ACNC Commissioner, the Hon Dr Gary Johns, examines how key bushfire relief charities managed a surge in funds and in a column published by The Australian.

The column is reproduced here in full with permission.

Charities Burnt by Black Summer Outpouring

Managing a surge in funds was just the start of the problems. Are they any better prepared?

Images from the Black Summer bushfires were broadcast around the world, portraying apocalyptic scenes. Millions of Australians, and others from around the world, pressed a donate button in support of the victims of those bushfires. We estimate more than $640m was donated to charities for Black Summer bushfire relief.

Then came the complaints. Someone did not get the money they wanted. Some charities were reported holding on to funds, some were reported spending too much on administration, and some wanted moneys to go to another cause, after the fact.

And some of those complaints turned nasty — abusive calls and emails to charities, even a bomb scare to one of our most trusted charities. Some crises bring out some real dills.

Some money was donated to non-charities, individuals who wanted to help. Good on them, but who would know how those moneys were spent?

By mid-January, it became evident that there was a significant gap between the public expectation of how bushfire donations should be spent and how rapidly money could be distributed and the reality for organisations responding to the disaster.

Earlier this year, the regulator, the Australian Charities and Not-for-profits Commission, urged the public to let charities get on with their work, and that if they were thinking of donating money, to send it to a registered charity. The message got through.

The ACNC charity register received more daily hits between January 6 and January 15 than it had ever had before, with more than 140,000 visits in that period.

We vowed to return later in the year to investigate some bushfire charities. This we have done. Normally, our secrecy provisions prevent publication of the results, but with the permission and co-operation of three of the largest charities, we have been able to make public our findings, for which we thank them.

To maintain, protect and enhance public trust and confidence in charities, we chose to review the Australian Red Cross Society (Red Cross), the Trustee for NSW Rural Fire Services & Brigades Donations Fund (NSW RFS), and the NSW Wildlife Information Rescue and Education Service Incorporated (WIRES).

These three attracted high levels of public interest, each received significant donations ($420m between them), and variously supported groups directly affected by the fires, including firefighters, people who lost family, homes and livelihoods, and animals.

We asked three questions of the charities:

Are they spending the donations on bushfire response programs?
Do they have a reasonable plan for their programs?
Are they preventing fraud against their programs?

These questions may seem broad, and they are, because they reflect the governance standards that we use for regulation. They are good questions, but they do not place the regulator in the shoes of the charity, nor do they impose simple spending formulas.

More importantly, the charities’ response has to be assessed in the circumstances in which they found themselves. The three charities had to deliver their programs not knowing the number and size of donations, or when they would arrive; and not knowing the number and size of requests for aid, or when they would land. Each of these is important in judging response.

Needs and donations emerged over time; what was known in January was different to what was known in June. The Red Cross, for example, received more than 850 new requests for aid after June. These requests came from people who were initially able to rely on their resources but could no longer carry on without help. Their needs too had to be met. Who, other than an experienced charity, would have enough experience to make that judgment about how much money to hold back?

Another piece of the puzzle is how long people will need help. Again, experience counts. The Victorian Bushfire Appeal Fund, established following the Victorian Black Saturday bushfires in February 2009, was still distributing funds in 2016. And properly so. Several members of that fund advised the Red Cross in 2020.

There was also uncertainty in identifying affected people, communities and wildlife. The charities cited a lack of data on properties damaged by the bushfires, a lack of information about how animals were affected, and a lack of national licensing for wildlife carers and rescue organisations.

The Red Cross resorted to sending staff to physically inspect properties to find people in need and verify grant requests — thereby enabling the payment of funds. The incomplete information meant the charities had to take time in delivering their program to understand where there were needs.

Donors are a key part of the bushfire response. Charities that disappoint donors may go out of business. Donors need to understand, however, that charities have legally binding constitutions or trust deeds that determine how they can use donations. The charities’ ability to deliver programs that meet donor expectations are limited by their rules.

