Need to know
- With tens of thousands of charities seeking donations, knowing which ones to trust can seem like a tall order
- A good first step is to check is whether it's registered with the Australian Charities and Not-for-profits Commission (ACNC)
- The ACNC has the power to revoke the charity status of organisations that mismanage funds
With the holiday season closing in fast, many of us are going to receive calls or be approached in public about giving to a charity. And, of course, many of us are willing to give what we can to help people in need.
But we're also worried about whether the charity in question can be trusted, or whether it's a legitimate charity at all.
The charity sector in Australia is extra large. Over 10% of the Australian workforce has jobs there, and it brought in over $200 billion dollars in 2023–24. Around 13% of Australians currently take part in volunteer work for a charity, and most charities depend entirely on volunteers.
The smaller a charity, the more it depends on individual donations
But nearly a third of registered charities in Australia are comparatively tiny, with annual revenue of less than $50,000.
Knowing whether these charities are a legitimate place to send your donation can be especially difficult, because they're not the big-name charities that most people have heard of. The smaller a charity, the more it depends on individual donations rather than other forms of financial support such as government grants.
Check the charity register
The sheer number of organisations asking for your money can lead to doubt and confusion, but it turns out there's a government organisation whose job it is to keep charities operating in Australia on the up and up.
It's called the Australian Charities and Not-for-profits Commission (ACNC), and it provides a lot of useful information about charities large and small – around 60,000 of them. The ACNC maintains a charity register that a spokesperson tells CHOICE is "a critical source of truth" for people wanting to know more about an organisation that's asking for their money.
"If a charity is listed on the register, you can be confident that it submits required core information about its work to us as the regulator, so it is transparent and accountable," the spokesperson says. "Donors can be confident donations are going to the particular cause they would like to support."
Charity status can be revoked
The information on the register includes what the charity does, the names of the people who run it, and details about its finances. If a charity fails to provide the required information, the register will show that – a red flag for potential donors.
Making sure this information is accurate and up to date is a central focus for the organisation, but it can also act as a watchdog as part of its mission to "promote trust and confidence" in the sector.
The ACNC will take enforcement action if a charity repeatedly fails to submit information or keep proper records; if it fails to meet minimum standards of conduct and governance as defined by the ACNC; or if it's no longer eligible to be registered as a charity.
If a charity fails to provide the required information, the register will show that – a red flag for potential donors
"The ACNC will act firmly where vulnerable people or significant charity assets are at risk and where there is evidence of serious mismanagement or misappropriation," the spokesperson says.
Its strongest enforcement tool is revoking an organisation's charitable status, which means a loss of tax concessions.
In 2023–24, the ACNC received 2309 reports about potential problems with charities. About a quarter of them had to do with charities using donations for the personal gain of staff, while 21% were about other forms of mismanagement of charity funds. The ACNC conducted 59 investigations and revoked the charity status of nine organisations. Another 36 charities were referred to other government agencies.
In 2023–24 the ACNC conducted 59 investigations and revoked the charity status of nine organisations
The ACNC will also kick charities off the register if they fail to report required information for two consecutive years, something that happened in 181 cases in 2023–24. The spokesperson told us that charities who repeatedly fail to report have usually ceased being charities and that 73% submitted their information on time in the last financial year.
In many cases, third-party marketing firms hired by charities are the ones that contact prospective donors.
Concerns about charity administration costs
Another big organisation that's dedicated to keeping the tens of thousands of charities operating in Australia honest is Fundraising Institute Australia (FIA), an industry body whose code of conduct "helps to ensure best practice and lifts the professionalism of the sector overall," CEO Katherine Raskob tells CHOICE.
Raskob acknowledges that FIA has ongoing concerns about dodgy practices.
"Unfortunately, bad actors in our sector can have an enormous impact on donor trust and confidence in charities and charitable fundraising overall and a negative impact on the charities that are well run, which I believe are the majority."
Unfortunately, bad actors in our sector can have an enormous impact on donor trust and confidence ...
Fundraising Institute Australia CEO Katherine Raskob
A well-run charity would have certain internal costs, which in many cases would be justified. But it's a sore point for many donors. We've heard from many who have expressed concern that too much of their donation may be whittled down by this administrative spending. Raskob insists this concern is overblown. The evidence shows, she says, that charities that spend less on administrative costs are often less effective.
"This misaligned focus can mean that charities do not have the resources they need to operate effectively and use the generous donations received by Australians in the most effective and efficient way."
The industry term is the 'non-profit starvation cycle', Raskob says, a phenomenon fuelled by donors who have "inaccurate expectations of how much overhead is needed to run a not-for-profit".
"It leads to a sector starved of the necessary core funding required to create resilient charities," Raskob says.
The evidence shows, she says, that charities that spend less on administrative costs are often less effective
Prospective donors can get a broad view of the financial workings of charities by going to the ACNC register, but making a decision based on this information alone is problematic.
The most recent annual information statement for a well regarded charity such as the St Vincent de Paul Society of NSW, for instance, indicates it had $126 million in revenue and $133 million in expenses, over half of which were employee expenses.
The role of charity marketing firms
Another sticking point for potential donors that CHOICE reported on last year is that it's often not the actual charity contacting us but a marketing firm hired by the charity. The people we're hearing from aren't actually involved in the cause, they're just getting paid by the hour – or perhaps even earning bonuses based on how many people they persuade to donate.
We want to be big-hearted and giving, but this complicates matters.
The ACNC spokesperson says charities are responsible for the actions of the marketing firms they hire to ask for money in their name, adding that donor concerns are not without merit.
"There have been examples of external fundraising agencies using questionable tactics to get donors to commit to regular ongoing donations. This can impact public goodwill and damage the reputation of both the charity and the wider sector."
There have been examples of external fundraising agencies using questionable tactics to get donors to commit to regular ongoing donations
ACNC spokesperson
But Raskob says outsourcing the mission-critical aspect of fundraising – getting people to donate – is often good governance.
"It can be much more cost effective for a charity to engage a professional agency that has people specially trained in face-to-face fundraising, than for the charity to hire, train and manage a team of its own. This way, more of the money raised can go into service, instead of staff overheads."
Raskob also makes the point that fundraising campaigns tend to be cyclical and it's more cost efficient to hire a team of fundraisers when they're needed, rather than having them permanently on the payroll.
How to check if a charity is legit
FIA provided CHOICE with the following tips for exercising due diligence on a charity you're considering.
- Check if the charity is a member of Fundraising Institute Australia. Members must abide by the FIA Code.
- Check if the charity is registered with the Australian Charities and Not-for-profits Commission. A non-profit that displays the ACNC Charity Tick has passed a screening process for legitimacy.
- If you're looking for a tax deduction for your donation, ensure the charity is registered as a Deductible Gift Recipient with the ATO.
- If fundraisers approach you on the street, make sure they're wearing a badge that shows who they're working for and that it matches their identity.
- Be wary of unsolicited emails, phone calls or approaches from charities you haven't heard from before.
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