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Charities reveal high cost of marketing -

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Charities reveal high cost of marketing

Bronwyn Herbert reported this story on Monday, October 26, 2009 12:30:00

ELEANOR HALL: A peak body representing charity groups in Australia says a national set of accounts
would boost transparency and end the criticism over the fundraising practices of some charities.

More than 600,000 charities operate in Australia and many of those that raise funds through street
marketing hand over an enormous proportion of their takings to private marketing companies. But the
charities concerned have defended the practice saying it happens worldwide and is just part of
doing business.

Bronwyn Herbert has our report.

BRONWYN HERBERT: It might be an oversized koala giving you a hug, or a boy in a brightly coloured
T-shirt spruiking the good work of Doctors Without Borders. But 95 per cent of money raised through
street marketing in its first year isn't going to the charity.

DAVID BRITTON: Fred Hollows is one of a number of companies in Australia that are doing direct
street marketing through the face-to-face method. Over the last four years the foundation has been
able to increase the number of operations it's doing in the developing world from 50,000 in 2005 to
176,000 in 2008, and that is a result as being able to raise more money from the Australian public.

BRONWYN HERBERT: David Britton is the director of public affairs with the Fred Hollows Foundation.

DAVID BRITTON: Technique that is used all over the world by many, many charities and it is an
effective way of helping us plan, giving us regular income.

BRONWYN HERBERT: Marketing company Cornucopia Consultancy has some of Australia's best known
charities as clients including Amnesty, the Red Cross and Oxfam. Cornucopia takes 95 per cent of
the value of the donor's pledge in the first year, but takes the loss if a supporter withdraws
within the first three months.

The company declined to speak with The World Today but in a statement says fundraising these days
is a profession and the commercial arrangements between Cornucopia and its clients are available
publicly.

Chris McMillan is the chief executive of the Fundraising Institute of Australia - the peak body for
charity groups. She says there is nothing wrong with this style of marketing - because people sign
up far beyond a year.

CHRIS MCMILLAN: In the main they stay for the long-haul because the charity then takes over and
engages with the individual and brings them on board so that they actually feel very much a part of
shaping what is happening as a result of their donation.

BRONWYN HERBERT: An Amnesty spokeswoman says face-to-face fundraising is its most effective and
successful means of raising money and on average donors stay committed for at least four years.

Marc Purcell is the executive director for the Australian Council for International Development. He
says the Australian public donate about $800,000 a year in aid and street marketing is one
legitimate way of recruiting funds.

MARC PURCELL: Some aid agencies will use companies that will help secure donors that provide
credit-card donations over a number of years. When those donations are averaged out on the four
year credit card deductions, it means that for a $30 donation per month, that might be about $1400
over four years, $1100 will go to the aid agency. So it provides a very secure, predictable income
for an organisation to be able to plan into the future to provide its programs.

BRONWYN HERBERT: But Chris McMillan from the Fundraising Institute of Australia says reform is
necessary.

CHRIS MCMILLAN: Right now we do not have a national chart of accounts in Australia that will allow
us to compare charities equally.

BRONWYN HERBERT: She says she supports the Productivity Commission's recent recommendations in its
draft report for a national set of accounts.

CHRIS MCMILLAN: I can tell you most charities would welcome that with open arms because it will, I
guess, in lots of ways put to bed the issue surrounding cost of fundraising and hopefully allow
people to not just focus on that, but get on with focussing on the real services that are
delivered.

BRONWYN HERBERT: Marc Purcell from the Australian Council for International Aid says many companies
already disclose their administrative costs but a national set of accounts would help.

MARC PURCELL: I think that sort of standard would be very welcome. We have a code of conduct that
115 aid agencies are signed up and that requires a standard of financial transparency and
accountability back to the donor in terms of a common standard but I think other standards and
other improvements would be very welcome.

BRONWYN HERBERT: Responses to the commission's draft are due by late November, before a final
report is released at the end of the year.

ELEANOR HALL: Bronwyn Herbert.