Scale of fees charged by Charity Collection Agents, just WOW!

I thought it must have been high but not 8 to 17 times the monthly subscription rate as reported.

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I read the ACCC report and I was fairly shocked on this point as well. One thing I think was missing that would be interesting to know is the average conversion rate for phone sign ups, which I think would tell a story about the impact on the public vs the benefit to the charities.

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It is a bit depressing that commercial entities profit from the charity organisations. Maybe I am a bit cynical, but maybe this is the only way they can raise funds due to inability to get good volunteers. Maybe society as whole has perpetuated the problem as any non-profit or charity organisations, to which there are numerous, can’t find volunteers and have to pay for labour support. ‘We’ don’t want to volunteer and then complain when we donate others get a take for taking the money.

Maybe if we did volunteer more money would go to the charity and we may even feel good within ourselves. Money for thought!

I also have refused to give to persons ‘chugging’ since I discovered they were paid workers…as I was concerned my all my hard earned dollars weren’t going where i thought they were going. I instead now give. directly to the organisation.

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Charities are businesses in every sense, they are just non-profit which means they cannot pay dividends. Some charities are just depressing regardless of how much gets paid to chuggers, or for whatever, because so much of it is put in pockets not into their product of ‘good work’.

To find out where chartiable donations go there are a number of resources and links including

http://www.changepath.com.au/
and last in my list is the government version where there is lots of information if you can find it.

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So if as it says in the Canberra Times article:
The fee is commonly calculated by a multiple of the monthly donation to which the donor commits. The multiple is typically as high as between eight and 17 times."
and the collectors only get $3/hr:


then agencies like Aida Sales and Marketing, Credico Australia, Global Interactive Group (GIG) and PCA Group must be making massive profits from our generosity.

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I read it directly from the ACCC’s charity calls report (PDF), so to my knowledge the Canberra Times article is correct. As shocking as the payment multiplier is, does that mean the sales and marketing agencies are making massive profits? I decided to have a go at an educated guess. I’m just working this out as I go, so feel free to correct me or add your own analysis.

For a start, they’d have to make a lot of ‘sign ups’ where they convince people to become donors. In the case of street charity “salespeople”, I’ve heard first hand that their success rate is extremely low, and the ACCC report lists one conversion per 30 interactions (probably 1-2 sign ups per day maximum). It seems that students or travellers are often the ones giving it a try, and as noted in the report, this tactic often results in negative outcomes for everyone involved. Personally, I think it’s terrible branding and outreach for the charities that use this particular method and no one is winning here.

The ACCC report also lists a 7% sign-up rate example for telemarketing or phone sales (overlooked in my above comment). However, one company claims sign-up rates of 10-18% while Apple marketing claim 3-6%. To my understanding, a telemarketing salesperson can make around 500-600 calls per week on average. With a full-time call centre of 30 people making around 16,500 calls and converting to sign up at 10%, that’s 1650 sign ups that earn a commission.

The median donation in 2016 was $200 annually or around $15 a month, according to Philanthropy Australia. If a telemarketing agency achieves 1650 $15 sign ups, that equates to $24,750. However, again according the aforementioned ACCC report, the attrition rate is around 50% and most arrangements feature a ‘clawback’ clause, meaning the charity does not have to pay if someone decides to stop donating within three months. We can therefore probably halve the figure and add the multiplier (say 10) to give us $127,350. At a call centre of that size, a very rough estimate would be that it would cost say $45,000+ in weekly operating costs, considering equipment, rent, insurance and so on. So, that’s a potential profit of $82,625 per week (before tax) based on those (again very rough) numbers.

In reality, there’s going to be a lot of fluctuations depending the circumstances. Higher conversions, higher donations, lower call centre staff members, staff operating on this task for lower time periods and lower operating costs (perhaps utilising overseas call centres for lead generation, or outsourcing of other costs) would change those numbers. Certainly there must be decent profits and even massive profits for some agencies to operate in the charity space, but it’s worth noting the industry in general is in decline according to Ibis world. Of course, there are also likely other less tangible benefits for agencies as well, being able to proclaim about working with a charity partner for example, motivating staff and so on.

