h1_bkg

“Every penny goes to beneficiaries” no longer rings true

Among the revelations that Comic Relief had been misleading people over its investment policy, another revelation went almost unnoticed – that it has been  misleading people over how much money goes directly to the cause.

Comic Relief has always pledged that every penny donors give goes directly to frontline organisations. It manages to do this, it says, despite spending around £17m a year on staff.

Of course, there’s nothing wrong with spending that amount of money on staff. Giving cash away is not free or easy, despite everything we think, and the process probably needs those people.

But what it doesn’t say is that when it gets a donation, some of that money goes into the stock market before getting spent, where it brings a return of around eight per cent a year. Meanwhile, inflation means that the value of your donation is decreasing, in real terms, by about three per cent a year.

All of this is perfectly reasonable – charities often fund projects over several years, after all, and it must take time to get all that cash out of the door.

But it does mean something strange happens to the donor’s tenner.

It appears, from what they’ve said so far, that some of those tenners get invested in Cluster Bombs Inc or No Throat Tobacco. After three years of healthy dividends, the charity has £12.50. It spends £2.50 on paying its staff and gives the tenner – now worth around £9 in real terms – to another charity. It’s like a magic trick. Except it’s the value of your donation that’s disappearing.

Of course, there are various caveats to this. It could work slightly differently. If the charity hung onto your cash a bit longer, it could get enough money to pay staff and give more than your original tenner to charity – covering the value of inflation. It’s also not clear whether it counts Gift Aid as part of your original donation. Maybe your cash goes to the cause and the Gift Aid it claims pays the staff. Or maybe the charity also gets a grant to cover core costs, leaving your cash to go direct to the beneficiaries.

Any which way, it requires some nifty legerdemain on the part of the charity to keep its promise that all your cash goes to the cause. Like every other charity that tries to pretend it doesn’t spend any cash on administration, it’s about time Comic Relief ditched their nonsensical claim, and explained the truth.