Wednesday, June 6

Justgiving: Charity's Middleman?

By the grace of God I've managed to raise a total of £1810 for climbing Ben Nevis, £1330 of which was raised via Justgiving. However, as enjoyable as the whole experience was, I cant but help feel a little underwhelmed with the whole fundraising process, and further, some aspects of the charity industry as a whole. I think that in order to explain the issues I have, I'll have to touch on how charity works in the UK with respect to tax and collection.

Over here, all charitable donations are exempt from taxation. This means that if you donate five pounds to Cancer Research, then you shouldn't have to pay Income or Capital Gains Tax on it. However since most of us pay tax "as we earn", we would have already paid this tax, and so need to claim it back respectively.

Generally, claiming any kind of money is a difficult process. In this case it's not: by simply declaring to the charity that your donation has come out of taxed income, they're able to claim it on your behalf - increasing your donation by a whopping 28%.

All good and fair, right? The trouble is that many people don't realise how easy it is to make this declaration (you can do it by email or fax), or that it's possible at all. This is where Justgiving steps in. As well as making it a snip to donate to charities who may not have their own websites, JG also offers to claim any tax back on their behalf too, allowing donors to declare their tax status with nothing more than a tick box. Apparently, this saves the charity in question time, and so, money. Hmm.

The problem begins when you realise that JG isn't a charity itself. In fact it's a business and therefore has a corporate mouth to feed. It does this by charging a flat fee of 5% on the gross donation (i.e. after any tax has been claimed). It also passes on any card transaction fees (in comparison donating directly to, say, the DEC incurs no transaction fees at all). See here for the detail, although bear in mind that reclaimable tax is assumed in the examples. Finally, JG charge a minimum of £15 a month for charities to list their name on the website in the first place.

In short this means that of your £10 donation made via JG, the charity receives around £9. Of course, this £9 may be subject to tax relief taking the total above £10, but since that's something charities can do themselves I'd say that the donation is still much lower than its full worth. To quantify this: of the £150 million JG raised last year, at the 5% rate (and assuming two thirds of that had tax claimed on it), they would have earned a cool £8.9 million.

Now, I don't have a problem with this model per se. Although not as clear as it could be, JG do list these fees if donors are willing to look for them. And for those who can't donate otherwise, they do provide a handy service. Personally I think that 5% plus card fees is a bit excessive and so I will not donate via this facility, but I don't blame others if they do (provided they know about it).

I do think that it's a shame that some charities rely so much on the service. By promoting the (sometimes exclusive) use of JG, they're accepting the cost of 5% to collect donations. That, in my opinion, is totally unacceptable. Transparency would make things better (it's likely that most JG users are unaware of the transaction costs and are even confident in donating when charities tell them to), but it's really something charities should be looking to avoid paying altogether. It's a particularly low blow to fundraisers who may have put free time, effort and even money into raising the funds in the first place.

There are a few reasons why charities may use JG, some genuine and some not. For the smaller places, they may not have a website or the expertise to collect that much money. More dubiously, some may see it as a quick and responsibility-free way to claim Gift Aid on donations that don't quite qualify; it's easier to ask a donor to "accidentally" tick a box than it is to ask them to fill out a form.

Charity is an activity where integrity and transparency is vital. It's arguable whether I could have raised over £1800 plus Gift Aid without the help of JG, but judging by the reaction of some when I've told them about the fees taken out of their donations, I'm pretty sure they would have chosen to donate in another way anyway. And of the offline donations I've collected, I've managed to get Gift Aid forms for around 90% of applicable cases. That's more than comparable to JG; I just didn't charge the charity 5% for doing so.

No comments:

Post a comment