Transcript

Matt:

Hello everyone, and welcome to the ACNC’s webinar for today, the topic being Administration Costs and Charity Spending, as you can see on your screen.

My name is Matt Crichton. I’m from the Education and Guidance team here at the ACNC, and joining me to present today’s webinar, we have a very special guest, the Assistant Commissioner himself, Mr Murray Baird.

Murray:

Thanks very much, Matt. Glad to be here.

Matt:

Before we get into the content proper, just a few admin bits and pieces to cover off at the beginning. If you do have some trouble with the audio today, you can dial in to the webinar using your phone.

In the confirmation email you got when you registered there should have been some instructions in there with a number and an access code with which you can use to call in to the webinar if you’re having trouble with your computer’s audio. That sometimes happens.

Also we will be answering questions as we go throughout, so if anything pops in your mind and you want to ask about it, feel free to ask a question using the Go To Webinar navigation panel on your screen there, there should be a little option in there with which to answer questions.

We have a couple of colleagues, Chris and Simone, in another room answering all your questions as they come through. And just on the questions, if they are really specific about your charity, it may be best that you give us a call, call one of our Advice Services staff, and they’d be able to provide you with probably a more tailored answer than what we can give in the webinar.

So we’ll try our best to answer all the questions as best we can, but if they do get a little bit specific about bits and pieces with your particular organisation, it may be that we’ll advise you to give us a quick call and we’ll be able to talk you through some of the issues.

And just finally, if you’d prefer to hold off until the end, that’s well and good, too, because we’ll have a Q&A session after the formal presentation of the content, and that’s your chance to shoot through some questions at that time, and Murray and I will do our best to answer them live.

If we don’t get to your questions, because we have quite an audience today, never fear, we will make the effort to get back to you, get in touch with you, get an answer to you via email later on.
OK, all that out the way, the admin stuff is done, so now on to the admin costs. Let’s have a look at what we will cover in today’s webinar.

First we’ll have an explanation of administration costs. It’s a common term, and it’s one that is maybe a bit nebulous, and people might not have quite a grasp on it, so we’ll touch on what it actually means; look at how admin costs are unavoidable; the concept of costs not going to ‘the cause’ as is often talked about; spending too much on administration; charities’ responsibilities to explain costs; some difficulties identifying administration costs; and finally we’ll just give the ACNC’s take on administration costs.

So there’s quite a bit to get through, and you’re probably sick of hearing my voice for the time being, so to kick things off I’ll start with the concept of admin costs, administration costs, Murray, can you give us just an overview of what we’re talking about when we say administration costs in a charity?

Murray:

Yeah, thanks Matt. I think when we talk about administration costs they can mean all things to all people, but we think generally in terms of the overheads of an organisation.

Some might describe it as the indirect costs. Some might say, well there are frontline activities that we deliver on, but there are the back room activities, or the preparation activities which we separate out.

So we think of the frontline delivery as one thing, and then the back room stuff as the administration costs.

Now probably the best way to think of it is some typical examples. So you might regard your employee salaries and other expenses as overhead, or volunteer expenses, your costs of fundraising, your advertising costs, your accommodation and infrastructure costs, such as your rent and your electricity, your phone, your internet, your water, your insurance, your equipment, your computers, your paper, your stationery, your training. They might all be regarded as administration costs.

Matt:

Right. It’s quite broad and varied, as the second dot point on the slide says here that it covers a wide range, and will differ for every charity.

In saying that, many of the examples would be common across all charities, the ones that you just mentioned, and we want to say here that administration costs are in a sense unavoidable. Could you explain how they are unavoidable?

Murray:

We talk in terms of delivering charitable services to beneficiaries, but of course to do that we need to have an investment in the tools by which we deliver. So every charity will have expenses to get to that delivery. People and goods and services are not free for charities.

Matt:

Of course. Yeah.

Murray:

But they have to pay out for those things, to bring together the resources to ultimately deliver. Now typically when we think of delivery of charitable services, we think of say food and accommodation for people experiencing homelessness, or medicine, or vaccines and medical supplies for people with illness, supplies of food and clothing for disadvantaged people, money to research diseases, money to assist people in natural disasters. But of course we have to gather those resources, and we have to deliver them efficiently, and that involves overheads.

Matt:

Yeah. And this last dot point here that charities need to employ people, and people need to make a living, there’s a reasonable expectation I guess for people that are involved in the charity sector.

