Saving threatened habitats worldwide

Are charities spending money appropriately?

7 August, 2013 - 09:18 -- John Burton

We learn from recent news reports that William Shawcross, Chairman of the Charity Commission, has warned that inappropriately high levels of pay for charity chief executives may bring the sector into disrepute.

We have also learned that over the past three years the pay of top executives in large foreign aid charities has been rising while income from donations is falling, and that it is the big, international charities that offer the biggest salaries and salary increases. (The chief executive of one major international charity now earns £184,000.) In the past three years the number of charity executives on six figure salaries in the country’s 14 largest foreign aid charities has risen by 60 per cent.

Granted, these pay packets are considerably less than those offered to chief executive salaries in the private sector, but while income from charitable donations is falling, are these salaries acceptable?

Comparisons are odious, or so goes a popular saying. But how else does one evaluate?

The Charity Commission publishes concise summaries of every charity along with their accounts and I regularly check World Land Trust’s (WLT) accounts against those of other conservation NGOs. Occasionally I compare WLT with NGOs in completely different sectors.

Compared to other charities, a large proportion of WLT’s income comes from the corporate sector. In the last set of accounts listed on the Commission’s website, 47 per cent of WLT’s income was corporate. This year, WLT’s income from the corporate sector is running at more than 60 per cent.

There are also huge differences in our costs compared to other charities, and therein lies a dilemma.

To illustrate the difference between WLT and other charities, take the example of another (large) conservation charity. According to its last set of accounts, this other charity raised nearly £32 million from its membership and supporters, of which 12 per cent was from the corporate sector. But, they spent nearly £11 million (40 per cent of total spending) doing so.

WLT, on the other hand, raised just £3.1 million, but direct costs were £248,000 (less than 8 per cent of total spending).

The question is: should WLT spend a larger proportion of its income on fundraising? The charity quoted above was able to fund conservation projects to the tune of £33.2 million, while WLT spent only £2.3 million.

What is the answer? I am genuinely not sure, and WLT’s Trustees are also somewhat divided about it.

Everyone wants an organisation to run on low overheads, but it is clear from these comparisons, that WLT raising another £30 million would be very difficult working within the current margins.

While WLT only has the equivalent of 3 or 4 people directly involved in generating funds (out of 25), the charity quoted above has 68 (out of 312), which is not a dissimilar percentage of total staff.

However the other charity has a total wage bill of £13.8 million (average £44,000 per head), while WLT’s wage bill was less than £570,000 (average £22,000 per head, ie half the average wage of staff in the larger charity). And so the comparisons go on.

As percentages go, WLT looks more efficient, with more than 75 per cent of income going on project funding compared with 50 per cent in the case of the other charity. But in terms of actual money the large charity was able to spend nearly £31 million more than WLT.

So is it really right for WLT to stay lean and mean, and only achieve a limited amount, or should we put on a bit of weight? Let me know your views!

More information

Comments

Submitted by Cath Pickles on

I'm pretty sure looking at this, that there must be an optimum effort / achievement that can be calculated. The other point to make is that there is a finite amount of money available so if you achieve loads, then others will surely fail. Also - there has to be a case for charities with similar aims and ambitions to work more closely together. For example, employing one person to work across both organisations.

Submitted by John A Burton on

There may well be an optimum that can be calculated, but I don't know how to do it. And while there is a finite amount of money available, it is a question of how it is distributed. And while in theory some charities have similar aims, very often their means are very different indeed. So my fundamental questions remain unanswered: What is the optimum effort / achievement? All advice welcome!

Submitted by Dominic Belfield on

But there is another factor to consider here: namely QUALITY.

What exactly does the bigger charity spend its money on? High level conferences, governmental lobbying with attendant expensive schmoozing, consultancy fees, high worth items of kit (like SUV's which often somehow go "missing")?

What I like about WLT is that we know what we're getting. Acres of habitat, boots on the ground rangers, strengthening of local organisations and communities centred around wildlife conservation.

The amount of money that big NGOs must spend on these high profile jamborees which flit around the world - Tokyo, Johannesburg, Washington, Cancun, Cairo etc - and which promise so much but deliver, well.... What? Usually just more fine sounding political rhetoric.

Call me cynical, but I'll still go for hard acres over report production and paper shuffling any day.

Submitted by Dominic Belfield on

By the way, I need to make clear that I am asking the question: What DO the big NGO's spend their millions on?

I sincerely hope that the actual answer is more encouraging and positive. But you have to wonder - where DOES all that money go to ?

Submitted by chris Jenkin on

It is the classic conundrum facing not only charities but all businesses. How do you best invest to grow the overall size of the pie? As a business we have had gradual growth more or less for the last 30 years - Give or take the odd recession - but need to grow bigger and make more profits, just as charities must need to raise as much funding as possible. This is the prime reason for business/charities existence - to maximise income. The argument must be that having £30 million to use in buying land and providing rangers must be better than having £2.3 million. In light of fellow WLT supporter Tony Hawk's TED talk on billionaires, I've been thinking about how much is enough - unfortunately for charities this doesn't apply as there can never be enough as there is always more to be done. How funds are raised and how money is spent is of great importance and as a WLT supporter I agree with Dominic in that one of the strengths of the WLT is knowing exactly where the money is going. I'd like there to be more of it though... How to get a bigger slice of the charity cake to the WLT to allow it to do it's great work is the puzzle. I'm sure most if not all supporters would be happier with more expenses and overheads if it meant more land was preserved and sooner rather than later. Later may be too late. All this talk of pies and slices and pieces of cake is making me hungry...

Submitted by John A Burton on

Thanks Dominic and Chris. I think this is a topic that deserves a really serious look. I am going to talk to my colleagues at UEA Economics Department, and see if they can come up with a study or a way of evaluating the issues.

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