To be recognised
in the UK as a charity one must satisfy one
of the following objectives:
- Relief of poverty
- Advancement of
education
- Advancement of
religion
- Other purposes
beneficial to the (international) community
Most charities fall
within the last category. Charities must target
the public or a section of it, not individuals.
Industry concentration
The Charity Commission keep a register of
charities as required by the Charities Act 1993[1]. Figure 1 illustrates how the total number of charities has been
increasing, reaching 186,248 in 1998 (a 4% growth
since 1994). The sector is highly fragmented
and, for the supplier / donor, the choice is
vast. For example, there are over 600 charities
operating in the cancer field alone[2].
Fig
1, Financial Flows in the Charity Sector
(London
Business School,
2000)
Figure 2 provides
the financial flows in the charity sector. During
1998, the collective income of registered charities
totalled to £19.7bn. This was made up largely
from investments. Income from donations was
£5bn, with 80% from individuals. Figure 2 illustrates
that collective income rose by 23% in the four
years analysed.
Fig
2, Charity Types
(London
Business School,
2000)
Charities are divided into two main subgroups:
- A small number of big players which act
on a national and international basis
- Many small niche players deliver services
with a limited scope.
Research by Ann
Bartlett (2000) of the London Business School,
reveal that the big players dominate because
"they are adopting an increasingly
business-like management style. Hiring professional
human resources at market rates. The top 9%
of charities account for over 93% of overall
voluntary income."
Figure 3 illustrates
how the financial wealth of charities is concentrated
in just a few large charities.
Fig
3, Major Charities and their Income
(London
Business School,
2000)
1.1 Gaining Membership
The Charity Commission estimates that approximately
80,000 charities have a membership structure[3]. Their research indicated that charities with
members overwhelmingly saw the role of their
membership as a positive one, with 84% of charities
with individual members and 81% with corporate
members stating that their members made a useful
contribution to the running of the charity.
Findings from the
Charity Commission research show that membership
charities receive wide-ranging benefits from
their members, these include benefits such as:
- Enhancing the
trustee board's transparency and accountability;
- Providing a greater
appreciation of the needs of beneficiaries;
- Improving a charity's
influence within the charity sector, giving
weight to an advocacy role;
- Providing fundraising
opportunities; and
- Providing a consistent
source of trustees.
Membership can be
segregated into the following two main groups
Individual and Corporate Membership. Others
include; Sponsorship, Parliamentary Patrons
and General Funds. Figure 4 illustrates this.
Individual membership is the largest type of
membership at 44%.
Fig
4, Combination of Types of Members in the
Charity Sector
(The Charity
Commission, 2004)
Retaining Membership
Membership is retained by many charities
by providing an incentive to remain a Member.
For example, ROSPA the Royal Society for the
Prevention of Accidents provide its Members
with the exclusive access to their Members'
area on their web site. Members' are able to
access latest training courses, seminars and
online discussion forums[4].
Communicating With Members
Charities communicate with their members
on a regular basis so that Members are kept
informed and their interest in the charities
cause is kept alive.[5]
Communication is achieved by Email briefings
on current issues, including policy news, reviews
and topical publications on everything from
financial management to trusteeship
1.2 Fundraising
There are many options to fundraising for
charity organisations. Information on how to
go about this and making funding applications
is included in the Charities Information Bureau's
web site. The Charities Information Bureau
provides help and advice for the Voluntary and
Community Sector throughout England and Wales
through its website[6].
Funding is often available from the following
sources:
- Government
- European Community
- Trusts
- Banks & Building Societies
- High street stores
- Business
- Lottery
Government
Voluntary organisations which work within
specialist fields will often gain funding from
the government department responsible for their
area of work (for example, Those alleviating
poverty overseas will often gain funding from
the DFID; and those resettling ex-offenders
might gain funding from the Home Office) Funding
opportunities will vary over time[7].