Murray:

Yeah. Although charities do rely on volunteers, sustainability often means that you’ll have to employ people.

And people who choose to work for charities are often making some sacrifices, but they do need to survive, pay the bills.

Matt:

Yes, a fair requirement.

Murray:

And people sometimes we survey and say, “Should say directors on a board be paid, a charity board,” and we sometimes get the response, “No one in a charity should be paid.” But that means that we’re not going to have charities that are sustainable if we starve our workers.

Matt:

Yes, it’s unrealistic to expect that every charity would operate solely by volunteers. When we think of the breadth of the organisations involved in the charity sector, and some of the really difficult, technical work that they do, you have to expect that people will be employed.

Murray:

Yeah. And every charity really needs to work out what the right mix of resources is to deliver the most impact. And sometimes it will be a fully professional service, others it will be a mix. And then there are a lot of charities, especially the extra small charities, say 30% of our Charity’s Register, which will rely entirely on volunteers. We don’t say that any is more legitimate, we simply say every charity must work out what’s going to deliver the most impact.

Matt:

Yeah, right. And just before we move on, just this concept of it being unavoidable, even the smallest charity with fairly small operations would run into an administration cost at some point, whether that be the cost of photocopying something, or the cost of a phone bill.

Murray:

Yeah, or the cost of driving, the volunteer driving to somewhere to do the work. Sometimes those things are absorbed by the volunteers, and that’s fine, that’s part of their contribution. But you’re right, inevitably there will be a piece of paper to write on, a computer to use. So I find it very difficult to imagine a charity where there is no administration costs, but sometimes they’re hidden. And another example is the charity that says, “Every dollar goes to the frontline.” Often that means someone else is paying for the infrastructure, to allow every dollar to go to the frontline, so one might query whether that really is an accurate statement.

Matt:

And just on that, a nice segue there, Murray, with this concept of costs not going to the cause, you mentioned that some charities, some organisations will claim that every single dollar is going to the cause, and a common, well complaint or criticism, or maybe even point of frustration amongst members of the public is that their donation isn’t entirely going to the cause, and some of it might be sucked into admin costs along the way. What do you say to this thinking about things?

Murray:

Well I think every step along the line to delivering impact is going to the cause, it’s on the pathway to the cause, and to say, well some bits aren’t for the cause is, I think, a narrow way of looking at things. So we would find it often very difficult to say something is not for the cause. And in fact if it is not for the cause, probably something’s going wrong in the charity. What would be an example? If it is simply going into people’s pockets, without them putting any effort in at all, that might be an example of not going to the cause, but then that goes to the heart of what it is to be a charity.

We talk of charities having a sole purpose of doing good, of doing public benefit, but everyone along the chain contributes to it. The receptionist, the person who answers the phone, they would all say, “Yes, I am contributing to that impact that we ultimately achieve.”

Matt:

Of course. Those people play an important role in the organisation, even though sometimes in the public consciousness, and maybe on the part of donors, it appears as though those costs aren’t frontline costs, as you describe them, they’re still essential to the charity being able to carry out its operations and its mission.

Murray:

Yeah. And I’ve seen in the United States some receptionists and other people in organisations wearing t-shirts that say, “I am overhead.”

Matt:

Oh right.

Murray:

And what they are making is a fair point, people might accuse them of being overhead, but they are part of the delivery.

Matt:

Yeah. So I think the second point is one to just bear in mind if this is one of the issues with which you’re struggling when you’re thinking about your contributions to charities that you support, is to think of donations as contributions to the charity’s work, rather than them being quarantined as different parts of a charity’s operations, its frontline, its back room staff and all of that.
The donations are contributing to the whole approach of the charity.

Murray:

Yeah, sometimes donors will say, “I want my donation only to go to a particular project,” or, “Only to go to the frontline,” and it’s almost as if it’s suggesting that there are no overheads involved in getting that donation to that frontline. So perhaps in a mischievous way, sometimes when I give I will say, “I want this to go only to overheads,” or “I want it to go only to administration.” And the point I’m trying to make is I know that’s important, and I want to perhaps balance up some of those others who are saying, “I only want it to go to the frontline.”

Matt:

Right. But having said all that, administration costs and the amount that is directed towards what we may commonly define as administration costs could conceivably be too much.

It’s finding this line of what is too much spent on admin, if we can even draw a border around the costs that are directed at admin, and then figure out what admin costs are, but this idea of spending too much on administration costs is a real concern, though, isn’t it?

