How society's helping hands may be dipping into your pockets

CHRISTMAS marks the giving time of year and with charities and other not-for-profit organisations receiving upwards of $7 billion annually, the lack of scrutiny is striking. For part of the economy that employs almost 900,000 people and enjoys annual income of $75 billion, with a healthy portion of this received from Federal, State and local governments, reform is long overdue.

The lack of uniform reporting standards means that it is often difficult to know whether your donations, or funds given by the Government, for example, are lining the pockets of managers and employees or not. You may think every dollar you give goes to that poor family in need, or that child in Africa, or whatever the cause that prompted you to dig deep, but rarely is this the case. Once management and promotional expenses are taken into account, often precious little makes its way to the intended beneficiary.

And that is only the start. A host of other governance issues needs to be addressed by an industry that assiduously mines your goodwill to its own ends.

The Senate recently concluded an inquiry into charitable and not-for-profit groups which made a host of commonsense recommendations - from a national reporting standard to having all fund-raising undertaken under national legislation, taking these powers from the states.

It also wants a uniform standard of accounts, which would make it easier for donors to understand just how "efficient" each organisation is in channelling donations to their intended recipient, for example, and managing their own costs.

The 2008 annual Givewell Survey of Australian Charities noted a further improvement in the number of registered charities disclosing fund-raising costs, which now stands at 59 per cent, up from 56 per cent a year earlier. That still means more than one in three charities hide this vital figure. Givewell argued the improvement in recent years reflects heightened criticism and scrutiny of charities following the surge in donations in the wake of the 2004 tsunami.

Of those charities that disclose fund-raising costs, the survey found the level was steady at 19 per cent of funds raised. But the different ways this figure is arrived at by charities casts doubt on its accuracy. "Donor confidence will only continue if positive trends in levels of disclosure persist. In the frugal times that lie ahead, convincing donors that their money is being well spent will be a key factor," Givewell said.

With the economy facing a slowdown, this will see donations cut at a time when many charities will be faced with rising demand for their services, forcing them to be more cautious in managing their funds in hand.

These pressures also come as many charities have lost heavily on investments thanks to the downturn in financial markets.

Go to Oxfam Australia's annual report, for example, and you find that it has lost $4 million in the sharemarket. Putting money into shares may not be what you expect of a charitable group entrusted with your donations. Oxfam Australia still has millions of dollars tied up in local and overseas sharemarkets. It was not alone, with the Cancer Council losing $7 million, to take just one other example.