‘The Ethics of Giving’, Researching the Issues of Voluntary Organisations Using Commercial Organisations for Fund-raising.

 Research paper by Stephanie Remers (C)

Abstract:

Since the early 90’s many things have changed when it comes to fundraising. Seeing people standing with a bucket in the street was almost endearing and having someone knock at your door to ask you to sponsor a child in Africa was virtually unheard of. Since then everyone has jumped on the bandwagon and our streets, front door and home telephones are inundated with charities wanting our sponsorship. Over the last two decades charities have had to get more creative in raising funds. One of their main sources of income is through regular donations from the general public and one of the ways in which they can achieve this level of regular donors is to use fundraising firms to source the donors for them. This paper examines the ethics behind the use of fundraising firms and questions the validity of employing such firms.

PART 1: Introduction and overview of literature

Understanding Charities

In a House of Commons Research Paper they declare that between 1997 and 1998 there were approximately 300,000 charities in the UK, employing over half a million people. At the time this contributed to over £12 billion to the British economic activity (HM Treasury, 1999)

One of the most lucrative forms of money charities receive is through regular donations. In order to get these charities need donors, given today’s current economic climate charities are faced with more challenges in getting people to give. The methods most charities use to get donors are fundraising firms. The question is; is it ethically correct for people to be making money out of non-profit organisations and in paying people to do so are we removing the true value of the work that the charities do? To answer these questions I interviewed two Charities and one Fundraising Firm and researched literature on the subject of fundraising.

The Interviews

I decided to start by looking at the running costs of using fundraising firms and show the results from the charities & the firm I interviewed. I decided to look at different human behaviours which may affect or influence the way in which charities are run and in the way that fundraising firms may behave towards the charities. Looking at it from all angles I have given the responses of the charities and the fundraising firm from a perspective of their responsibilities, motivations of the staff and of how self-interest may affect or influence the outcomes of performance. I then question charities as a business. I also wanted to know if government financial policies and the current economical state had any influence on the productivity of charities / fundraising firms.

I will conclude by looking at it from the prospective of Singers (2009) ideas and assess/objectively argue if fundraising firms are the best choice for charities.

Interview preparation

Before contacting the Charities and Businesses identified for interview I needed to improve my skills in interviewing. In order to do this I read How to Conduct Interviews by Telephone and in Person (James, 1995). It talks of the advantages and disadvantages of using survey interviews and the advantages of using narrative forms in interviews. I also took advice From Microscope to Comfy Chair: Imaging Control in Interview Situations (Fairbairn 2009) on techniques of interviewing, this made me realise that I wanted more of a ‘living room feel’ interview process.

THE BBC

The BBC programme News Night (2010) did research on door to door and street fundraising.  It showed that millions of pounds go to fundraising companies every year. I use this as another information source to give a wider overview on fundraising as well as the evidence gathered from the interviews.

The life you can save

In trying to rationalise the methods of fundraising I had to find literature that would look at it from an ethical perspective. I came across Peter Singers book The life you can save (2009). Singer suggests that people in general can afford to pay a minimum of 10% of their wages to charity. Towards the end of the book he actually concludes that people on an average wage should only pay 5% and people on above average wages should pay 10%. Nonetheless, his theory is that ‘ethically’ we could and should be doing more. From this I thought; could singer’s theories help in understanding how charities utilise funds and transfer his theory of ‘people’ to the charities themselves, if individuals can give more can they?

What Singer wrote about human behaviours made me think, while the strong moral dialog to help the needy is apparent in the creation of charities and to some degree in the fundraising firm, are they somehow missing the point? Are they just do-gooders who want to be seen helping the needy, starting out with good intentions but ultimately ending up in fulfilling their own selfish ends by being paid for charitable work? Is that ethically the way it should be?

Charity websites, Governmental websites, Newspapers & Statistical websites

As humans we are not under any obligation to give anything yet the fact remains that we do, this encouraged me to look at charities in general and the ways in which they chose to spend their money, with this question in mind I looked at sources of data from Charity, Government and recognised Newspapers and Statistical websites. In doing this I investigate the websites of the British Heart Foundation and Cancer Research UK with regards to their spending. I also had to source statistical information from Governmental websites such as HM Revenues policies on tax cuts and charitable giving (HM Treasury, 1999). Furthermore I investigated recent reports on the new Tax caps that the Conservative Party are placing upon the UK at present and related this to the effect it may have on the funding charities receive from businesses as well as large private donors. In order to do this I looked at Newspaper reports using information from a P. Wintour article titled Vince Cable and David Davis break ranks to join outcry over charity tax cap (The Guardian, 2012) and J.Bingham, M.Beckford, C.Hope article  titled Charities’ anger over Osborne’s ‘tax dodge’ attack on donors  (The Telegraph 2012). I also looked into the Invisible Children (Kony 2012) Campaign in regards to the awareness it has encouraged in people to investigate the charities they are investing in.

Thomas Hobbes, Karl Marx & Richard Titmuss

Singer (2009) writes of giving as a human behaviour, how this can affect the way in which charities receive money and what we can be done to influence or leverage this. One aspect of this is shown by Dale Miller (1999) in The Norm of Self-interest. He gives the example of Hobbes theory on Self-interest. Hobbes says that Humans only act out of their own interest.  I looked at this in relation to the ethical thinking of the charities and the fundraising firms. Ethics are meant to overcome self-interest, so on this basis are the charities and the firms behaving ethically?

