Editorial: Charities need to come clean

When it comes to deciding on who is deserving of our charity, perception is every bit as important as reality. If those who contributed towards the total of more than $2 million raised by last weekend's Telethon did not feel that their virtue was its own reward, the good-natured 23 hours of entertainment would have helped to induce a strong sensation of the warm fuzzies. It might even have been enough to still any qualms about why, in a civilised society, a nationwide televised extravaganza was necessary to raise funds so that kids could get raincoats, shoes and even food.

But when the tumult and the shouting had died, misgivings started to pile up as prolific blogger and commentator Russell Brown and then the mainstream media began to do the maths. In its own 2008 report to the Charities Commission, the statutory body that registers and monitors charities, the KidsCan Charitable Trust Group, whose Big Night In programme was the beneficiary of the Telethon, reported that of the $1.95 million it had raised, $357,289 was delivered to the hard-pressed in whose interests it purports to work. The beneficence bestowed barely exceeded the $341,668 wages bill or the "events and promotions" budget of 293,768.

Applying the same formula to the Telethon takings would suggest that barely 18 cents in every dollar pledged and paid in the philanthropic frenzy last weekend would actually end up being spent on the needs of the target group.

It's important to keep in mind that any suspicions that might be raised by this arithmetic do not alight exclusively on KidsCan. This newspaper revealed last month that telemarketing company the Epilepsy Foundation - a registered charity - raised $2.8 million in a fundraising drive but delivered only $70,000 - 2.5 cents in the dollar to Epilepsy NZ for spending on the needs of people with the condition. The sector's professional body, the Fundraising Institute of New Zealand, described that result as scandalous, an assessment that seems hard to dispute.

The KidsCan trust chairman, lawyer Rick Shera, did his organisation's cause no good when he appeared on TV One's Close Up. The 18-cent-in-the-dollar calculation was "not the end of the story", he said blandly because of the "huge amount of extra value" contributed in kind - suppliers of free food, clothing and logistics - which is "not reflected in our accounts."

Perhaps anticipating the question ineluctably raised by his answer, he continued that KidsCan was intending to "try and work with other charities and the Charities Commission to make sure we can present accounts in a way that is better understood". It seemed an obvious enough response, particularly in the light of the comment by an accountant who seemed to think that the trust's accounts as they stood obscured almost as much as they revealed. But anyone reaching into their pocket for a charitable dollar last weekend - or indeed at any time - may feel inclined to wonder why Shera thinks KidsCan needs to "work with" anyone other than its own employees (the ones who are paid almost $350,000 a year of the charitable donations) to make accounts intelligible to an accountant, never mind the average punter. Making a charitable donation is about as discretionary as spending gets; the least the charities owe their supporters is transparency.

Presumably the figures are not that hard to ferret out: Shera seemed able to throw them around with casual abandon during his television interview, assuring us that the contributions in kind "roughly" (the sceptical might say conveniently) equated to the $1.5 million that it had cost to raise the annual $1.95 million.

This is scarcely the point of course: if the in-kind contributions are of that order - and it would be good to see that quantified in audited accounts rather than airily estimated on the hoof - that's all well and good. But there is a wider question to be asked about the proportion of funds raised that should be eaten up by the fundraising. Any business whose overheads were 78 cents in every dollar of revenue would soon be belly-up and charities - unburdened by the need to deliver profits to shareholders - should explain why they should be assessed by a different yardstick.

The Minister of the Community and Voluntary Sector, Tariana Turia, has foreshadowed a review of charities' financial reporting but the onus is on the charities to clean up their own acts rather than wait to be forced to. The sector's good name depends on it.