Can you easily compare charities’ running costs by looking at the pie charts they display on their websites?
Sadly not. There is no simple, agreed way of measuring and designating ‘running costs’ when submitting your accounts to the Charity Commission. So each charity is free to decide for themselves what is a running/admin cost.
The truth is that ‘running costs’ have become the yardstick that many people use to measure a charity’s effectiveness. That’s led to a ‘race to the bottom’ as we all try to compete with each other with pie charts with ever-smaller running cost/admin slices. But since there’s no standard way of measuring these things, they’re really there for marketing purposes and not transparency ones.
Can you tell how good a charity is by looking at how low its running costs are?
Yes, to a point. Of course charities have a mandate to do all they can for their beneficiaries, and it’s right to be wary of supporting a charity that spends most of its money on a plush headquarters and an ineffective fundraising system.
But there is a big difference between ‘wasting’ money and ‘investing’ it. Let us illustrate this with a simple example:
Charity A spends 5% of its money on staff salaries and 95% goes directly to buying and distributing school books for children in Kenya. Charity B spends 85% on the books and 10% on its Monitoring & Evaluation of the project.
At face value charity A is ‘better’ because it is more efficient and more of its money is spent directly on project activities – it’s getting more books on desks. But without stopping to ask and assess whether these activities are the best activities to be doing, you don’t really know how much money charity A is wasting. Potentially all of it.
Are you buying the right books, in the right subject, in the right language? Are they actually being used in the classrooms? Do they fit in with the local curriculum and style of learning? Do you have a proper oversight on how your money is being spent in the field? Is it really a lack of books that is preventing more children from completing school, or is it a lack of properly trained teachers? Or family poverty?
10% invested in asking these questions and acting upon the answers allows the other 85% to be invested much more wisely and allows you to make informed decisions about how it might be better directed.
There’s so many children in need of help. Shouldn’t I support a charity that has economies of scale and reaches as many as possible, as cheaply as possible?
We like to think that we’re good value for money, but we’re not cheap and we don’t try to be. It’s important to know how much it costs to help each child and their family, but it’s not our aim to drive those costs as low as we can. And it’s not the case that all other things being equal, a charity that helps more beneficiaries at a lower cost per one, is a better or more efficient charity. Because things never are equal. Giving out 100 T-shirts to 100 children is probably cheaper than providing the many counselling sessions that one former child soldier needs to start rebuilding their life. But it won’t help them to deal with the trauma they’ve faced, or help to improve their resilience.
We deliberately seek out the most marginalised and most vulnerable children to work with, and that work is individually tailored and often intensive. And it’s delivered in highly insecure environments where it’s expensive and hard to work. If it was easy then everyone would do it. If we didn’t do it, then usually no-one else can or will.
You can read more about why we believe our interventions have the best impact for children in the “Demonstrating our Impact” page of this site.
So how do you decide how good/effective a charity is when you’re looking for one to support?
Whilst this isn’t a major issue if you’re donating £10 from your back pocket, if you want to invest a substantial sum then you need to scratch beneath the surface of the websites and the Annual Reports.
To be confident that your money will really have the biggest impact you need to dig a bit deeper into the charity’s DNA. To get honest, straightforward answers to the questions of what, why, when and how your gift will be spent and the difference your generosity will make.
This website and accompanying brochure and our Impact Multiplier tool are the basis upon which to start that conversation with us.