Other literature reviewed was The Economic Philosophic Manuscripts of 1844 in regards to Karl Marx theory on money being the ‘universal agent of separation’ (Marx 1964). This encouraged me to think about how in charging for something we could be undermining its true value? I then related this to the theories of Richard Titmuss and the ‘The gift Relationship’ (McLean, 1999).

In attempting to gather information on this topic I discovered literature was hard to find. There have been many articles on how charities should be run and the ethics of fundraising in the non-profit sector but there are no real arguments in relation to utilisation of fundraising firms, apart from newspaper articles which have written reports on the annoyance caused by street fundraisers. Because of this I have had to rely on writers such as Singer.

PART 2: Research Design

Methodology

This project is an empirical research paper:

Before making a decision about the methods, I had to look into the different varieties of data collection available and which would be most suitable to my investigation.  I was aware that there was a variety of data collection techniques such as; interviews, questionnaires, and focus groups. After taking these into consideration I decided to interview charities and fundraising firms. I believe this was the best way of gathering information for the kind of research I was doing.

Some of the problems I faced in gathering information were sourcing enough people to interview. Overall I sent 7 requests to different charities and fundraising firms, from which only 2 charities and 1 fundraising firm responded (See Appendix A for copies of email sent). I had the intention to do a questionnaire too, however fell short on time. The reason I was inspired to do a questionnaire was from reading Peter Singers book The life you can save (2009).  I wanted to look into society’s perception of giving and ask people some simple questions on percentages and statistics of individual and government giving. Unfortunately I had reached this stage of the investigation too late and was not able to get ethical approval in time.

The companies and charities I contacted who declined my request for an interview did not give any reason as to why they did not want to take part.

The challenges in interviewing were that I had never interviewed anyone before in this manner. I do have experience in interviewing people from an employer’s perspective; however this process of interviewing was completely new to me. I was concerned that through a lack of experience in this type of interviewing I may not have been able to achieve the information needed; nonetheless I believe that the approach I took allowed the interviewees an opportunity to express their knowledge of the fundraising processes in detail, therefore enriching the date received. Structuring the interviews in a semi-structured and narrative style helped to gain these results.   I wanted the interviewees to feel comfortable in taking to me about the subject and not threatened in any way. Therefore I wanted a ‘living room type’ interview process to happen; I believe that this was the best technique and helped tie in the information I received from the interviews with the literature I used help to structure the theories and arguments in the conclusion.

Finally, I considered a focus group but because I assured the interviewees that the information would be anonymous, this was not a viable option. It would not have been logistically possible to get the collective number of people required for the interviews to meet in one place at one time. Using an interview procedure allowed me to interact with each individual on a more personal level, creating an intimate and private atmosphere which I believe helped the conversation to flow and ultimately the required information to be gathered.

Sampling

To keep the anonymity of the charities and fundraising firm I have changed the names of the people interviewed and referred to them as Charity 1, Charity 2 and Fundraising Firm I have also changed the names of the interviewees and not mentioned the names of the charities or fundraising firm, I have given a brief overview of what sector the charities were from:

Charity 1 – James is the director of the branch and has worked at the charity for eleven years. The Charity helps in the support of people with mental health needs.

Charity 2 – Frank is the Head of the Fundraising Department and has worked at this particular organisation for approximately twenty months. The charity work in the wildlife area, overall he has worked in the sector for over ten years

Fundraising Firm – Sarah is Head of External Communications, working closely with the Marketing and PR Department. She has not worked for the company for long but has worked in the fundraising sector for three and half years. The company specialise in door to door fundraising.

Research & ethics

When approaching the research I had to take into account the ethical issues as well as data protection. In order to do this I had a consent form (see appendix B) which the organisations and businesses needed to sign. It was made clear that participation in this research would be voluntary and they would not be obliged to take part.  If participates agreed to take part in the interview but at any time wanted to withdraw from the process they could and would not need to give any reason or explanation, with the proviso that they would have to do so up to three weeks after the interview has taken place or in all cases before the 14^th April (two days before the scheduled dissertation publishing date).

In order to get an accurate recording of the interviews the interviewees were informed that I would be using a Dictaphone as well as taking notes during the process. I had to take into consideration the privacy of the interviews as the information they may give could affect their position at the charity or company. Therefore I advised them that the recordings, transcripts and any notes taken would be given a numerical code and their name would not appear anywhere within the data.  I also had to secure this data and store it on a password protected computer file and assure them that only I would have access to it. I made sure that the contents of all interviews were kept confidential and that their names are anonymous in all publications, reports or presentations arising from the research, unless they specifically requested otherwise.

The interviews that were digitally recorded were completed in March and April 2012, the interview of Charity 1 was done in Leeds I travelled to their office. The interview took approximately forty minutes. For Charity 2 I travelled to York this interview also took a similar duration to that of Charity 1. The third interview was done by phone, this was the Fundraising Firm. Their office is in London so a telephone interview was a more logical choice, this interview took thirty minutes.

I made sure all interviews were performed in a quiet room where we could not be disturbed. I already had pre-defined questions set down and had a draft copy of these to send the interviewees before the interview took place (See appendix C). The questions posed to the participants were not rigid and varied with each person I interviewed. The idea was to have a framework to allow a reactive and fluid questioning depending on what answers were received.

As mentioned previously, I took notes during the interview process and added these to the transcripts. This turned out to be an appropriate thing to do, as due to technical issues in my first interview, with Charity 1, the Dictaphone stopped working. Consequently I had to rely solely on the notes I had taken during the interview.  All notes were typed up and put on a password protected computer and the written notes were destroyed after use.

