When unspent donations reflect good governance
Wildlife rescue charity WIRES copped a drive by shot in The Saturday Paper, citing volunteers who complain that the $91m in donations raised during the 2020 bushfires is not being spent, while grass roots community groups struggle for resources.
WIRES declined to comment. So let’s think about the challenges faced by charity leaders and boards who receive a windfall in donations. Why didn’t WIRES spend all the money? What do the numbers tell us?
Firstly, $8m was spent on an emergency response in 2020 – spending lifted from $3.3m to $11.8m, with $5.7m granted to external partners. On face value, this makes sense. As a charity growing from 13 to 24 full time staff in 2020, partners have the capacity to respond quickly.
WIRES booked a surplus of $89m in 2020 and its Net Assets ballooned from $2.5m to $92m. Interestingly, the funds are held as current assets; indicating that it is not a long-term investment or endowment. It is a very healthy war chest to make a difference.
The charity says those donations are funding multi-year programs. Note: accounting standards (the dreaded AASB 15) do not allow charities to spread “non contract” donations over the life of the programs. WIRES has subsequently recorded losses, booking a $7.1m deficit in 2022 (that is, drawing down from reserves).
It sounds easy to kick money out of the door. The board, however, has a responsibility to invest bushfire donations into mission aligned programs that deliver the best outcomes. It takes time and capacity to design, deliver and evaluate effective programs. Spending down quickly can create serious reputational risks.
Interestingly, the 2022 results include $2m in consulting fees – perhaps this is work to arm the charity with a new constitution and long term strategy?
The newspaper article also highlights tensions between unfunded volunteer-led initiatives and centralised control of programs. Local innovation, energy and knowledge are essential to charity work, but it also creates organisational risk. It is a difficult tightrope to walk. If done well, carefully delegated autonomy can empower volunteers and scale your charity’s impact.
It is also good practice for charities with grass roots community groups to encourage local fundraising while tightly controlling donations. If donations are misused, the charity risks de-registration. A fatal blow. It is with noting that the ACNC’s latest annual report revealed the regulator revoked the registration of 7 charities in 2021/22. One third of complaints received relate to the use of charity funds for personal gain. One-quarter related to mismanagement of charity funds.
I don’t know the team at WIRES. But it appears they are embracing an opportunity to transform its impact and I look forward to learning more. Sadly, good charity governance and financing won’t sell newspapers!
better charity can help your nonprofit grow. we can help you benchmark your organisation against the charity sector, assess your financial model and develop a plan to bring more money through the door.
2 responses to “When unspent donations reflect good governance”
While I understand the challenegs of a charity as I am a chairperson of one but when finance is given to a specific cause ethically is needs to be expended in that cause and expedited in a reasonable time and for that cause alone otherwise the charity looses more than money, it looses its credibility. It is not given for a buffer or for future needs.
Thanks Errol, I agree the funds should be expended on bushfire recovery programs. But I doubt a charity with annual income of $3m has the capacity to spend $90m on properly designed impactful programs. It will be interesting to review WIRES’ plans when its financial statement is lodged with the ACNC early in 2024.