Should disaster relief money fund core costs?

The debate about charity overheads re-emerged this week after the Australian Red Cross was criticised for spending 10% of its Disaster Relief Fund on ‘office costs’.

The charity is leading the response to the devastating fires sweeping the nation, and has been the first port of call for the millions moved to donate. Instead of setting up a new fund, they have sensibly been directing donors towards their standing Relief Fund – of which, they reserve 10% of donations for backroom costs.

Unsurprisingly, the response to this news has been polarising. Either, people are outraged that 100% of donations have not been spent directly on reconstruction. Or, they are furious that this is even a debate in the first place.

Away from the battleground of Twitter, my take is a bit more nuanced. In fact, I’d go as far as to say that both reactions have merit.

Running a charity demands significant investment in overheads. We rightly expect our charities to be effective, strategic and prudent with our hard-earned cash. All of this requires a level of professionalisation that is impossible without skilled staff, diverse expertise and functioning offices.

But more than this, spending money on ‘office costs’ is a core part of delivering sustainable change – something any charity worth its salt should be aiming for.

Disaster relief is a prime example. Overheads are an essential part of the service: negotiating for the best materials at the cheapest price; physically delivering the relief; communicating with affected people; and designing strategies to stop the disaster happening again – be it investment in new solutions or driving global action on climate change.

This is why I think both reactions are correct. 

As a sector, we have dug our own hole by bending over backwards to tell a story of ‘low overheads’ – separating this core part of our work when asking for money. It is also where the Australian Red Cross have found themselves in trouble, after promising to spend 100% of a previous fund directly on the response.

Instead of making these false promises, we should be having an open and honest conversation with the public about what it takes to deliver sustainable change.

Yes, a simple story of a money spent on a vaccination that saved one child’s life is incredibly powerful. But money spent on lobbying governments to invest more in primary healthcare, or investment in R&D for new solutions, or support for skilled staff to administer the vaccines often represents even better value for money – and we woefully underestimate the public if we think they wouldn’t understand that.

Happily, these assumptions are starting to change. 

NPC’s ‘What makes a good charity?’ guide helps potential donors and funders look holistically at what drives impact. This is mirrored by the effective altruism movement in the USA. In both cases, the organisations’ driving policy change often emerge as the most sensible investment as the potential for transformation is so much higher than any one single intervention.

Similarly, the USA’s Council of Non-Profits through their #OwnYourCosts campaign, are encouraging charities to be transparent about their costs and honest about the important role they play in delivering change.

Trust in charities has taken a beating in recent years. Part of this is driven by public concern around living our values, coupled with a growing hunger for authenticity. A vibrant third sector is critical to building a better society and bringing people together. In order to fulfill this role, it is essential that we reverse this trend – so let us learn from this debate, and from our colleagues around the world, and have an honest conversation about costs and the quest for sustainable change.

This blog was originally published on NPC


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