PART 3: Findings and Discussion

This investigation attempts to look deeper into the ways in which charities raise funds and to look at how Fundraising Firms work in practice. The aim was to see if the charities receive value for money. To do this I selected two different charities; one that does use a Fundraising Firm and one that does not and as aforementioned I also interviewed a Fundraising Firm. With these three I hoped I had selected the correct parties to achieve some meaningful results.

Charity 1: James advised that their branch do not use any fundraising firms. The method they use for fundraising is face to face fundraising such as direct collections on the streets or in supermarkets, the hosting of events to raise money etc. James did state however that because of falling donations due to the current economic situation they are looking into employing agencies to do fundraising on their behalf. Because of the sensitivity of the organisation they are very particular about the approach the fundraising firms would have in achieving new sponsors. They have hired and fired two fundraising firms already as they were not happy with the methods employed whilst raising funds for them. At the minute they are testing the water with hiring fundraising firms, since it is early days they do not have any meaningful information available on the cost of this approach.

Charity 2: Frank commented that as a charity they are fortunate to have found three good fundraising firms to work with that charge them in (monthly) arrears, rather than upfront. Consequently the firm they use for face to face fundraising charges them a commission based on the first years payment per recruited member, so the cost can be highly variable as it depends on what the donors achieved actually sign up for on a monthly recurring basis.  For example; if 100 donors signed up for £100 a year or alternatively £10 a year the commission would be a percentage payment of 100 x the donated first year total sum. They essentially get a percentage of that first years signed value. As a safeguard to the charity if a member then cancels within the first twelve months the charity will receive back the commission paid to the Fundraising Firm. Frank informed me that this challenges the staff of the Fundraising Firm they are carrying the vast majority of the business risk of donor churn. Frank explains that most donors, if they plan to stop giving, will do so in the first 12 months. All the charity will have lost is the money they spend on the membership packages and the general administration costs with this being on average just a couple of pounds. Frank articulates that in order for this model to be viable the Fundraising Firm must not push the donor for too much money, as it is better to get a little something rather than nothing. The principal enforced by the contract between Charity 2 and the fundraising firm is to avoid donor turnover. The second fundraising firm they use is contacted on a similar basis, only they do not pay in arrears. This fundraising firm charge per successful call, rather than the face to face scenario outlined above. They charge as and when they have recruited a donor at the end of the month. Therefore if the customer does not stay signed up for a year then the charity are going to lose out. Frank advised the fundraising firm charges a flat rate and the charity does not have to pay a lump sum in advance i.e. for every donor signed up there is a fixed payment made to the fundraising firm.  Frank was unable to provide me with the actual costs but did conclude that the fundraising firm charge way below the going rate, the vast majority of companies that are out there charge a lot more he stated. Because they have found such good companies they try hard to keep a balance between cost reduction and the financial wellbeing of the fundraising firm. It could be argued that this relationship is more a partnership than that of a customer and service provider. He continued to state most other companies want the payments upfront. I.e. for an upfront investment of X amount we will go out and get you X amount of donors.

Fundraising Firm:

The way it works with this firm is a charity will approach them and will have a set project budget; their scope will be a target number of donors that they want them to recruit on their behalf. This particular firm will work out a pricing model for the charity. This model will include a fixed rate per donor recruited. There are usually a number of guarantees around this arrangement, these are, but not limited to; the firm may replace any donors that don’t make a first payment or they may offer a gift back to the charity. Sarah described it as a low risk model for charities because other fundraising methods (like direct mail or TV ads) are relatively much more expensive. She explained further that using these other fundraising models can have unpredictable results i.e. you are paying a large amount of money upfront however you do not know what donations you will get back as a return, it might work, it might not. With this particular payment model you are assured to pay only for the donors that you’re getting in, effectively you’re paying by new subscriber.

The charities will pay X amount for X amount of donors, but she advised that most charities will pay a weekly amount for what they recruit the number recruited and it would be unlikely to pay upfront. They have a budget set aside and they have already agreed the target volumes.

Further research:

Captured within the interviewed parties are several different examples of fundraising firms.  The three that Charity 2 use and the Fundraising Firm I interviewed. To expand this view further I would like to provide further research on other fundraising firms;

The BBC programme News Night (2010) did research on door to door and street fundraising, they interviewed Mick Aldridge who runs and regulates face to face fundraising through PFRA (Professional Fund Raising Association). Mr Aldridge said that for every £1 spent on face to face fundraising they get £3 or £4 in return (NewsNight 2010). The report investigated Cancer Research UK and The British Heart Foundation on the pricing of using fundraising firms.  Cancer research UK pay an average of £112 per donor to the fundraising firm used and the British Heart Foundation pays an average of £136 per donor. The British Heart Foundation pays a total of £161,000 to an agency to recruit 1,180 donors, giving the average of £136 a signature received. Given the average donor pays £90 a year; this means that it would take 18 months for the charity to pay it off the recruitment fee and gain a real return (This ignores the Net Present Value of money – NPV). Cancer Research UK pays an average of £112 per head to an agency for approximately 27,000 donors. It would take 15 months of an average donor’s payment to cover that fee (Jones, 2010).

Cancer Research UK says these new donors would raise more than £13.4 million for the charity, therefore it is worthwhile. In these examples given the fundraising firms take at least the first year of donations (NewsNight, 2010).

NewsNight (2010) also reported that the PFRA doesn’t require a charity to tell donors how much of their donations go to fundraising firms.  They also state that there wouldn’t be a charity without these investments. The hope is that the donor will stay with the charity for 4 or 5 years, meaning that the charity will get a return on the amount that they have paid to the fundraising firm.

