The Ethics of Accountability for Australian Charities

There is no question of the good intentions of charitable organisations and their dedication to the causes they address. However, it is natural to expect a greater consideration for ethical behaviour around philanthropic activity. When we look at charities' regulatory framework, the quality of professional services they receive and their public profile, several ethical issues arise for further debate and consideration. I believe that addressing these represents an important step towards the much lamented culture of giving in Australia. Do consumers want more controls, better disclosure and more accountability? Our market research has found that many individual donors resist a businesslike approach to evaluating charities. They are also skeptical of anything which might unnecessarily add to charities' costs. Donors prefer to rely on trust, history and the messages conveyed in the mass media in deciding who they will support. That said, their No. 1 concern is gaining assurance that their donation is getting through to the cause and they will desert a charity en masse if it is publicly shown to be wasting or rorting its funds. There are significant ethical issues and an ethical dilemma here. There have been calls for more accountability, but this brings up the question "accountable for what to whom?". Many charities and donors alike seem to prefer fewer controls and place more importance on the history of the organisation, its reputation and the trust it has earned. Yet there is also evidence that the charitable sector suffers a lower level of public support because of a perception that it lacks accountability and transparency. Likewise there are indications that both individuals and business would give more if these areas were addressed. Lack of Standards In support of the latter argument I offer some views on current ethical issues for major Australian charities. The charity sector in Australia has not experienced the same degree of regulatory and professional development as the business world during the 1990s. Fundraising for charitable organisations and authorised trustee legislation remains state based with major differences between states while charities defined as religious bodies generally enjoy exemption. There are still no sector specific accounting or audit standards. In 1997 around 38% of major Australian charities had qualified audit reports and 45% of major NSW charities' audits did not follow a requirement to report on compliance with the NSW act. The Australian Council for Overseas Aid acts as an industry body for non-government development organisations. It has a formal relationship with AusAid, a Code of Conduct with a compliance and complaints resolution process and consumer representation on its Board. However, there is no equivalent industry body covering other categories of charities in the same way. The government has few apparent concerns - a broadly accepted 1995 Industry Commission Report containing 31 recommendations over 427 pages has received minimal implementation. An audit report with a qualification over the accounting for fundraising income signals to a consumer a lack of assurance that donations will get through to the cause. Current audit practices could enable fundraising methods which lack proper accounting controls to continue unchecked. Many professionals work for charities on a pro bono basis. This work can attract a lower priority, less attention to detail and provide a training ground for less experienced professional staff. This seems to be prevalent even though the legal and professional responsibilities are no less onerous. It helps to explain a trend for charities to selectively choose to pay for professional services and so command the same level of attention and quality as other business clients. Uneven media coverage There are other factors that exacerbate these concerns. For instance, despite the size and importance of this sector, media coverage is patchy. Excellent coverage of the New Guinea tsunami highlighted the need for support, provided information on what the aid agencies were doing and how the public could help. Consequently, donations exceeded expectations. In contrast, crises in Sudan and Indonesia have had heart-wrenching coverage, yet minimal information about the aid programs in place and no invitation to provide public support - hence limited funds. While donors look to the media as a key information source they retain a prime concern over whether their money is actually getting through to the cause. This presents an opportunity for the type of media coverage we see in personal finance, information technology or motor vehicles ie. treating readers as consumers - even though the advertising program would require creative input to attract sponsors. Other "giving" problems also relate to a lack of understanding about the financial realities facing charities. Many charities are accumulating large investment portfolios and are nervous that both government and donors might withhold support if it appears they already have enough money. Setting a benchmark for the level of funds invested and educating those concerned why funds need to be accumulated for future needs would be a solution. In sum, with greater accountability and transparency, charities can inform consumers more fully about their operations and in turn, one hopes, gain greater support for their missions. By Michael Walsh Givewell