The administration obsession

You may have seen a couple of articles run in the Sydney Morning Herald a fortnight ago examining the administration and transparency of some of Australia’s better-known celebrity foundations.  In the firing line were the McGrath Foundation, The Shane Warne Foundation, the Cathy Freeman Foundation and others. The journalists rightly point out a number of inconsistencies regarding the required public transparency of the non-profit sector here in Australia. Both articles contend that without adequate transparency the donating public can never know how much of their dollar is actually making it to their cause of concern.

The inconsistencies raised in the articles are nothing new to non-profits.  The sector has long struggled under the burden of a fragmented regulatory system and been crippled under the red tape of multiple compliance obligations. It’s hoped that the establishment of the Australian Charities and Non-profit Commission (ACNC) will help to reduce the burden on the non-profit sector while providing a new level of transparency sector wide.

What the two articles also helped to highlight was that there continues to be a lack of wider public understanding around administration costs in the non-profit sector. Held up for high praise were those organisations with the bare minimum of administration costs, while those with professional staff and overheads were the inferred to be less effective and somehow less impressive.

It might well be that those organisations highlighted in the article are ineffective but examining administration and fundraising costs will only paint a partial and sometimes misleading picture.

I’ve worked for a grantmaking organisation that was incredibly strong on applicant organisations submitting ‘real world’ budgets. A budget submitted without a provision for administration costs and contingencies was considered poor, full stop.  Administration costs were considered realistic if they were in the 8%-25% field (depending on the project type).  Any lower or higher and it deserved some prodding. Equally, it was considered poor project management if an applicant didn’t factor at least 10% of the total project costs for contingency costs.

For that particular grantmaking organisation, low administration costs increased the risk of the project operating at the margins, which in turn increased the risk of the project failing.  As a grantmaker they decided to mitigate against that risk. When I called organistions to ask why they had submitted application budgets with low or no administration costs their responses were generally the same – most thought putting the actual administration costs in the budget would reduce their chances of success with the grantmaker.

I’m reluctant to suggest that there is any ‘right’ range for administration fees. What’s really important is that donors examine the administration figures within the context of the organisation’s activities and mission. There is no one rule.  As a donor you need to be more savvy and a donating public we need to expect that administration costs are a reality for charities.

I’d also encourage donors to recognise that staff within the non-profit sector deserve to be adequately reimbursed for the work they do. One of the great tragedies of non-profit sector is our high staff turn-over, and inadequate remuneration is partly to blame. Working in the most challenging of areas, doing the toughest of work, it’s imperative that the non-profit sector hold on to good staff. That includes senior managers and CEOs whose leadership is so valuable in ensuring the ship is pointing in the right direction.

You can follow the musings of Caitriona Fay on Twitter via @cat_fay