European Funding
Some examples of European Funding are as
follows:
- Training for staff and volunteers
- Employing community development workers
- Confidence building for communities
- Encouraging volunteering
- Research projects
Structural Funds
Structural funds, fund a wide range of regeneration
and social inclusion action. All of these provide
some funds for the voluntary sector. The 4
Structural Funds are:
- European Social Fund (ESF)
- European Regional Development Fund (ERDF)
- European Agricultural Guidance & Guarantee
Fund (EAGGF)
- Financial Instrument for Fisheries Guidance
(FIFG)
European Social Fund (ESF) - Revenue only
This means you can pay for project running
costs such as: Staff costs, rent, heat, light,
consumables, small items of equipment and training
which are under £1000. Projects that bid to
a co-financing organisation can get a 100% pre-matched
ESF grant. If not, ESF funding will only pay
for a proportion of costs (typically up to 45%)
so you will need match funding.
Co-financing
Co-financing is a new way of accessing ESF
through the Objective 3 Programme (Objective
3 is known as the training fund). The aim of
Co-financing is to make ESF easier to get to
and to add greater consistency to the use of
funds.
Applicants apply
directly to the appropriate Co-financing Organisation
(CFO) for 100% grant and not to Government Office.
Applicants contact the CFO to find out about
the application, timetable and bidding processes.
Evaluating European Funding
Applying for European Funding is not always
a simple process. Below are listed some of the
advantages and disadvantages:
Advantages
- Valuable source of funding
- Innovation encouraged
- Staff and running costs can be paid for
Disadvantages
- Some funds are only available in certain
areas
- The Organisation applying for Funding may
need to match some of the money raised through
funding.
- Developing and applying for your project
can take a long time.
1.3 Managing Data
Charles Cox in his article "Managing
risk and reducing your risk exposure"[8] explains how voluntary organisations are struggling
to manage their data systems. He says "the
majority are taking the obvious precautions
to safeguard their data and systems from loss.
However, a significant minority are risking
disruption to their activities by not having
basic controls such as anti-virus software and
data back ups." The truth is that
charities are struggling to compete for qualified
computer employees to manage their data management
systems. This is also the view of Ms. Connolly,
Oxfam's Director of Communications and Education.
Oxfam is one of the key market leaders in the
UK voluntary market with an annual net income
of 90 million.
In an article by
Meg Sommerfeld dated April 20 2000,[9]
Ms. Connolly says "It has been really
tough for us, we have been trying to find one
person who can do everything from developing
the site and managing the content to engaging
in high-level strategy work." This
is also the case for charities of all sizes.
(Jessica McCallin, 2001) says that many
charities are trying to diversify their revenue
streams by taking advantage of its IT and management[10].
"Some
charities are looking to plug any skills gap
they may have, by recruiting trustees from diverse
backgrounds. Those with financial, accounting
and fundraising skills are becoming a sought
after commodity, with many charities taking
the expensive route of advertising for the right
people."
(Jessica
McCallin, 2001)
Meg Sommerfeld (2000)
explains that the main reason for this is that
demand for skilled technology workers is outstripping
the supply of 1 out of 10 technology jobs which
are currently unfilled. Commercial companies
are offering salaries that charities can't afford.
It is not just the higher salaries that are
luring technology employees away from charities.
In addition, higher salaries in the commercial
sector, professionals are given stock options
and many dot-coms are dangling enticing perks:
health-club memberships, in-house massage therapists
etc.
Meg Sommerfeld's
(2000) research has shown that non-profit leaders
are fighting back by trying to identify other
creative and less expensive ways to recruit
and retain technology employees. These include
cash bonuses for employees who refer friends
for jobs, or to increase resources for professional
development. Low-cost approaches such as, introducing
casual-dress policies or allowing employees
to set their work schedules have been adopted.
1.4 Best Practices - Charities' current use
of the Internet and ecommerce
Many charity organizations are experimenting
with Internet fundraising. Email solicitations
are increasingly popular. Despite early concerns,
these solicitations are not generating prevalent
complaints about spam. The key is to limit your
online soliciting to those individuals who have
already expressed an interest in your work by
becoming a member, joining a list service, or
participating in an action or event that your
organisation sponsored.[11]
Charities are exploiting
the enveloping nature of the Internet to increase
awareness of their cause. Ann Bartlett (2000)
says that "they are offering pre-written
emails, which committed individuals forward.