As for charities, the ACCC report quoting Appco Australia stated that “donors give for an average of 3–5 years" (that’s the ones that stick around). Charities need donors to stick around for at least a year (or less than three months) to avoid the situation becoming a loss-making exercise. Ultimately, charities are undertaking the behaviour because it outsources a big challenge and based on the longer-term numbers it appears to be worth their while.

For those who are thinking of giving or increasing their donations, doing your research on the charity and making a direct donation is typically the best way to make sure the right people get the most amount of money. However, for many people at least, things just don’t seem to go down that way.

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We pay directly to the Charity we help fund, our monthly donation is about $50. I refuse to use the street hawkers or the tele hawkers. I remember a Current affairs program that looked into the Surf Lifesaving one and from memory about 95% of the donations remained with the business and SLA got about 5%. I guess if you get 5% of something it is better than 5% of nothing but a very poor return regardless.

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The argument that charities have is that without the paid collectors, they would not have received that donation in the first place. The Dept Fair Trading advise that a 20% fee is the maximum reasonable commission allowed.
We ignore these phone calls, and just donate direct to the charity concerned. Then they don’t pay any
commission.

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Great explanation @BrendanMays. Thank you.

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The 5% of not much money may go to SLS Australia, but I’m a bit cynical about how much of that gets back out of their bank to all the clubs actually doing the hard work.

Further, when the local Surf Life Saving clubs go out to collect money, people are more reluctant to donate because they have already given. (This has been said to me.)

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Maybe charities could have a “5 Star” efficiency rating system based on their previous years performance. So if 0-20% of monies collected gets spent directly on the stated target (ie monies collected - collection costs and administrative overheads) they get 1 star, 20-40% 2 stars and so on. Then they, or their agents, can be required to disclose their star rating when fund raising.

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I engaged with the acnc a while back with just that sort of suggestion. The pushback was almost as breath taking as government defences of the mining, financial and property development sectors.

The reply was essentially they receive and publish metrics and let each donor decide if they are happy with a charity. At the time there was no (and might still not be) any standardisation required. The reason for that was putting requirements on the charities might dissuade them from ‘cooperating’.

One of the plausible parts of the explanation regarded what constitutes performance and how does one attribute ‘good work’ across education, events, support, meals to the destitute, school supplies to the marginalised, and so on. A dodgy charity could, for example, send the CEO around the country to the Gold Coast, Broome, the Barossa, Margaret River, Yarra Valley, and similar locales to give tralks on the charitable subject matter. Was it a boondoggle or did it make a difference to anyone but the traveler?

I trust the example suggests the problem, although the USA charity watch seems to have resolved the problem in their domain, and awarded ratings. But, in the too hard possibly unfair basket here, according to the acnc.

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I will not donate to any charity who pays people to collect! No matter how badly you need a job. Being paid to collect for a charity organisation is not acceptable!

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Do as I do and donate to your selected charities via direct debit. The charity then gets ALL of your donation. I then select other charities and send them a cheque in time for Christmas that way there are no collection agencies skimming off the top. As a pensioner I only have so much I can afford to donate and I want the my charities to get the lot.

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That is not the silver bullet you might expect. Many charities engage for profit businesses to process their donations. It is a much smaller cut than the chuggers/solicitors, but you might be surprised how much they still take off the top :frowning:

One needs to read all the small and smaller print to understand what, if any fees are taken from a donation for processing.

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Thanks for the tip. I will now ask my charities if they do this and if they do I will scrub them off my list. I’m sorry but as a pensioner I cannot afford for my donations to be squandered in this fashion. My nephew was engaged by a collection agency to spruik for donations for Surf Lifesavers and he got to keep 30% of what he collected. He even had to dress up as a lifesaver.

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I wisj they woild stop ringing me!

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Let your answering machine pick up your phone calls. That way you hear who is on the line and you can pick up the calls that you want to take.

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I donate to the charity fund of my choice directly (have done so for 20+ years) and ignore all others. Charity starts at home and I think the majority of people could help in their local community whether it is their time or money, or giving away last season’s clothing that they no longer want*. Charities can’t sell worn old clothing, but they can sell quality last season gear at a reasonable price which can be put to good use within the local community. I know I have put into the clothing bin several items of clothing which still have the store tags on them. Impulse purchases that I should have known better not to buy. (* I saw this put into effect on a UK TV show).

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