A stronger charity sector
Charities and not-for-profits play a critical role in Australian society. Charities often go where government and business can’t, and are vital in creating an equitable society and supporting the underserved. But for the most part, we have under-invested in our charities.
As American charity disruptor Dan Pallotta has called out in his 2013 TED talk, we have essentially been operating with two rulebooks – one for the business sector, and one for the charity and not-for-profit sector.
While we expect that businesses invest in talent and innovation to ensure the best results for the company and its shareholders, there is a false assumption that a charity is efficient if it keeps administrative expenses low and gives as much donated money as possible straight to "the cause". A weak not-for-profit sector ultimately means worse outcomes for the people and causes they are trying to serve.
This project aims to support a stronger charity sector capable of delivering on impact.
The overhead myth
The majority of people say 'how much money goes to the cause' is an important factor when choosing charities to donate to. However, what about the necessary costs that are incurred as charities strive towards the cause? Overheads are the indirect expenses that are incurred and consumed in the process, such as fundraising and administrations costs. In theory, the less money spent on overheads, the more money is available for the cause.
Yet, direct costs can be an unreliable way to measure the contribution that donations make in achieving positive impact. The right balance of indirect costs can vary greatly depending on the nature of the not-for-profit.
Have we been asking the wrong questions?
Overemphasis on direct versus indirect costs can stifle growth, scale and innovation as it can detract from the key questions.
Like the for-profit sector, investment in infrastructure, capabilities and potentially risky ideas are needed to tackle complex problems at scale. Strategic funding addressing a not-for-profit’s foundational needs can amplify impact.
We need to change the conversation
Not-for-profits should be rewarded for impact. It’s time to change the conversation so that charities can focus on core objectives and achieve more impact and scale.