This spreads their message to a lot of people,
with virtually no effort. It has worked particularly
well where corporate donations to charity depend
on site visits (http://www.thehungersite.com).
Hungersite had 65m visitors from 162 countries
in 1999."
The moderately low
entry cost allows small organisations to appeal
to supporters world-wide, which would be normally
expensive using traditional publication methods.
Due to the relatively low marginal cost of disseminating
information charities use the web to campaign.
Jan Rogers is the
Business Development Manager for Associa. Associa
specialises in offering Membership Services
in providing tailored and practical solutions
for charities, membership organisations and
trade associations. Jan Rogers in his article
"Change for the Better"[12] says;"Direct mail
campaigns to 'cold' new donors raise an average
of £1.01 for every £1 spent. In contrast, a
direct mail campaign to existing donors raises
an average of £3.41 for every £1 spent."
According to Ann
Bartlett (2000) charities are pioneering new
channels to network with interested parties.
They are creating online communities through
chat rooms, online events and bulletin boards.
Furthermore, they are adding email contacts
to their databases, to enable them to
communicate via email and make direct appeals,
whilst saving costs. The Samaritans[13] are encouraging people to contact
them by email, as well as by telephone.
Ann Bartlett (2000) says that charities use
their sites to raise funds in the following
ways:
- Secure credit
card payment facilities or other options such
as payments via a third party like Paypal.
Charities actively promote tax efficient giving.
- Membership fees
- Sale of advertising
space. Although charity websites may carry
corporate advertisements or advertise themselves
on corporate sites. This huge potential does
not seem to have been realised. Beside the
usual benefit, advertisements placed on a
charity website can enhance a company's image.
- Sale of merchandise
- Events such as
auctions or sponsorship.
- Collaborative
profit sharing activities such as the Amazon
Associates program (http://www.amazon.com)
or the greatergood[14] site, where charities take
a percentage of each purchase (http://www.greatergood.com/).
It is estimated that charities raised just
over 1% of funds via the internet in 1999.
In the first half of that year, the Red Cross
raised $1.2m in online gifts for Balkan Relief
from over 9000 donors, highlighting the potential
of the internet medium for fundraising.
1.5 Impact of the Internet and eCommerce
on the Charity Sector
Figure 5 illustrates a framework which
the London Business School have used to assess
the impact of the Internet on the charity
industry[15]. From their research they have found thatcharities are in the
early stages of Internet adoption which is
to say that they have merely concentrated
on stages one and two: marketing and channel
innovation.
Fig 5, Best Practices Charities' current
use of the internet and ecommerce
(London
Business School,
2000)
The article in which Figure 5 appeared concluded
that "Internet and ecommerce will
have a far greater impact on the sector, once
charities progress to stage 3 -product / service
innovation, and to stage 4 -business model innovation."
(Ann Bartlett, 2000)
What exactly is stage 3 of the charities framework?
The two key elements of the product /service
innovation (stage 3), and business model innovation
(stage 4) is as follows:
Speed and accuracy of delivery
Much of the work charities do is reactive.
Therefore, when the charities become aware of
a problem and rally resources to resolve the
problem, it has often developed into a crisis.
According to the findings the internet has the
potential to speed up every link in the chain
from awareness through to action and could even
prevent the problem occurring in the first place.
All charities will benefit if they can answer
calls for help more quickly and accurately.
Accountability
Mintel,[16] a Market Research and Consumer Intelligence Company reported
that many people believe that charities spend
too much on administration. The Channel 4 programme"'The
Hunger Business" (11 / 12 November
2000)[17] questioned why charities supply aid without
asking recipients if this is what they want.
The Internet enables a way to accomplish better
transparency, allowing both charities and donors
to know more about the environment in which
they are investing and more importantly, the
efficiency of that investment.
