Income to a charity is received as either unrestricted or restricted funds. Unrestricted funds can, as the name suggests, be used by the charity for any purpose that the charity determines, meaning it can spend funds where they are most needed at the time. Restricted funds are limited by the donor for a specific use, and the charity is legally obliged to use those funds according to the restriction stipulated.
All donors who restrict the use of the funds should be advised that ALERT retains 10%* of that donation to be used by the Charity as unrestricted funds.
* calculated as a percentage of the donation (and any Gift Aid claimed on it) before any donation collection expenses (e.g. bank charges) charged to ALERT for receiving that donation.
Why does ALERT do this?
ALERT’s costs are of three types, all vital to the proper management of the Charity:
1. Costs of generating income (fundraising)
2. Costs of governance of the charity (meeting our statutory requirements)
3. Costs associated with our charitable activities (our projects).
These costs are funded by income from four sources:
1. Donations and grants (unrestricted and restricted)
2. Sales of merchandise
3. Sales of our educational programmes (internships and facilitated research programmes)
4. Other income (e.g. income from films)
We always seek to raise funds as efficiently as possible; ALERT typically spends 5 cents to raise $1 of donation income, 34 cents to raise $1 of merchandise income and 59 cents to raise $1 of educational programme income; giving an average fundraising efficiency across all income types of 27 cents to raise $1. BBB Wise Giving Alliance and CharityWatch say that charities should spend no more than 35 cents for every $1 they raise.
The net incoming resources to the charity are therefore a mix of donated and commercially generated income, and also a mix of restricted and unrestricted funds. ALERT generally attracts a high proportion of restricted funds.
Typically ALERT spends between 10 and 12% of net incoming resources on governance costs to meet statutory obligations. Research conducted by Giving Evidence and Givewell recommends charities spend an average of 11.5% of their costs on administration. For ALERT, these costs include employing a financial manager, and paying for independent accounts examination and legal fees related to our statutory returns. Governance costs are, as far as possible, met by ALERT’s commercially generated, unrestricted income, but sometimes they need to be topped up to pay for these vital functions.
Oftentimes, the restrictions placed upon donations does not include being able to use those funds on salaries, or on project operating expenses (such as insurance for a research vehicle). Yet, without qualified personnel to manage and evaluate projects, or the means to visit the project site to implement our charitable activities, we are unable to effectively progress in meeting our goals.
Our aim should not be to spend as little money on running costs, but to deliver the most effective programmes in support of our responsible development approach. Sometimes that means investing in future fundraising efforts to create increased income, paying for independent professional services to meet statutory obligations, or paying staff to manage and evaluate projects. We are aware that these things may not be what many people want to think their hard-earned money is being used for, but we want to ensure that the Charity is able to effectively function in the best interests of the communities and wildlife that we serve in the long term.
* all figures given are representative of several years of operation and may not apply to a specific year.