Murray:

I think certainly the public would say we want to make sure that the funds we are giving are used prudently. But who are the best judges of that? I think they are probably a prudent board, that it has a good idea of what they’re trying to achieve, and responsibly assessing how best to achieve it. So what is too much? Too much is where it is not a reasonable expenditure to achieve the charitable outcome.

And some people would say, “Well how much is that? Is it 5%? Is it 15%? Is it 30%?” And at the ACNC we resist these rules of thumb because if you’re delivering for a popular cause, close to home, you might find your overheads are very low. But what if you’re delivering for an unpopular cause, a long way away, where both the costs of raising the money, and the cost of delivery of the service are just higher, because it’s a lot tougher.

Matt:

Yeah, right. The nature of it. Yeah.

Murray:

And so who are we to say one size fits all? So we look to the question of a responsible board to take these things into account. We don’t want wastage, we don’t want private benefit, but we do leave it to the discretion of a board how they use their scarce resources to get an outcome.

Matt:

And that’s what the points here on the slide point towards. The first one here just quickly, ratios and percentages may seem useful, but there are difficulties with them. And that also touches on what you just spoke about, but also the different nature of charities and the work that they do means that some charities will need to spend a higher percentage on administration costs than others.

For example, let’s say a local soup kitchen that has the costs of the van and some of the ingredients, and making the food to deliver to people in need, might not have the same administration costs as say a medical research charity that needs to have a lab and some equipment, and medical scientists to carry out the work. Just the nature of the two organisations are such that the percentages will likely be different.

Murray:

Absolutely. Yeah.
I quite like a story that someone tells of choosing a local doctor. You move into an area, which medical practice will I go to? And I don’t ask, “What are the overheads here?” I really ask, “What are the mortality rates of this doctor?”

Matt:

Yes.

Murray:

So what we really need to be asking is in all the circumstances, and in the nature of this charity, what’s the best outcome that can be achieved, rather than what are the overheads?

Matt:

And just before we do move on, you did mention the idea of the ACNC not, you know, condoning wastage, or private benefit, how do we draw the line between that which is a reasonable administration cost, the likes of which we’ve described a fair bit already today, and that which probably does cross the line if in fact that line is so difficult to find?

Murray:

Yeah. I suppose it’s one of those things that you know it when you see it. You know when someone appears to be acting irresponsibly, or appears to not be acting in the best interests of the charity.

So if we find that money’s going in, and then it’s going out to personal expenses, which is often some of the scandals that occur, people are benefitting themselves, they’re spending the money on fast cars, we would say that is leakage to private benefit. I think it would be true to say also that if the whole of the organisation appears to be administration, with no charitable impact, we would be asking questions.

We would be saying, “Are you serious about this? Do you really have a charitable intention, or do you have an intention to build an empire which is going to benefit the people involved within the organisation, not the ultimate beneficiaries?” Because charity is about public benefit, it’s about identifying how the general public should benefit from this activity, not from the people within the charity.

Matt:

And if a charity can point to their expenses and explain them, justify why they were spent for the charitable purpose, and in which way, and how it came about that they made the decision to spend this money, then it’s likely that that would be – we touch on it again – a reasonable board, it would likely be part of the charitable, the costs pursuing the charitable purpose.

It’s where a charity can’t do that, or can’t reasonably explain these costs, or reasonably justify it, where they get into trouble.

Murray:

Yeah. I would say that sometimes there are some flags that would have you question whether these expenses are legitimate towards the charitable impact.

And once the flag is raised, we would go to the board and say, “Can you explain what you were doing here, and why these expenses are here?” Now some will be obvious. If it is going straight into their pocket, without any effort being put in, it might be very easy to ask the question, and you find that there is no satisfactory explanation.

But at other times the charity will say, “Can we explain the particular idiosyncrasies of delivering this sort of charitable outcome?” And if it is within the range of prudent decisions, of good governance, we will accept that.

Matt:

Yeah, right. OK, so it is, in summarising the content we’ve got on the slide here, it is difficult to come up with a hard and fast line, and a ratio, or a percentage that will fit all charities, it really does depend on the nature of the organisation, the governance by which the expenses are being used, and how a charity is using their funds to pursue their charitable purpose.

Which brings us to a point on reporting. We can all look at charities’ financial statements and annual reports to have a look at where the money is going, and what percentages are being spent on what aspects of charity operations, but as the heading of this slide suggests, there isn’t any standard reporting, a prescribed way in which charities must report and, again troubling, no common definition of administration costs in accounting terms.

