By Catherine Eden
Donors to charity organisations want to know that their money is being spent on services that alleviate the suffering of others. Countless worthy causes vie for support, but what makes them worthy of funding is transparency, a proven track record and good governance.
The concept of charity is as old as the hills, but while there’s nothing new about the physical and spiritual benefits of sharing wealth with those in need, orchestrating the gathering and distribution of money has complicated the simple act of giving in the 21st century. Fund-raising has become a serious business, and, like any business, can be tarnished by the unscrupulous, with disastrous effects on the poor and the vulnerable.
For integrity and professionalism to prevail, donors should ask some searching questions before parting with their cash, and organisations should ensure that their procedures are beyond reproach.
Apartheid left South Africa with a seemingly endless need for development funding; at the same time, it resulted in the creation of the most sophisticated corporate investment field in the world.
In the 1980s, when sanctions were imposed on the old regime, the Sullivan Code of Principles, drawn up in the United States, pointed out that international pressure would inflict further hardship on South Africans who were already suffering under the political system. American companies that elected to stay in South Africa had to become signatories to the code, which required them to contribute either one percent of their payroll or one percent of their net profit to the disadvantaged, whichever was the greater.
The obvious beneficiaries of the corporate social responsibility departments set up by US companies were non-governmental and charity organisations. Major South African companies voluntarily followed suit, gradually establishing a strong culture of corporate support for charity. In turn, it became imperative that charity organisations developed an equally strong culture of good governance.
Until quite recently, there was no formal training available to fund-raisers. Many charities do excellent work thanks to focused planning committees and the active participation of benefactors, but these organisations are not obliged to conform to any statutory standards. Big money is tempting, and high-profile charities have had their share of scandals. To eliminate skulduggery, charities must have squeaky-clean policies and a creative partnership with donors who can demand accountability.
“Chequebook charity is all very well, but if all donors followed up and were a little tougher on their beneficiaries, we would see an increase in professionalism in these organisations,” Jill Ritchie, the national vice-president of the Southern Africa Institute of Fund-raising (SAIF), says.
Ritchie serves on the ethics committee of this body and has a private consultancy that raises funds on behalf of a few carefully chosen charities.
She consults to the corporate sector and is one of only six accredited trainers who run the SAIF’s entry-level training programme for fund-raisers. The three-day course is recognised by the South African Qualifications Authority.
“Fund-raisers, like publicity agents, must charge an organisation a set fee for their services,” Ritchie says. “It’s their job to bring in large sums of money, and there should be no special treatment – and certainly no commission – for doing so. For example, I secured the first donation to South Africa from the UK lottery, for R8 million; imagine how much money would have been sliced off if I’d taken commission?”
Historically, charities have been very well intentioned, but not so efficiently managed. “There is no reason why a charity should not be run like a business,” Dawn King, a forensic accountant and senior manager with Ernst & Young, says.
King, who has nine years of investigative experience, has been involved in numerous prosecutions, including a high-profile case of misappropriation of donor funds heard in the Cape High Court.
King is a board member of the Cart Horse Protection Association, and her financial know-how makes her favourite charity a blueprint for sound management.
“We are a small charity, but have to show that we are ahead of the rest with the best practices and procedures,” King says.
“We took a decision at committee level that benefactors should receive benefits to the value of 70 percent of all funds raised, and we stick to our budget, and fund special needs separately. If a large donation comes in for food, we’d rather have that expense covered for five years than swing the budget around.”
Not surprisingly, people prefer to donate where they can see a specific result. A funding proposal from a donor is a legally binding document – the charity is obliged to spend the money the way the donor requests. But if a charity does not have a clear vision, it may be influenced to move away from its core operation by creating projects that a big donor is willing to sponsor. To be sustainable it must be able to show that it is responding to a specific need, and it must have detailed records of the services it delivers.
“Every charity should have a budget and a plan for the year, and all its affairs should be documented and open to scrutiny,” King says. “Donors should ask for financial statements and look at the statistics: How many employees does the charity have? By what measure does it determine the effectiveness of its projects and the extent to which its objectives are being achieved?” she says.
“In our case, the idea is to solve the cart horse problem by providing support and education for the owners, and not to keep expanding the budget. It’s crucial to look at the credentials of the people managing the financial side of the organisation.”
Before 1996, the only indication that a charity was legitimate was that it had a fund-raising number. In 1978, the Fund-raising Act empowered the Security Police to investigate charities applying for fund-raising numbers to make sure they weren’t a front for “the struggle”. Since 1996, when the Non-profit Organisation Act was passed, the registration of a charity has been made entirely voluntary.
