Last month we published a landmark report that examined how charities managed the massive influx of donations they received for the 2019-20 summer bushfires.
The report, Bushfire Response 2019-20 – Reviews of three Australian charities focuses on three charities that received in excess of $420m between them through bushfire appeals – the Australian Red Cross Society, the Trustee for NSW Rural Fire Services & Brigades Donations Fund and NSW Wildlife Information Rescue and Education Service Incorporated.
As I outlined in The Australian on 23 October, it found that despite public criticism, the charities acted appropriately and had used or allocated the funds they’d received to bushfire-related activities.
During the catastrophic disaster, the charities faced pressure from donors, the public and the media to use the donations in a range of ways – some of which the charities were legally not allowed to do.
In reviewing the charities, we asked three questions that reflect the ACNC’s Governance Standards and broader public concern about transparency and accountability: were they spending the donations on bushfire response programs; did they have a reasonable plan for their programs; and were they preventing fraud against their programs?
Importantly, the report highlights that in emergency situations like the 2019-20 summer bushfires, charities face challenges in responding. It is not always possible for charities to deliver programs immediately. And, certainly, it is not always possible to spend funds on all the activities demanded of them.
The three charities we reviewed cited rapid increases in demand, difficulty identifying legitimate fire victims, and, given the scale of the amounts they were suddenly responsible for, the pressing need to protect charity funds and combat fraud.
Crucially, to maximise impact and get the best outcomes – both in the immediate aftermath and in the long term – charities needed information and time to plan. While we all recognise the importance of the immediate response, we must remember that charities are there for the long-term response and recovery. This requires careful management of funds and a view of how they can be used for the affected communities in the months and years to follow.
Understanding donor intentions can be a challenge, especially when charities do not have direct contact with their donors. The three charities we reviewed had millions of donors and received donations from multiple third-party fundraising campaigns, many of which grew out of social media.
Ordinarily, a charity would manage donor expectations by providing information about plans for using funds, and report publicly on outcomes of its work. In this special case, we found the nature of the fundraising – its speed, reach and volume – meant that charities’ ability to communicate effectively with donors was reduced significantly. With donations pouring in from all over the world at such speed, the charities struggled to be able to explain the ways they could legally use their charitable funds directly, however each of the charities did produce public information on their websites about their programs to support the bushfire response.
Regardless of the third-party messages about how funds will be used, a charity can only use donated funds for activities that advance its charitable purposes as stated in its governing document.
While the three charities received some criticism about the costs of delivering their services, we found that these concerns are based on a common misunderstanding. Running a charity costs money – it requires infrastructure and staff to deliver programs. The law does not set benchmarks for charities’ administration costs because, as every charity operates differently with vastly different purposes and activities, such costs are not a reliable measure of a charity’s effectiveness. Focusing on what a charity achieves gives a better understanding of its work.
Nevertheless, a charity should use funds in a way that maximises its impact, and it should be open and transparent about how it uses its funds. The ACNC may look into a charity’s operations to ensure it is run in accordance with its obligations.
Our reviews, and the subsequent report, demonstrate the importance of managing funds carefully and responsibly despite external criticism and demands for action. And in doing so, it emphasises the need for charities to be open and transparent about their plans for their funds when they conduct fundraising.
When charities stick to their purposes and the activities they can undertake, and are open about how they are spending funds, they promote donor and public trust in their organisation and confidence in the sector as a whole.
The Hon Dr Gary Johns