The NSW RFS Trust’s deed, for example, limits its activities to supporting fire brigades, which means firefighting equipment and facilities, and training for their volunteers. In contrast, WIRES’s trust deed allows it to engage in rescuing and caring for sick, injured or orphaned native wildlife, arranging permanent care for injured animals, training, and supporting research.

The gap between donor expectations and the charity trust can widen when high-profile supporters spruik a cause without a full understanding of the limits within which charities operate.

The NSW RFS Trust received significant promotion online from a celebrity, initiated without the NSW RFS Trust’s involvement, which resulted in an extraordinarily successful social media fundraising campaign — the campaign recorded 1.3 million donations, totalling $51.2m.

The campaign also worked rapidly, reportedly raising $30m between January 3 and 5.

The campaign raised expectations about the NSW RFS Trust’s use of the money, promoting on various social media platforms activities that the NSW RFS Trust could not legally deliver, which the public may not have known.

Initial promotion, particularly through Facebook, stated that donations would support the fire brigades, people affected by bushfires and animals. The campaign directed donations to the PayPal Giving Fund, another registered charity.

The PPGF transferred all donations to the NSW RFS Trust shortly after the campaign closed. At this point, the donations became the NSW RFS Trust’s “charitable funds” and could only be spent on activities outlined in its trust deed.

The NSW RFS Trust did try to intervene early — at the first point it could have identified a potential issue — however, the campaign had already been initiated and raised tens of millions of dollars.

The NSW RFS Trust could neither control the messaging during the fundraising campaign nor identify donors and communicate with them directly after the fact. Media reports, evidence given in the NSW Supreme Court and a NSW parliamentary inquiry suggests this has led to a significant difference between donor expectations and the programs NSW RFS Trust can implement.

To confirm its position, the NSW RFS Trust sought a ruling from the NSW Supreme Court. The court confirmed the relatively narrow scope of the activities the trust can legally undertake. While donors may be disappointed, the trust must make legally correct decisions on how it spends its charitable funds.

Managing a sudden increase in funds and the donor expectations that come with it requires different skills to those that may have been available to the charity.

WIRES, for example, received bushfire donations far in excess of its previous revenue — $91m compared with $3.4m received in 2018-19. The funding enabled, and required, WIRES to expand its operations significantly.

Charities need to be alert to their changing circumstances and be prepared to bring in support to manage the changes when required. The ACNC has provided advice to charities experiencing rapid growth, advice that has been derived from work in assisting charities involved in previous emergencies, such as last year’s drought, affecting much of the rural holdings of eastern states.

As well as significant community generosity, the bushfire disaster attracted frauds. The Australian Competition & Consumer Commission’s Scamwatch program, police forces and charities have identified opportunists posing as fundraisers for charities, advertising fake charities, impersonating legitimate charities or seeking grants from charities despite not being affected by the bushfires. Police pursued fraudsters and brought charges against several individuals for allegedly defrauding bushfire charities.

The Red Cross identified more than 1000 applications lodged by “bots” and believes some grants it approved were suspicious (based on information obtained later), including people claiming aid who weren’t affected by bushfires. It made referrals to law-enforcement agencies as necessary.

The ACNC’s assessment of the charities’ performance are set out in the report Bushfire Response 2019-20: Reviews of three Australian Charities. We shall undertake more reviews early next year.

Meanwhile, an important way that charities fulfil their obligations to the ACNC, and the public, is to report on outcomes in a range of ways — via annual reports, websites and media releases — so the public can understand their activities and their use of funds.

Each of the three charities reviewed­ produced public inform­ation about their programs to ­support the bushfire response, including how much they had raised. A number of other charit­ies with programs to support relief and recovery are doing the same. If there is one lesson that is clear, it is paramount that charities provide­ regular communication about how they respond to dis­asters and how they spend donations. If charities have a good story to tell, they have to tell it.

See the column as published by The Australian.