Murray:

Yeah. And in fact you can decide what your categories are in your accounts, and you can place expenses in categories almost in a discretionary way, as to how you regard those expenses.

I went to an activity conducted by Myles McGregor-Lowndes at the Queensland University of Technology Centre for Philanthropy, and what we did that day is take a set of charitable activities, and then determine how we should work our accounts to represent those activities.

And by using Australian Accounting Standards some came out with a ratio of about 15%, some about 50%, and some up in the, you know, 70 and 80% area.

Matt:

Right. And this is using standards that all organisations across the country are welcome to use?

Murray:

Are welcome to use. So frankly, the Accounting Standards we have at the moment provide very little assistance if someone wants to determine administration costs.

Matt:

And just on a practical level, how would this look for a charity? So for example, if charity A has some costs, let’s say running a vehicle, they’ve got some insurance, they’ve got some regular petrol payments, and charity B has the same costs, does this mean that the two charities could conceivably report those same costs, or very similar costs, in different ways in their financial statements?

Murray:

Absolutely. And legitimately so.

Matt:

Right. They’re not hiding anything, or doing anything nefarious, it’s just all above board, it’s just they can be categorised two different ways?

Murray:

Yeah. And I think the temptation, because observers put so much emphasis on this ‘what are your overheads; what are your fundraising costs’, the temptation is to try to put it into an area which is not administration, so that your ratio looks better.

Matt:

Oh, OK. Right. Right.

Murray:

And that can often distort the way that you record things. It can avoid transparency. So there are some real challenges then in the Accounting Standards not being able to demonstrate a consistency of administration costs.

Matt:

Yeah, particularly when it’s all legitimate, too. I think that’s the point.

Murray:

Yeah.

Matt:

If there were some, you know, dodgy behaviour underpinning some of this it would be different. But the point is that using the standards applied by the Accounting Standards Board, you can legitimately categorise them in a bunch of different categories.

Murray:

Yeah.

Matt:

Just the third dot point here on the slide we’ve got, is that charities should consider, and this is an acronym, NSCOA as we like to call it here at the ACNC, which stands for the National Standard Chart of Accounts, which is an attempt to try and standardise the way in which charities can report a whole range of costs, not just administration costs, but the way in which they can do their accounting according to a more streamlined way.

Murray:

Yeah. The National Standard Chart of Accounts is simply a set of headings in your accounts, with definitions attached to those headings.

It was originally designed to help charities in their acquittals to government departments. So the government department makes a grant, and then requires you to acquit on that grant, and to explain that you’ve used the money responsibly.

And some charities were reporting that if they had say scores of grants during the year, and each government department was requiring a different from of acquittal, a different set of headings, they were running the risk of spending more on reporting than the grants were worth in the first place.

Matt:

Yeah. Of course, yeah.

Murray:

And so originally coming out of the Queensland University of Technology, now under the jurisdiction of the ACNC, a set of headings and definitions was developed which is accepted by various state and federal government departments as an appropriate way to report.

And that’s sort of a methodology, that set of headings and explanations can contribute to consistency and comparability.

Matt:

Right. Yeah. It doesn’t solve the entire problem, but of course it provides some sort of uniformity with which we can try and look into some finances, and make sense of the financial statements that we see on the Register.

Murray:

Yeah. Look, I think we really still have a long way to go to find a way of consistently reporting the finances of charities, so that there is greater transparency. In some jurisdictions they have created Accounting Standards that are sector specific, they are for charities, but we’re not at that point at this stage.

Matt:

Right. And just the final dot point on this slide is that notwithstanding the difficulties in trying to examine an organisation’s financial statements and where their money is going, the information we do have on charities is worth looking into, and it is available freely on the ACNC Charity Register.

So if you were interested in looking at the spending of charities, and the way that they’ve reported them in their financial statements, you can do so by looking at the ACNC Charity Register and having a look at the statements that are submitted by charities themselves.

Murray:

Yeah. And you’ll certainly be able to get an indication of the scope of a charity’s revenue, and the scope of a charity’s expenditure, to get a general idea of the size and stability and sustainability of a charity.

Even small charities, that’s less than $250,000 revenue a year, will give you some line items from their accounts. Whereas over $250,000 you will get the financial statements in more detail. Some will be reviewed. And then the larger ones over $1 million will be audited. So you do get a pretty good picture of what’s going on in that charity.

