The tsunami disaster on Australia's doorstep has struck a chord with the public. This is reflected by the staggering amount of donations to aid agencies, which last night was rapidly approaching $200 million. To put such generosity in perspective, this amount is more than 13 times what the Red Cross managed to raise for its Bali Appeal.
Australians have watched the pictures of wholesale destruction and human misery. Giving to aid agencies has been a small but tangible way that people have been able to "make a difference".
In doing so, the Australian public has placed a high degree of trust in the aid industry. As the Treasurer, Peter Costello, said in a speech to Anglicare shortly after the controversy surrounding the Red Cross's Bali Appeal in 2003: "Trust is the currency of the charitable sector".
In spite of the large sums of money flowing to various aid agencies, there is surprisingly little information and good hard data about exactly how this money is being spent, or how and where it will be spent in the future. Most charities have issued their appeals with general but sketchy plans about how the money will be used. On this occasion, the Red Cross is one of a handful of exceptions.
Aid agencies can be excused for this at present. Though much of the urgent emergency relief work has already been done by the military and volunteer teams of medical personnel, emergency workers and police, the relief operations are still in their infancy.
It would be a grave error of judgement, however, for aid agencies to believe that their current levels of disclosure are sufficient.
By now, all of these aid agencies should have completed their needs assessments and should be in a reasonable position to spell out the type of work needed and the tasks which they have the capacity and expertise to undertake.
Aid agencies need to provide the public with detailed audited financial statements providing a breakdown of exactly how the money raised has been and will be spent.
Australians are always interested in efficiency when it comes to charities. This is out of a great desire that the maximum amount of money reaches those in most need. As Mr Costello pointed out in that same speech, "charities have to do better if they want to keep the public trust" because "inefficiency is corrosive of trust".
For that reason, aid agencies need to spell out the costs associated with their relief work in sufficient detail. That goes far beyond explaining the amount taken out for administration costs, which features so frequently in the media on programs such as Sunrise, the ABC's AM, Today Tonight and A Current Affair. It is not uncommon to hear claims such as that only around 10 cents in every dollar will be used to cover costs.
The problem is that the definitions behind these figures are too vague.
In order to determine how efficiently emergency relief is being delivered, one needs to examine the cost of delivering services.
"Service delivery" expenses can cover a broad range of costs that members of the public might associate with administration costs and cover items such as travel, accommodation, wages and stationery. As such, they need to be revealed separately instead of being embedded in the cost of projects.
Many aid agencies collecting money don't have any assets in the tsunami affected areas and rely on contracting their services to other organisations, most of which would also have additional administrative costs. All of this needs to be spelt out clearly.
In addition, there needs to be a full breakdown of the capital expenditure made by the aid agencies so that we can see what sort of equipment is being purchased.
The cost of providing such information is usually cited as a reason against providing full disclosure. This is as false and risky for charities as it is for the corporate sector. Moreover, there are accounting firms, such as PricewaterhouseCoopers, preaching the gospel of corporate social responsibility that could volunteer to undertake this work gratis to show the public their social responsibility credentials.
The public also needs a better idea of how much money is being spent now, how much money is being held back and whether the funds being held for longer-term projects are being kept for weeks, months or even years.
Generally, aid agencies tend not to disclose their internal assessments of projects, but there is really no reason why the public should not know details of the aid efforts which their charity dollars have paid for.
Australians have responded to the tsunami disaster with unprecedented generosity and aid agencies have a responsibility to repay this trust with high levels of disclosure and transparency. The public and the media have a moral obligation to tsunami survivors to keep asking the question: how is the money being spent?
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