The NewsNight also interviewed Betty McBride the Director of Policy at the BHF who said

“They like face to face fundraising and telemarketing with private companies because it works. We recruit supporters who stay with us for years and years and have a two way relationship with them. The donors support us with donations and the BHF support the donors with heart health information. We are very upfront with our donors that we use a fundraising company to raise funds for us”

(Betty McBride 2010)

The question is, are most donors aware that the first years payment will be going to the fundraising firm? Should the businesses be more upfront with the donors? While a fundraiser may advise that they are being paid to fundraise on behalf of the charity, should they also that have it on the contract that the donor signs that the first year’s payment is going to go to the fundraising firm?

The NewsNight report included a statement from the BHF that they are very open and have information regarding fundraising standards on their website and in their annual reviews.

BHF state that it works out at approximately 70% of the donors they receive stay with them long term and because of the stable income they receive from these donors they can financially plan over longer periods and give long term medical research projects the go ahead.

The NewsNight reported that Oxfam stopped using fundraising fundraising firms in 2008 as did Friends of the Earth Scotland. If other charities are no longer using fundraising firms what does this suggest? Although fundraising firms raise a lot of money for charities, is it always clear that they are paid to do so and receive large profit from it too?

To examine this further I want to compare the three parties interviewed in relation to their commitment to the cause and then evaluate the finding from the interview.

Responsibility of staff

In both businesses Charity 1 and Charity 2, regardless of the fact one charity was mainly run by volunteers and one charity had a large percentage of paid staff, they took the responsibility of their roles seriously, in relation to wanting the best for their organisations. I could see that both the organisations I interviewed were passionate about their jobs.

Charity 1: James informed me their branch is predominantly run by volunteers and he has been a volunteer there for 11 years. He advised that they have to work as a team and know that they can rely on the volunteers for the charity being an effective human resource. The work they do help and supports many people so their main objective it to make sure the branch is running smoothly and effectively to this end.  He advised that the branch runs very well and the organisation as a whole has run successfully primarily being run through volunteers. This model has worked well for their organisation and has done for over 50 years. Perhaps the kind of work that the charity does lends itself to a model based on volunteers. Nonetheless with training the volunteers provide the skills and services which are vital in the success of the organisation and it is ultimately the responsibility of the volunteers to make sure the charity runs successfully. James advised that they tested the water with a number of fundraising firms but the approach and integrity they required from the fundraising firms needed to be guaranteed and by not hiring a firm that won’t fulfil their requirements and expectations as an organisation they are acting responsibly.

Charity 2: They have about 100 paid staff and 500 volunteers and this mix can be found throughout the organisational structure even at the top level of trustees volunteers can be found. Frank advised they have a five year development plan and each year they put together an annual development plan. The annual business plan is then filtered down into plans for each team and in turn each member of staff. Each individual is then aware of their contribution to the overall development plan. Frank also said that it can almost work the other way round in that everything starts from the task list and is built up and built up from there. It means that all of the staff on the ground have a clear view of the issues faced and the plan to address them by the organisation. They are therefore aware of the responsibility of the organisation as a whole and their individual responsibilities.

Fundraising Firm:

The responsibility of the staff is to that of the business and not the charities that they are raising funds for, however if a ‘fair’ arrangement or contract is in place then the charity should benefit from this too. If the Fundraising Firm is not able to get the donors then it is not going to receive its subscription payments and will eventually go out of business. It is in their best interest to train the fundraisers they employ to a level that they can get guarantee donors to the required level. Previously in this paper I advise and explore some of the concerns around using fundraising firms. One of the potential issues that arose was that if donors don’t sign up for a 12 month period that may result in the charity losing out, here the fundraising firm would need to take responsibility for this. As previously mentioned the fundraising firm usually has a number of guarantees around the arrangement with the charity.  Effectively the fundraising firm is taking some responsibility and being forced to consider the best interest of the charity through contractual safeguards. However, this particular protection is only applicable if the donor has not made the first payment. If the donor was to stop making payments to the charity after say three months, then this is still going to be at a loss to the charity. This loss is also a loss for the donor too; from one perspective you could suggest that the donor had made that payment for the charity however their money is ultimately funding the fundraising firm and hurting the charity it’s trying to assist. Sarah’s response was that you have to look at it differently. You wouldn’t look at each individual donor; you would look at the campaign as a whole. You measure success as the amount of money that you have invested in versus the returns to the instructing customer. If there is an upside or ‘profit’ then as a whole the campaign project was a success

Motivation of the Staff

Is the motivation of the staff a contributing factor to the outcome of the charities success?

The motive of charities 1 & 2 are basically the same again, the work that they do is to make the charity more successful, however there are some variations.

Charity 1: Their staff are motivated by the other people that they work with 99% (of the Leeds branch where I held the interview with James) are volunteers and the financial motives are therefore minimised. People may be motivated by wanting to gain more skills and experience to better their C.V or to get the free training that the organisation supplies. The majority of staff within this office as a whole are working for free, many of whom have worked there for over a decade, their motive is to run a successful organisation and to support their clients and each other.  The branch that I visited was just one of the 150 branches that they have all together, as well as their head office in London. However all branches are run the same and the Leeds branch is the 3^rd largest of them all. Their Head office in London does have some higher level paid staff, so their motive may also be influenced by the wages that they receive.