Matt:

And we do recommend doing the research. If someone is looking to donate, and isn’t sure, or is concerned about administration costs and everything that comes with it, it is a good spot to begin.

Now what can charities do?

This feels like it’s been one way traffic up until this point, talking about how the public wants to view administration costs, and how can the public find out information, and is the public desire for information about admin costs even a fair query?

Having said all that, where does a charity’s responsibility lie within this discussion on administration costs?

Murray:

Well the responsibility is simply to use their resources responsibly to an impact. But I think there are some traps to fall into. If the charity sector puts the overhead ratio as a primary measure of efficiency and effectiveness, I think that they are creating a false expectation. People are giving because they trust the organisation, they’re related to the organisation in some way, or they admire the impact the organisation makes.

Frankly, I don’t think a lot of donors are pouring over accounts, checking ratios. I think they’re saying, “Is this a badge I trust?

Are these people I trust?” Or, “Do I admire the things that they’re achieving?” So my counsel to charities would be to say, think about the best way of communicating your effectiveness, and often that that will not necessarily be in your accounts, as much as in your stories.

So in your annual report, for sure, put your numbers in. But tell us the stories. Tell us how things change, how lives are changed by the work that you do, how the public has benefitted from these things.

So more storytelling would be my view on how charities should go about things.

Matt:

And just on this second point here, charities should show how reasonably administration costs are central to supporting the work on the ground.

Murray:

Yeah, admit it. Admit that we need to spend money to be effective.

Matt:

Yeah.

Murray:

But don’t…

Matt:

Don’t hide from it.

Murray:

No, don’t hide from it, don’t be coy about it, be quite open about it. And, as I’ve hinted at before, say to your donors, “Will you help us with the overheads, because that is the fuel that allows us to deliver.”

Matt:

And that’s one thing that I think typically historically charities haven’t been great at because of the, let’s say the baggage or the stigma that comes with this concept of administration costs, it’s something that has historically been something to almost shy away from, not embrace it as part of the operations of an organisation.

Murray:

Yeah. Or even perhaps more dangerous, feel that they have to keep cutting and cutting and cutting at their administration to project a persona of efficiency, and find that they just don’t have enough administration to do things effectively. If you keep just whittling away at your administration, you could get into a doom cycle, that means you can’t achieve your impact at all. So always a danger.

Matt:

Right. Yeah. That’s very good advice.

It’s one of the things that charities I don’t think see coming, is that doom cycle, as you describe it, the more you feed into it with that rhetoric, the more difficult it can be to break from it, like a pit of quicksand or something.

Murray:

Yeah.

Matt:

Let’s have a look at a summary of the issue today, before we do get into some questions, and we are looking forward to taking a bunch of your questions, which are coming through thick and fast.

But just summing up the issue, let’s go through these dot points. So number one, Murray, we have here we understand the concerns with administration costs.

Murray:

Wherever we go as a regulator, people ask about administration costs, and particularly if I spend time on certain radio programmes where shock is more important than information I will be pressed very strongly, “What are the ratios? How much? Is it 15%, 20%?” And really it reflects the concerns people have.

My response is almost inevitably it really is the wrong question. The right question is what’s reasonable in all the circumstances? So, yes, we understand the concern, we want to shift the focus to impact and effectiveness.

Matt:

Right. And the second point here we expect charities to operate responsibly. And most charities are responsible with money.

Murray:

Yeah, it’s important to say overwhelmingly charities have good governance. It’s an essential element of being a registered charity. And the danger of us occasionally tracking down someone doing the wrong thing is that that becomes the narrative.

Matt:

Yeah, sure.

Murray:

But that is a very tiny part of the narrative, and we wouldn’t want it to colour the terrific work that charities are overwhelmingly doing.

Matt:

Yeah. The third point we just touched on before, that charities should be open about their spending, explain their costs through, as you said, their stories.

Murray:

Yeah. Yeah, don’t try to suggest that you have no overheads, when everyone knows you do.

Just say, “Yeah, for sure, these aspects are important in our delivery, and this is why they are important.”

Matt:

And the public – this is back onto the public desire for this information – is that members of the public should consider administration costs in the context of the work of the charity.

Murray:

Yeah. Yeah, realise that different charities, and charities are so diverse, will have different ways of organising, so again, no one size can fit all charities.

Matt:

Yeah, that’s right.

