CHOICE questions charities’ accounting methods

The consumer group Choice has today criticised the accounting systems used by Australian charities, claiming the systems “can disguise true costs”.

“Many charities put their own definitions on items such as administration and fundraising costs and juggle these expenses around to achieve low cost ratios,” Choice media spokesman Christopher Zinn said.

Choice today released the results of a study that found the variety of ways in which overheads are recorded makes it difficult for donors to realistically compare charities’ cost effectiveness.

Nearly nine out of 10 Australian adults give to charity, and the average annual donation is more than $400, according to Choice.

Yet the Choice survey found that 81 per cent of respondents did not know what proportion of their donation reached their charities’ beneficiaries.

Nine charities willingly gave Choice their financial information, but the different ways the information was structured made comparisons almost impossible to achieve, Choice said.

While it is difficult to figure out which charities are the most cost effective there are some ways to make your donations more likely to be cost effective, Zinn said.

“You can find out something about the cost of fundraising by looking at annual reports”, Zinn told Money Management.

If you don’t have time to research your charity try to give direct rather than attending charity balls or giving to street collectors and call centres, he said.