Knowing where your donation goes

19 July, 2017

The last decade has seen a long-overdue hard look at the level of reporting, transparency and accountability of many charities in Australia and overseas. This resulted in the development of a national governance framework overseen by the Australian Charities and Not-for-profit Commission (ACNC).

MS Research Australia ensures that our costs and financials are transparently displayed on our website and we would like to share with you some top tips on how to compare and choose charities.

Still however, many of our donors and stakeholders are asking us the same questions- how can we compare charities and how do we know exactly what your costs are and where the money goes? These are absolutely critical questions, as everyone who donates money to charities want and have the right to know that their donation dollar is being put into something worthwhile.

So how does a donor make sure that the money they give is being used wisely? The list below contains a few tips from experienced experts in the sector.

  • Make sure you choose a charity that displays evidence of strong reporting back to donors on exactly how the fundraised dollars are spent and what impact has been created as a result. Reporting back regularly to donors with an annual (or post event) impact report allows donors to stay up to date with the exact outcomes that have resulted from the valued donations including exactly where the funds have been spent.
  • The sharing of full and independently audited financial statements on the charity’s website shows how the NFP is spending the funds it receives, not just in one single year but over many years. It also provides good information on the revenue sources to each charity, how reliant it is on certain revenues and the financial stability of the organisation. Additionally, all registered charities must comply with ACNC regulations which means that their full financials must be displayed on the ACNC website. It’s quite easy to look through these finance statements to get an idea how much of the fundraised monies gets to the stated mission on their website.
  • Look for the ACNC tick of approval. This means that the ACNC has given the charity a tick of approval in terms of transparency and accountability.
  • Analyse the cost of fundraising ratio. One method is to look at how much is spent on fundraising activities. When you compare the costs of all fundraising activities (such as fundraising staff, direct mail, events, third party costs etc.) against the amount of money raised, it is called the Cost of Fundraising (COF) ratio. The ratio indicates how much of each donation, in percentage terms, is used on raising the funds it needs to fulfil its purpose.
  • Evidence of independent expert analysis performed on the charities financial status and effectiveness in impacting on its mission. Many charities will transparently display evidence of independent evaluations by fundraising or NFP experts of their stated accomplishments and how the funds have been used to achieve their mission goals. Some others may also have in- house facts and figures that are easily accessible on their website so every donor can easily get a picture of how the funds flow.
  • Look for evidence of a highly skilled and diverse Board that includes expertise in finance, accounting, governance, ethics and fundraising law.
  • Ascertain whether the fundraising staff at the NFP are an organisational member of the Fundraising Institute of Australia (FIA) and upholds the ethical fundraisers ‘code of conduct’ for all its staff.
  • Evidence of peer-reviewed awards and recognition for the NFP to which key criteria relate to items of corporate governance, financial transparency and ability to achieve demonstrable impacts on its mission from the money it receives.
  • Look for evidence that the CEO and senior executive team has extensive experience and peer recognition in the areas of fundraising in general, fundraising law, governance and ethics.
  • Evidence of strong governance principles on their website including corporate governance principles, Board subcommittees involving governance, audit and risk and whistle-blower policies.
  • Independent analysis. It is not uncommon for some donors, who are looking to invest a reasonable sum of money, over a period of time to ask an independent expert to give their opinion on the openness, transparency, impact and ability to show effective use of donated funds of a particular charity. At MS Research Australia, we have had a number of savvy donors who have undertaken an independent analysis of our governance and impact before making their decision.

Taking an interest in the charity you are supporting and learning exactly how your donation is being used requires a holistic wide-ranging approach. Being actively involved in the outcomes and impacts of your donation will ultimately provide you with a more rewarding experience and will hopefully encourage regular donating and a positive donor-charity relationship.

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