One Third of Australian Charities Not Transparent – Charity Star Rater

Nearly a third of Australian charities are not transparent, according to a controversial star-rating charity assessment website.

New figures released by ChangePath show that 28 per cent of nearly 900 top Australian charities have no annual or financial reporting available on their websites, 20 per cent have no privacy policy for what they do with donor’s personal information, and 8 per cent have consistently lost money for the last three years or more.

ChangePath lists the statistics of nearly 900 Australian charities and not-for-profit organisations, including their financial details. It gives each charity a star rating for its transparency, privacy, and financial management.

The star-rating system was set up in early 2015 by Sydney entrepreneur Sam Thorp on his website ChangePath, using data from the Australian Charities and Not-for-profits Commission (ACNC) as well as financial data he said he tracked down himself.

At the time Thorp said his concept was based on the controversial Charity Navigator – a US not for profit that posts charity evaluations and compiles top-10 lists on controversial topics such as highly paid CEOs at low-rated charities and inefficient fundraisers.

The first star rating report looked at 630 charities. The latest report looks at 890 charities.

“Overall, only 18 per cent of charities received a full seven stars out of seven, indicating that they made information freely available, are well financially managed, and have a published privacy policy,” Thorp told Pro Bono Australia News.

“Probably the most concerning result for me was just how many charities were losing money.

“Eight per cent of our listed charities had lost money in three out of the last four years. Over that time they made over $200 million in combined losses.

“Many of them have a large rainy day fund to help deal with this kind of pressure, but it goes to show just how hard it has been in the Australian charity sector over the last few years.

“I was surprised at how much money was being lost. I think looking at that and seeing how many charities are losing money. They are not-for-profit organisations and they are allowed to lose money for one year but to lose money for three or four years in a row is pretty intense. You would think after three years of losing money you would start to do things differently.

“But the transparency results were less surprising. Unfortunately it’s about the same from the previous research results.

“I was shocked that charities don’t have a privacy policy and don’t tell people what they are doing with their personal information in direct contravention of the privacy principles. This is while people are giving out their credit card details and their valuable personal information and I found that quite shocking really.”

He said some of these issues were easy fixes for their online presence.

“They are not difficult to do but they do really improve information for donors. From our perspective it is a way of nudging the industry to really do a bit better but also it is also there to help the charity sector because… donors are going to be more receptive and engaged the more information they receive,” he said.

Thorp said while he acknowledged that the star rating of Australian charities remained controversial the aim of ChangePath was to help donors to make informed decisions about where their donations should go.

“We provide independent, unbiased assessments of charities. It also helps charities to promote themselves as open and honest,” he said.

“While people are hesitant about it I think people are coming around to the idea [of the star rating].

“ChangePath has changed quite a bit since we launched. Charities have made contact and said look we have put up our annual report or we have changed things up can you update our star rating, so we did.

“A fair number of charities especially the big ones, the household names get a seven-star rating… and a lot of small charities as well. It is not that difficult to get seven stars.”

The total star rating is a rating that combines a score for transparency (out of 3), financial performance (out of 3) and privacy (out of 1).

Thorp said, from a personal perspective, there was much more compliance with the establishment of the ACNC in the research results for the 2015/16 round than there was compared to the 2014/15 round.

“It’s night and day [in comparison],” he said.