The competition by Australia's many aid agencies for the aid dollar in the wake of the Indian Ocean tsunami disaster has been a good thing. It is worth asking whether it could have been a better thing. For example, the agencies were quick to respond to questions about the costs of fundraising and dispersal. The Red Cross indicated that it would "not deduct more than 10 per cent of any donation for an international appeal to cover its costs", and Caritas was reported to promise to allocate no more than 8 cents in the dollar to fund raising and administration. Others were apparently not so confident of their costs. As there is no standard by which to compare costs in the sector, the claims are meaningless.
World Vision Australia dropped its ban on donations from gamblers after it missed a pledge of $500,000 from ClubsNSW, which went to CARE Australia. It appears that World Vision changed its behaviour to ensure funds were directed to it, although it is unlikely to ensure that more funds would be raised for the victims of the tsunami. Many politicians and business people use a moral fig leaf to undertake changes that have a competitive advantage but no public benefit. The lesson is that even the good face issues of competitive behaviour. Like the political and business markets, regulation is a way to ensure the market needs are met.
There is also the question of what charities do with their money. For instance, some charities are very active in government. The Queensland Conservation Council boasts 60 representatives sitting as environmental consultants on committees throughout the state. Even those that help the sick and the poor want to do it differently, they want to overcome inequality. Russell Rollason of Anglicare has asked: "Is the role of charities and churches simply to apply band aids to the victims of our competitive society or should charities actively contribute to a fairer more just Australia?" A very astute question by Senator Brandis, the Chair of the Senate Economics Legislation Committee on this issue, "is the purpose [of the charity] attenuated by the mode of advocacy?" elicited the following response by the Commissioner of Taxation: "It may well be" (Senate Hansard June 3, 2004).
Charity work is not always unambiguously good, or for the public benefit. It may be altruistic, but increasingly it is embedded in a political framework that seeks to use public power for system change. These methods are political in nature and arguably, at odds with the donating public's expectations of the charities. When the charity's methods are direct -- giving aid to the poor, planting trees, and writing letters to foreign governments on behalf of political prisoners -- the task of informing the donor is not great. As the methods and definition of charities widen however, the assumption of donor knowledge may not hold.
The key players in the charity market are the donors, one of whom is the government (because it underwrites some part of most donations), the recipient of the donations, and those who devote their time to the cause. Only the government has sufficient ability and interest to set the rules for the charity market. Who should inform the government of an acceptable standard of performance by the charities? Should it be the donor? From the donors' point of view, there is a gaping hole in the scrutiny of charities. The present scrutiny does not provide an answer for the donor to the question: are charities any good at what they do?
A well-informed donor market, however, is the least invasive form of regulation. How then to inform the donor? The trick is to agree on a standard of disclosure by charities. No such standard exists in legislation in Australia. The states and the Commonwealth regulate some aspects of fundraising and eligibility for tax deductibility, but the compliance bars are low and not always adhered to.
Setting the standards to inform the donor will require establishing a dedicated regulator. The Charity Commission for England and Wales for example, looks and sounds like an industry advocate. It would be better to have a new regulator standing separate from the market: grey suited men and women have their uses.
As to the standards of disclosure, what should a charity tell the donor? The Institute of Chartered Accountants in Australia has recommended that charities report on their three core business segments; generating funds, administering funds and spending funds. In these segments, they should use key performance indicators that measure the effectiveness of activities such as fundraising and administration, and delivery. The government should however, assist the sector to reach the required standard of disclosure.
Governments do not have to rule on whether 10 per cent of funds should be soaked up in costs, the government's role would be to ensure a standard of measurement and the trustworthy apportionment of costs to activities that would allow the donor decide which charity to support. Nor would the government need to provide more than a broad guide as to acceptable charity work, as long as the work was sufficiently described and costed, the donors would decide. If lobbying is an acceptable activity for example, then let the donor decide.
ADVERTISEMENT