And that’s not to say that the concerns about administration costs are illegitimate, it’s just to say that this desire for a one size fits all approach is probably the wrong way to go about it.

Murray:

Absolutely. Yeah.

Matt:

And this last point, occasionally some spending on administration is excessive.

Murray:

Yeah, sometimes we’ll look at a charity and say that that’s not quite right, it doesn’t seem to add up, where is this money going? It doesn’t seem to be representative impact. It may well be represented in people creaming off charitable funds for their own purposes.

Matt:

And when that happens, and the ACNC is made aware of it, we can look into that and act where we can.

Murray:

Yeah. That’ll be a cause for inquiry. And it would be a cause for the board to explain how it’s spending its money.

Matt:

Yeah. OK, there’s a lot in that today, and a lot for you to take in, and we’re getting questions pouring in.

So we’ll try our best to get to as many of your questions as we can. But as I said at the beginning, if we miss yours, we promise we will get back to you via email. And if your question is a little bit too specific, it’s about your organisation, some of the aspects of your organisation in particular, it’s best to give us a call on 13 22 62, and one of our very knowledgeable, intelligent, charismatic staff members on the phone will be able to talk you through all your issues for your charity.

Murray:

Yeah, and committed and passionate.

Matt:

Committed, passionate as well. One question that has popped up, Murray, and I know we’ve touched on it, but it is worth reiterating, is on ratios and percentages.

Although we have said that it is really difficult to find, you know, the Holy Grail of the one size fits all, at the extremes there are flags that would indicate certain wrongdoing, right, so when we say percentages, 99% on administration costs might be a flag.

Murray:

It might be a flag, and that’s all.

Matt:

Yeah. Right.

Murray:

It might be a very red flag. And again, we will simply go back and say, “Why are you spending so much without any frontline delivery?”

And we will ask for an explanation. We generally, speaking of flags, we generally talk of charities swimming between the flags, are they within the range of conduct that a charity ought to be involved in?

If they’re outside the flags, we’ll start by blowing the whistle, we’ll want to know why, and we will try to get people back between the flags.

But if they insist on staying out there, which seems to be conduct that’s inconsistent with being a charity, that’s when we will say, “Perhaps you shouldn’t be on this Register, because this Register is a sign of good governance, and we’re forming the view that you’re not holding the wheel, and you’re not steering in the right direction.”

Matt:

Yeah. Right, a couple of questions have come through which are similar, but from two different angles.

Someone from the public has said when donating they noticed a lot of charities claim to have little to no administration costs, and then on a similar note someone from a charity has asked that in their promotional material they feel like there’s a desire to claim they have no administration costs, to solicit the donation that they’re after.

So from both angles, on the same theme, what do you say about the organisations that are claiming to have no administration costs, or very little?

Murray:

Well beware the organisation that has no administration costs, because there’s no accountability, there’s no supervision, there’s probably no infrastructure, and no ability to deliver.

Matt:

OK Yeah.

Murray:

However …

Matt:

All the bad things.

Murray: …

yes, some organisations will absorb that with volunteers, volunteer time, volunteer resources, volunteers chipping in the petrol, whatever it is. So other organisations will say, “We have a donor or a fund that pays the overheads.”

Matt:

OK.

Murray:

My personal preference would be to explain where the administration is coming from, and admitting that there is such a thing. So instead of saying, “Absolutely every dollar goes to the cause,” you might say, “Because someone is meeting our administration costs we are able to ensure that your donation is delivered to the beneficiary.”

Matt:

Right.

Murray:

Or, “Because we are volunteers, and contributing our time and resources, we can ensure that your donation goes to the beneficiary.”

So be honest about the fact that there is admin, just who’s paying?

Matt:

Place it in the right context, so the donor, the member of the public, can fairly assess what’s going on.

Murray:

Yeah. I suppose the charity who’s worried that the next charity is getting donations because they’re able to say absolutely no overheads, has to make a decision where the right-thinking people will realise that there are administrative costs.

Are there really people out there who would assume that there are no administration costs, and secondly, that if there are no administration costs, therefore that charity must be more efficient?

We all know that you often need capital and investment to get an outcome, so sometimes inefficiency will arise from the smell of the oily rag.

Matt:

Right, right.

Murray:

But if you fuel an organisation appropriately you will in fact be more efficient. It all depends.