Charity 2:  Frank told me that he has a love of the job and this motivates him. The same could be said for the organisation itself and the other similar trusts in this sector. The organisation works cooperatively with these similar trusts so they can address issues that require a combined effort like lobbying governments. The organisation has its own members who raise their own money and decide how this is spent. Even though all the trusts are independent they all work together and are like a little family, there are 47 of them in total and they are all county based so there is no overlap of the service they provide. There is no competition between them; they all agree to cooperate and do things nationally, which means that they can be very connective and reactive locally but can address even the largest of issues. The motive of the organisation is that they all want to achieve the ultimate goals of continuing to make their trust a success.

Fundraising Firm:

Everyone at the company is paid as it is a private business. Within the company, especially on the operational side, fundraising managers and their associates have clear targets and they have regular performance reviews and receive training etc. There are bonuses paid but Sarah did advise that fundraisers are paid a fare hourly wage and that any bonuses are paid on top of that, the staff do not get paid purely on a commission basis. The concern is that although staff receive an hourly wage they do still have targets that they have to meet and this could encourage them to think of either protecting their employment or the additional money that they could receive from exceeding their targets rather than the benefits to the charity. Could this make money a more likely motive for the business than the cause they are raising money for?

Self-Interest

When we are acting does reason command our thought process or do we do things based on what we want or what we desire? The point to ethics is that we are not supposed to behave out of self-interest and should use reason to arrive at the best decision that will provide the best outcome for all parties.  Are Charities and fundraising firms behaving out of self-interest and do the fundraising firms have the charities best interests in mind?

Charity 1: In looking at Charity 1 we can see that the employees as a whole do have the best interest of the organisation at heart. As already mentioned there are 150 volunteers at this particular branch; they operate a system which is open 24 hours a day 7 days a week. Everyone who works there are volunteers apart from one member of staff who they pay to work part time within an accounting remit. Every member of staff takes the responsibility of their role very seriously; they are provided training which is free to ensure they have the skills to do their job correctly.  It could be argued that having volunteers enhances the service they provide and may create a better working atmosphere.  The staff may get a sense of achievement from what they do, but this is only going to go in the favour of the organisation. The only downside could be the staff turnover, which is currently at about 20%, but this is because everyone volunteers and uses their own time to support the charity. In this they may be losing some capital in training people.

Charity 2: Frank advised the reason he and many of the other members of the staff got into the role was for a love for the cause they are addressing, the fundraising was secondary to what he originally wanted to do, as he has always wanted to work in this sector and focused all his study and education with this aim in mind. Although his original intention was not to work in fundraising, this does not take away from the value in his work. He has a paid role and although this may give him some form of self interest in the role, he did focus his studies to be in this position and working in this sector. Therefore, his qualifications and what he could bring to the organisation could make up for any form of self-interest he may have regarding wages.  Everybody who is not a volunteer at the organisation has the relevant qualifications so this may affect the level of self-interest.

Fundraising Firm:

The company itself is owned by private shareholders.  Without self-interest would the business work? Sarah thinks the company is a very good option for charities.  There are quite a few barriers to charities conducting face to face fundraising in-house, including high costs, resource intensive nature of the exercise, financial risk and upfront costs.  With the cost model and financial guarantees offered by fundraising firms, they can offer charities a low risk model where they pay by results and pass the operational risk onto the agency.  Agencies can also have significant experience of this type of fundraising and know the pitfalls to avoid.  Agencies tend also to be able to recruit at a wider regional scale and at significant volumes. From what Sarah said regarding the company it gives a compelling argument for the business too. Interestingly when I spoke to Sarah about her role at the business she stated that she had always wanted to work in the ‘charity sector’. In this case, it suggests that she sees herself working as part of a charity, and not the business.  Perhaps her view on it would suggest that she is thinking ethically about the business and sees herself as helping the charities. In this case, while she may be earning a wage similar to that of people who are paid to work for an actual charity, she may not have self-interest; it would suggest that she has the charities interest in mind. Nonetheless, this is one view point. You have to consider what has already been said in relation to the charging system that they have in place

Charities as a business

Are charities run more like a business today or are they just adapting to a change in times? For this section I will only be giving the responses of the Charities.

Charity 1: Charity one did not have much to say on being run like a business as they believe that they are of a classic charity model in that they are still primarily volunteer based.

Charity 2: With charity two, the organisation that employ staff as well as having volunteers, believed that charities have to be professional and business like and they must be very efficient in how they spend their funds. Frank stated that:

“Businesses now run like charities, because charities have always had to operate extremely efficiently because they have to account for every penny that they spend.  He thinks that businesses, seeing how they have reacted during the recession have had to cut back on the way they have previously spent money with hospitality and so on. So they are actually running towards the charity way of working because they are very careful of how they spend their money”.

(Frank, Charity 2)

With Charity 2 they have always had employees on the books so they have always had to run like a business. The other issue with a lot of charities is that with the increasing legislations and bureaucracy imposed by governing bodies, they now have to focus on cost reduction to counterbalance these additional costs. These days charities have to appoint HR managers because employment laws have become so complicated that without them they run the risk of infringing employment legislation they must adhere to. The same can be said for having an IT specialist because it will help them to be more efficient in their work and is a necessary part of modern organisational operation. They need someone who can ensure their systems work and are robust. It is because of growing legislation and the inevitable OPEX (Operational Expense) cost increases they must be vigilant with everything that they do, to try and offset or minimise the impact. These are the reasons that some charities are now becoming more like a business but they are required to treat staff more fairly.

Government & charities

In 2000 the Government revised its policies on taxation of charities and introduced a number of changes to encourage businesses and individuals to give more.