However, since there is now no hidden agenda behind this law, there’s also no reason why a charity should not register and abide by a code of practice. This entails submitting annual financial statements to the Department of Welfare, which is the supervisory body that ensures that the organisation is genuinely not for profit. If a charity chooses not to register, and therefore not to submit its financial affairs to scrutiny, potential donors should ask why.
“The exception to this rule may be a community-based organisation,” Ritchie explains. “A grass-roots concern may not be registered because it lacks the know-how, but in time it should evolve.”
With the array of charities to choose from, how do you decide which to support? Ritchie’s suggestion to corporate donors is that they join an organisation called the South African Grant-makers Association (Saga). “Currently, there’s a lot of money going into education and the treatment and prevention of Aids,” she says, “and not enough into the environment, sport and the arts. By liaising with other benefactors, you can ensure that your donor rands are spread more equitably.”
The Nelson Mandela Children’s Fund is a case in point. “It’s an excellent and exceptionally well-funded charity,” Ritchie says, “partly because a large donation usually secures a meeting with Mandela. It does great work, but I would encourage donors to consider supporting other organisations that don’t have such high-profile patrons, but do as much.”
Animal lovers might be drawn to the SPCA or the Cart Horse Protection Association, which have effective programmes and dedicated staff.
Supporters of the arts might want to encourage Buskaid, which promotes musical talent in disadvantaged areas of Gauteng (and funded the Soweto String Quartet) or Dance for All, a similar initiative founded by ballet dancers Phillip Boyd and Phyllis Spira to promote the love of dance in Cape Town’s townships.
People who have been affected by serious illness will be attracted to Reach for a Dream, whose mainly voluntary staff bring happiness to terminally ill children.
Nazareth House, the first home for Aids babies in the country, has a waiting list of volunteers keen to help, and a full-time fund-raiser in Cape Town who works without a salary. A second home has been opened in Johannesburg.
The educationally-minded may prefer to support CIDA City Campus – the first university in the country in which every one of the 1 700 promising but disadvantaged students is on a full bursary. With its focus on business administration, CIDA manages to cut costs by attracting people from top companies to lecture potential employees.
A dated image doesn’t detract from the irreproachable nature of the Salvation Army, which played a pivotal role in delivering services during the September 11 crisis in New York. Here at home, it is active in the care of the homeless and in Aids-related projects.
And for sheer good governance, the St John’s Ambulance Foundation is hard to beat: interest from its accumulated reserves pays all of its running costs, allowing every donation to be channelled into first aid training and support skills for the family members of the ill and disabled.
To single out a few is to incur the wrath of scores of excellent organisations that richly deserve support. At the end of the day, however, the decision to donate to charity is personal and emotional. People have the right to contribute to whatever touches the heart, despite the expectations of certain other charities that the public should fund their more deserving causes.
The mammoth drive to save the Cape’s oil-soaked penguins put a few charitable noses out of joint, and there was a good deal of grumbling about wildlife taking precedence over people.
It’s impossible to know whether any of the critics man soup kitchens on a regular basis, but it’s pretty clear that they did not get involved in what Ritchie describes as “the largest animal rescue effort since Noah” or they would have realised that something much deeper was at work.
Over the duration of the crisis, 20 000 volunteers – not all of them Capetonians – gladly got chilled and pecked to the bone to save the traumatised seabirds. While the penguins were the undoubted beneficiaries, the overwhelming success of the project and the goodwill that was generated taught the world something about the magnificence of the human spirit. With love, generosity and sound planning, there is nothing we cannot achieve.
Tax on donations
You are entitled to donate up to R30 000 a year tax-free to anyone you wish without incurring donations tax.
Donations tax is levied at a rate of 20 percent of any amount over R30 000 you donate, and the donor must pay the tax.
However, you can also donate unlimited amounts of money to registered public benefit organisations without paying any donations tax. What’s more, you can claim the amount donated against your taxable income.
The list of public benefit organisations is fairly extensive and includes educational institutions, health organisations, public service bodies and, in terms of the latest Budget, organisations that provide low-income housing.
If you wish to make a donation that is tax deductible, you must ensure that the recipient is registered with the South African Revenue Service as a public benefit organisation.
The government is currently modifying the rules for the types of donations that qualify for deduction from taxable income and amending the list of public benefit organisations.
This article was first published in Personal Finance magazine, 4th Quarter 2003.