The New Year for me has heralded a new dose of questions about charity spend ratios. This is an old topic which remains stubbornly in the public consciousness, despite well-trodden arguments demonstrating how useless charity ratios are, particularly as a way of comparing charities.
This year also sees me celebrating my 25th year of working in this glorious sector. For most of that time, I have been trying to educate folks on why considering how much of the £1 you donate goes into ‘frontline’ services is pointless.
It hasn’t worked. It is me that is feeling pointless.
As charity CEOs, we know that it costs money to raise money. We also know that for charities like mine, CLIC Sargent, we need long-term financial stability to provide services to all children with cancer, so we invest quite a bit in things like our charity shops and regular giving to provide reliable income, every month.
Having a chunk of secure money means we can focus our energy on spending it well, and because we have fundraised like this for a while we are pretty savvy at doing it. So here a slightly lower ‘pence in the pound’ on services suggests you are actually looking at a potentially more sustainable organisation.
And when the bulk of your income comes from many incredible people raising small amounts, which add up into big amounts (as ours does), these people need to be supported and thanked and their donations processed: again just a few pence, but it all comes out of the £1.
Sometimes, as a charity, you need to save, to buy a big accommodation centre for the families of young people with cancer for example. In these years you might not spend as much on services as you are bringing in.
Similarly, charities must have ‘reserves’, rainy day savings that mean if something goes wrong – an economic downturn, for example, which may increase the need for our services at the same time as our income is reduced – we can continue to provide lifesaving services.
The truth is that charity accounts are complicated. There are about 185,000 registered charities in the UK and not one of us is entirely the same. Neither is how we raise and spend our money. Comparing ratios might be easy but it isn’t right.
So why isn’t this message getting through?
Last year CLIC Sargent made a commitment to significantly increase its transparency. We are keen to say to our supporters: “we want you to trust that we are working our pants off do to the right thing,” and know that that means being honest about the good and the bad.
So in 2019 I am starting a new tack. Let’s all encourage the public not to compare charities by what they spend. Let’s urge them to read about us and get a sense if we are honest. How do they do that? Well, as charity CEOs, we can start by demonstrating what I call our ‘golden formula’: reach vs resources vs impact.
Every charity has to make a choice. For charities delivering services, for example, it’s: how many people do we reach? Balanced with: how much of a bigger or deeper impact can we have? And balanced again with how much we should spend and on what.
As CEO I go constantly round this triangle. If I spend more on digital, I can reach more families affected by childhood cancer (those living rurally for example) than I can with face to face social workers, but the impact might not be as significant. Digital is cheaper but am I trading reach for quality?
Every charity in the UK is wrestling with finding the sweet spot between these three vital criteria. Should Cancer Research UK plough every penny into curing one type of cancer, creating incredible impact for fewer people? How do we feel about £634m being spent on curing one cancer quickly rather than all cancer over a longer period?
So if in 2019 we want people to assess a charity in a more meaningful way than penny-in-the-pound ratios, we should be encouraging them to ask us three questions:
- How many people do we reach?
- What sort of impact do we have?
- How much do we spend doing that?
If our answers are truthful, transparent and credible, then I believe it’s not unreasonable to ask them in return to trust us to work out exactly how we spend their money to get the most incredible impact for that cause they care passionately about – from cycle paths to otter conservation (or children with cancer of course).
Because in 25 years in this sector I don’t think I’ve ever met someone who isn’t trying to do just that.
CLIC Sargent is in the process of developing its own golden formula statement to include in its 2019 impact report. Kate will write a follow-up blog when it’s complete, sharing the statement and outlining the process of how it was developed.