Matt:

Yeah. It all depends. And just on that note, actually, in a similar vein, do you think that charities should be more trusting of the public to be able to understand that administration costs are simply a part of operations, and rather than, as we described earlier, shying away from the nature of administration costs, just being upfront and open about it, and trusting that the public will know what they’re talking about?

Murray:

Yeah. Matt, I do understand the fact that there are so many people out there, I suppose the spirit of the times is that overheads are bad, that I can appreciate it’s all very well for me to say here from the ACNC, “Educate your donors, educate the public.”

But I do realise that that is tricky, and that so many people are convinced that administration costs are the measure of efficiency. But perhaps I put out a plea to charities to be part of that educational solution as well.

Matt:

Yeah. And just one more, we’ve probably got time for a couple, or one more question. This one is taking a slight veer in another direction, but focusing specifically on the salaries of staff members, and in particular some of the executive staff or the higher ups, the boss, the CEO, the board, is there a way to calculate fair remuneration for people in such positions?

We’ve had a question from a couple of charities that are struggling with this concept. They understand that there’s a need to have people in those positions, and qualified, capable people, but resources of course are thin, and they don’t want to be seen as spending too much on administration.

Murray:

Well in theory it comes back to the question of the board deciding what is appropriate to get the right person, to get the right impact. And we all know about monkeys and peanuts. But I would say to a board grappling with this issue, what are the benchmarks? What would the outsider, looking in, say about this salary?

Not just the covetous person who wishes they were on that salary, but the right thinking person looking in. So there will be some charities where you do need a top gun.

Matt:

Yeah.

Murray:

Medical research might be an example. Running a big hospital, or running a university, you are not going to find someone…

Matt:

That’s a big challenge.

Murray: …

on the Award to be the vice chancellor.

Matt:

Yeah.

Murray:

So you really need to look at your segment, look at comparatives, and I think we would be asking the board to justify why they have set the salary at that level.

Matt:

Right, OK.

Murray:

Now in some cases it would be important to go to a consultant and say, “What is reasonable; what’s the range here?” At other times you might use some of the excellent annual surveys of what a CEO ought to receive in these circumstances.

Matt:

Oh, OK. Yeah.

Murray:

Or at other times you’d be saying, “This is how we set it, according to this benchmark.” Reasonable in all circumstances. It sounds vague, but that’s what we’re getting at.

Matt:

Yeah.

So it’s in the idea of admin costs not having a one size fits all approach to say ratios and percentages, the reasonable in all circumstances can, in lieu of that, be our one size fits all. Because it does apply to most charitable, well, all charities and all circumstances.

Murray:

Yeah, that’s…

Matt:

Be reasonable.

Murray: …

yeah, being reasonable is the key. And yeah, I think that’s probably the best way to look at it.

Matt:

And it’s probably a good spot to end on. And we’ve already taken 45 minutes of your lunch break on a beautifully sunny, well it might not be sunny everywhere I just realised … but it’s sunny here, and I’m sure everyone is as hungry as we are for our lunch break.

But we thank you very much for your time today. We always appreciate your attendance at the webinars, and we encourage you to join up for future webinars.

But if you did want some more information about this topic, we have lots of resources on our website.

On the screen here you can see a few – www.acnc.gov.au is the home page, and a few resources that would be considered handy on this topic there. Just a note, you don’t need to scribble these down quickly, we will send you a follow-up email with all of the links and all the resources in the next day or two.

And just for your reference, we’ll put a recording of this webinar on the website as well.

So if there any colleagues or friends or co-workers that you thought this might have been useful for, it will be available on the website later on.

And also, stay in touch with us via email updates, and the Commissioner’s Column from the website there. We have lots of web guidance, video content, webinars such as this, and you can find some advice for your charity, the specifics of your organisation, from our Advice Services team, who are available on the phones at 13 22 62, or email advice@acnc.gov.au.

And we’ll be on social media at those links down here on the slide.

And just before I do let you go, thank you for your attendance today. And if you have any feedback specifically about the webinars or other educational material, send us an email at education@acnc.gov.au.

And just before you do close off, when the webinar ends there will be a short survey, I think it’s only two or three questions off the top of my head.

We really appreciate you just taking the ten seconds or so to fill that in, because it does shape the way in which we approach our webinars, and how we can improve and get better. And we’re always looking to improve and get better, as we should be.

Thank you very much for your attendance today. Thanks to Chris and Simone, who have been answering all the questions as we’ve gone along.

And thank you, Murray, for being able to shed some light on this tricky topic.

Murray:

Thanks.