The total cost of tax relief for charities in the UK is estimated at over £2 billion, comprising £1.2 billion of direct taxes, about £200 million in VAT relief, and £600 million in business rate relief. (HM Treasury, 1999) Figures form 1997-98.

Charities in the UK are financially resilient but they are currently threatened by the income reduction due to the economic situation manifesting itself in a reduction in government spending and a potential reduction of financial support by the people and businesses they rely on.

Charity 1: The Leeds office state that they have not been affected greatly by the current economic climate, one because they only receive 2% support from the Government i.e. the current cuts are negligible in real terms and secondly they state that given the cause that they are raising money for perhaps encourages people to keep giving them money as it is in times like these that people are going to need such a charity.

Charity 2: They do not receive any direct funding from and do not deliver services to The Government but they do have the option to apply for certain funding through DEFRA. This is a grant that can be applied for therefore they do not have to rely on it as a source of income.

Fundraising Firm:

Sarah advised that over the last few years there has definitely been some impact on the industry, but this has just meant that they have to be careful with their fixed cost and they have to push productivity through competition. As a business they do not find this a challenging area, Sarah believes that they work quite differently to a number of their competitors for the following reasons, they don’t work on a commission base with their fundraisers, they don’t employ sub-contractors and she informed me that they have a good reputation. These factors give them a demand amongst the charities they serve. She commented further that they just have to think of the areas they are working in and work smartly.

PART 4: the way forward and Concluding remarks

The areas that we covered in the findings and discussion section were the, The Interviews, Responsibility of the Staff, Motivation of the Staff, Self-Interest, Charities as a Business and the Government & Charities. I will now attempt to give an overview of these chapters and offer some suggestions through the use of different theories as well as the evidence gathered from the interviews to suggest a way forward.

The economic environment is affecting the way charities are run, creating competition in fundraising. Most charities see Fundraising Firms as a successful method of raising funds; some of the charges levied can prove costly and from some of my findings show that for a donor to be an asset and not a liability to the charity they must be a part of the charity for 6 – 18 months. This is not the case with all charities, but the use of fundraising firms and the ways in which charities approach fundraising do need to be looked into further.

In The Life you Can Save, Singer (2009) demonstrates to us that unless a tragic event is happening to us we do not pay full attention, we will still continue with our lives.  We may feel empathy for the people it is happening to but we will continue on with our everyday lives.  Our concern for the welfare of others is limited to our family and friends.  What if we were to apply this principal to being paid for fundraising? People are less likely to help if the responsibility does not fall on them – if something bad is happening right in front of us we are likely to help but that is because the responsibility would be falling on us.  The first approach I took with the interviews was to question the interviewees’ responsibilities to the organisation they work with. A business working on behalf of charities should have a responsibility to the donors and to the charity. Therein could they not be offering more value than they already are?  From the interviews we can see that the fundraising firms have a degree of responsibility to the cause but what about the donors? One suggestion could be greater clarity in the information being given to the donors.  The Fundraising Firm gave examples of the declarations they have on their signup sheets

1)   I understand that the fundraiser I have been speaking to is a paid fundraiser and that the xxx (charity name) is seeking long term support to make this fundraising successful.   Signature of donor ……….

2)   The person you are speaking with is paid an hourly rate by Home Fundraising to fundraise on behalf of the xxxx (charity name). This month we are investing around £xxxxx in this campaign, and with supporters like you giving a regular gift, we hope to raise over £xxxxx in the next five years. Fundraising this way is very effective for us and enables us to commit to long-term projects. Thank you once again for your support.

While they express that they are paid fundraisers and in the second example they show that they will be ‘investing’ X amount of money to that particular campaign, are these statements misleading? Perhaps the firms should have to disclose how much money they make from the charities and in turn how much money the charities pay to them.

Karl Marx expresses that money undermines what is best and noble in human relations. Marx describes money as the universal agent of separation; this is called ‘idealistically motivated’ (Marx, 1964). By paying people to do voluntary work are we undermining and changing their intentions? Another way to look at it is through the use of Richard Titmuss who had a theory on this in ‘The gift Relationship’ (McLean 1999) Titmuss states that the best way to maintain the laws of commodity is to allow supply and demand to set the price. However, one example that goes against this can be seen in Blood donations. The British Government prohibited the sale of blood, stating that is should only be donated; this interferes with the supply and demand concept. If blood is priceless and people are willing to donate their blood for free then we are saving lives. As soon as we put a price tag on blood it becomes a commodity and altruism may be bypassed by financial motivation. So if there were not enough altruistic people willing to donate their blood, then we would have to purchase it as if it were any other good and this would be subject to market forces. In entering this arena there will always be a cost to what was once a free resource. This same theory could be applied within fundraising; if we do not have enough donors then we pay for people to do this for us and thus they become a commodity if the charity is purchasing this commodity has the charity themselves become a commodity too? Charities and fundraising firms need to work out a way to make sure money is not a motive in raising the funds as ultimately all money given by donors should be going to the original cause.

