on to outperform their rivals in the future. Fundraising is an investment.
More information is available online at www.charityfacts.org