UK: New generation of donors saves declining giving

Charities hit by falling donations over the past year yesterday welcomed figures showing online fundraiser justgiving.com had channelled more than £250m (315 million euros) to the sector since its launch in 2001.
The Charities Aid Foundation (CAF), which advises good causes on fundraising, said the private company was enabling charities to tap Britain's youth with viral marketing and sophisticated processing technology for online donations. Smaller charities, which find it costly to raise funds and track donations, benefited the most, CAF said.

Charities need all the help they can get
Charities need all the help they can get to target a new generation of donors after a recent drop in charitable giving. According to the latest figures from the National Council for Voluntary Organisations (NCVO) and CAF, the proportion of the population that gave to charity in 2006/07 dropped to 54%, down 3% from 2005/06.

The UK Giving 2006/07 report found overall donations slipped to £9.5bn (12 billion) – 3% lower than the previous year when accounting for inflation. Large international charities with well-known brand names expanded strongly, leaving many smaller charities to struggle, it said.

Young givers
Justgiving.com has spread the appeal of charitable giving to a younger generation. Hundreds of participants in this year's London Marathon, which takes place on April 13, have asked friends and relations to send their donations via the justgiving.com site and hundreds more have linked to the site from their personal pages on social networking sites.

CAF head of research Richard Harrison said the website allowed young people to include charitable giving as part of their social life and the way they portray themselves on social sites. "It is bringing giving to the public in an easy and enjoyable way that makes it part of their lifestyle."

Justgiving.com was formed in 2001 with seed capital from a group of private individuals to administer donations. There were similar sites in the US, but founder and chief executive Zarine Kharas said it was the first in the UK to provide online fundraising tools to enable the electronic collection of donations.

More than 3,000 registered charities direct potential donors to the site to avoid administering the process themselves. Combined with more than 300,000 fundraising pages for individuals, it has become one of the biggest players in the charity fundraising sector.

Part of the success is due to the automatic collection of the government's gift aid tax top-up to donations. It adds 28p (32 cents) to each £1 (1.3 euros) donated. The company takes a 5% fee from the total and charges charities a monthly subscription of £15 (19 euros) to appear on the site. "The government figures show more than £900m (about 1 billion euors) of gift aid has been left uncollected. We make sure all donations have 100% of gift aid attached," Kharas said.

She said charity fundraising events always posed a problem because sponsors can take weeks or months to match their promise to support the event with cash. "Around 20% of promises to donate to sponsored walks, runs and other events are never paid. The rest often comes in bit by bit over what can be a long time for a charity. That is costly when you are a charity run by maybe two people working voluntarily at weekends."

Controversial commission
Private sector firms working with charities always face criticism that they are exploiting the financial ignorance of many charities and profiting at their expense. Charities that pay fundraisers to sign up the public to direct debits on high streets typically pay £30 (38 euros) to £40 (50 euros) a donation. If the donor agrees to pay £2 (2.50 euros) a month, it can mean the charity has to wait more than 18 months to receive cash. Large charities argue that direct debits last an average of five years and the practice is therefore cost-effective.

Kharas said she is aware the commission charged by justgiving.com is controversial. Fundraising costs for charities are typically 15% to 25%, which she points out is higher than the 5% she charges. The business has taken millions of pounds to get up and running and has accumulated losses of about £5m (6.3 million euros).
She said no investor had received a dividend and although the company turned a profit in 2006 and expects an improvement in 2007, all proceeds are being reinvested in expanding its reach.

"We spend millions of pounds each year on IT development and invest in new products and marketing. We are already attracting donations from overseas. We want to expand to attract donations from the British expat communities, which can be very generous," she said.

Harrison said it was a mistake to examine the costs incurred by charities for raising funds, in isolation. Internal administration costs, publicity and staff bills were all factors. "The charity sector is becoming more sophisticated and the same gods of success apply as in the business world. We are talking about outsourcing, offshoring and close attention to their return on investment. We think about customers in the same way a multinational would," she said.

"We are aware of the dangers of going too far down this road, but that doesn't mean we shouldn't use sophisticated tools to support our work."