If we look at Hobbs theory on Self-interest the 17^th century philosopher believed that humans behave out of self-interest Hobbes was once seen giving money to a beggar in the street, he was asked by a colleague why he did this as it was a selfless thing to do and he responded that he was acting selfishly as he felt rewarded in giving the beggar money (Miller, 1999). If people are to always act in their own self-interest how do you come at it from an ethical point of view? Ethics are supposed to overcome self-interests, if we are supposed to do something we ought to do it, even when it is not in our best interest. In being ethical we are thinking of the interest of others and not in ourselves.  From a Hobbs prospective we do not do things ethically we always act out of self-interest, nonetheless, humans are still capable of acting selflessly or for the concern of others. The fundraising firms are however acting out of self-interest, while they make money for the charities their ultimate goal is to increase their own revenue. Ethically this is not correct. In paying people to raise funds are they promoting self-interest and inhibiting selfless acts, thus are they taking away the value of the cause. The opposing view to this would be in Sarah’s role at the fundraising firm. This is because her business can successfully compete in the fundraising firm sector, disregarding any self-interest, if no one used them they would be out of business. For the business in a free market there may not be a choice. Take free trade coffee; if sold in the same packaging as normal coffee i.e. no differential of product, then why would anyone choose to pay more. Just stepping back and looking at Sarah in isolation can she practically choose to negate self-interest? There must always be a balance struck. How will she pay the rent, food bills etc? If you want skilled labour then can you rely on volunteers as a human resource and can they devote enough time to accrue the skills necessary to complete their job to a high enough standard?

In the first section of the paper we looked over the evidence gathered by the BBC in regards to the pricing structures of Cancer Research UK and the British Heart Foundation (NewsNight 2010). It seems surprising that they would use fundraising firms that are so highly priced in comparison to that of Charity 2. These two charities receive large donations each year, in 2011 Cancer Research UK made over £433 M and in 2010 The British Heart Foundation made £152.2 M.

(Cancer Research UK, 2011)   (British Heart foundation, 2010)

One of the reoccurring responses received from all the charities & fundraising firms is that when it comes to analysing it you cannot look at it from the perspective of a single donor contribution in regards to them potentially not subscribing for the minimum payback period.  While the fundraising firms may be making a large amount of money from the subscribers, what if the charities did not pay a lump sum upfront to the fundraising firms and worked on the basis of paying in arrears the same as Charity 2. If they were to use companies like the ones that Charity 2 uses they would receive more secure donations and they could put a greater amount of the money they receive to the original causes. Charity 1 and charity 2 maximise their profits, yet not all organisations use this method of fundraising.

I created a chart (as above) to help shows that the donors for Cancer Research UK do not become ‘real’ donors until the third month and for the BHF they become ‘real’ donors after 18 months. This is because the BHF have a lower average donation value compared with Cancer Research UK, meaning the longer it take for the pay back point to be reached and for the donor to become a ‘real’ contributor to the cause. This also shows the need for feedback from these charities to maintain the attention and donations of the individuals. If you could give this chart in a survey to people who were already giving to the BHF what would their reaction be? If the Individual thought they were paying from point ‘0’ but on seeing the chart saw that in fact they did not become a ‘real’ donor until point ‘18’, would they still keep donating?

From my research could we conclude that there could be a better standard set when it comes to fundraising?  Should the PFRA be setting a higher standard in terms of the amount charities are allowed to pay per donor? It seems a simple change, but this could make a large difference in the money the charities actually receive, would it be ethically the better thing to do with regards to the people paying that money? Should the public’s money be making people rich?

It is not ethically right that these fundraising firms could be making a profit from the donations given for the purpose of the original cause when in theory under certain circumstances the donation may cost the cause itself.   The major concern is that many of the donors do not sign up for as long as a year, from my own personal experience working with a fundraising firm, I found that some of my fellow fundraisers would suggest to the donors, who they were persuading to sign up, that they just pay for the first couple of months and if they changed their mind or decided they could no longer afford to support the charity they should cancel their direct debit. This meant that the money the donor paid for the short period of time before cancelling the direct debit would go to the fundraising firm and not charity. The company that I worked for did state during the training process that this was strictly prohibited behaviour. However, each fundraiser was on an hourly rate as well as having targets to reach. Take for example a part time member of staff, if they had a target of five sign-ups a week and  they achieved six, they would receive an extra £30 in their wage, if they receive seven sign-ups they would receive a further £30 and this would continue on. Ultimately because the fundraisers wanted to reach their targets as well as get their bonuses they would resort to different tactics to get people to sign-up. This is not acting in the charities best interest and it is not behaving ethically. In putting a price on the sign-ups it was motivating the staff to not think of the interest of the charity. While I appreciate this is one personal experience of one fundraising firm there is still a chance that this could be occurring throughout the entire fundraising industry. A suggestion would be that employee commission payments could be removed in order to minimise the financial motive of the fundraisers.

In order for everyone to be getting the best deal higher standards must be set and people need to be more aware of where their money is going when they donate. There are several web sites that allow you to look at the way in which charities work so that you know for sure that the money you are donating is delivering the maximum benefit. One way to see where your money is going is through websites such as The Charity Navigator web site, this site provides you with information on charities so that you can trust you are making the best decision as to who to donate your money to. The way in which it does this is to encourage charities to apply for a grant, if the Charity Navigator web site can see that the charity is using its funding appropriately they will receive the grant, with the precondition that they provide their total expenditure information. This encourages charities to only spend 20% of their revenue on administration and encourages them to look closely at what they are spending their resources on and that it is being used appropriately. This is an American site however the UK also has sites like this available. They are the Intelligence Giving site and the GuideStar UK site. They disclose spending information which in turn ensures that the charities are helping the people that they intend to serve.  The motive of these sites it to allow people to access information on different charities funding.

I believe that these sites are great in providing the financial reports of for charities. Unfortunately the UK sites do not have the same level of detail as their US counterparts. In my opinion the UK sites should include information on the cost of using fundraising firms, the details are basic as you can see from the chart below:

(GuideStar UK, 2012)

These sites are a great tool for people to use who are considering donating to a charity but they are also a great way of encouraging charities to keep their costing down apportion their spending in the correct areas.

I wanted to briefly mention the work of the Invisible Children (Kony 2012) this campaign encouraged people to look at where their money is going. The Invisible Children Campaign was viewed on YouTube over forty-one million times and had up to 44’5000 people ‘like’ it on Facebook (Cook 2012). This campaign inspired lots of people to give £30 of their money for an activism pack in order to raise the profile of a war criminal. There was a lot of controversy in this case because so many people had got involved, no one wanted to be made a fool of or ripped off and consequently we found ourselves in a situation where people were actually looking into the funding of the organisation so that they knew where their money was going. The invisible Children raised awareness through social media, making films and selling merchandise. It was because there was so much interest it created debate and this in turn made people look at the marketing costs etc which the organisation were spending and many refused to give because they felt that the organisation did not spend enough of their proceeds on the original cause. The invisible children made sure that they were well documented in all their finances, if you go to  http://www.charitynavigator.org you will see that they the Kony campaign has quite a high rating: The Charity Navigator web site gives the Invisible Children 3 out of 4 stars and shows the above chart on where they stand with  their finances. It actually shows that the charity spend over 80% of their proceeds on the original cause, which is higher than many others charities. The fact of the matter is that this issue encouraged people to actually look where their money was going before they sponsored the charity, perhaps this campaign will have encouraged people to do this again before donating to other charities in the future and to be more aware of where their sponsorship is going and in turn encourage the charities to be more open about their finances.  Another interesting fact about the Invisible Children campaign is the age of the majority of people who donated to it, unlike most charitable donators, they were young people, perhaps it was there enquiring minds, the debates they held on social media websites or their knowledge and ability to seek out valid information on the web but this campaign has changed the way younger people feel about their ability to change injustice through charitable giving.

In regards to the Government and charitable giving the Government has announced that it plans to cap Tax relief; it will cap tax relief at £50,000, or 25% of a person’s income, to stop wealthy people using this route to reduce their tax liability (Wintour 2012).  This is going to have a huge effect on the charity sector.  As we have already established the total tax relief in the UK is estimated at £2 billion pounds which makes up for £1.2 billion in direct tax (HM Treasury, 1999). Although Charity 1 receive 2% support from the government and Charity 1 do not receive any direct support and this showed that they were financially resilient in current government cuts, with the new cap on tax relief it is going to  have a knock on effect. A report by the Telegraph (2012) showed that charities believe this will be received as an attack on businesses who are already finding it hard to deal with the governmental cut backs. The report also showed that gifts received from philanthropists accounted for over 15 % of the £10.6 billion donated to charity in the UK in 2010 (Telegraph 2010). Unicef told the Guardian that they are already struggling with the government’s approach and it will have an adverse effect on their urgent efforts to raise more funds for the millions of children facing food shortages in West Africa. The Guardian (2012) also reported that even the larger more established charities state that they will be hit by the tax restrictions. Karen Routhwell Director of Marketing at RSPB, nature’s voice stated that the move was a “big blow” to them and to all the effort that they have already put into trying to recruit larger regular donors. (Wintour 2012). Because of these new cuts charities are going to have to tighten their belts even more, and examine different areas of their organisations, such as what they spend on marketing, merchandise, productivity and fundraising etc.

Maybe perfect ethics is a difficult or impossible thing to achieve? If you consider every £5 that is received by a fundraising firm, this amount could be providing malaria medicine to someone in Africa. This means that for every £5 that is not going to the charity, ethically this is money that could be saving a person’s life. Another example is in productivity, if a charity has a project providing condoms in Africa to help prevent HIV Aids then they should consider where the condoms are being made. Some charities purchase items made in the UK and then ship them over to Africa. This is money which could be going towards the cause and raises the question, are charities utilising their money to the maximum so that as much of it as possible is going to the cause. Ethics may say that you should produce the condoms in Africa as it would create employment and means all of the donated ‘Stop HIV’ money lands in the right hands. You do however need to think economically, can these be produced as efficiently and at the same low cost? If not then the end point is that the total number of condoms and logically lives saved will be less. Can ethics therefore be argued to be a bad thing? There must be a trade-off somewhere. Is this the same when applied to fundraising firms, if they increase donations overall then do the ends justify the means? Fundamentally where do you stop on the financial trade-offs that need to be made? While there are many other factors to the funding charities receive and spend, essentially what we need is to get back to the bare-bones of the issue, critically assess where the money is being spent and know as far as is practically possible that these are the best methods to achieve the required results.

Ultimately, fundraising is a major contribution to the revenue charities receive and as already established, regular donations are key. With this in mind, are the fundraising firms exploiting the needs of charities through their pricing and the offer of increased subscriptions given the assumption that these lead to regular donations. However we look at it by taking some of these donations and paying the fundraising firms, in the most extreme case this could be saving a life. What makes it ‘right’ to spend the monies raised on  fundraising firms and how has it got to a stage where we believe that in financially supporting the fundraising firms that makes it ok because the charities are receiving some of the funding too. Charities meet many vital needs in society, the work they do needs to be financed; the present system of fundraising is complex and developed over many years. Perhaps now is a good time to take a step back and see whether ethically driven organisations have become a little too pragmatic in their use of commercial fundraisers. The fact an organisation continues to exist does not necessarily mean that it is still meeting the needs for which it was established.

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