Aussie Charities Given Controversial Star Rating

A controversial new star rating of Australian charities based on their transparency has been launched and its creator believes it is filling a gap that the national charity regulator cannot deliver.

The star rating has been produced 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 says he tracked down himself.

“When it comes to charities, some are more transparent than others,” Thorp said in launching the new charity assessment organisation and releasing the first charity star ratings which includes some of the country’s largest charities.

“Charities that work in financial assistance, research, and advocacy are some of the most transparent in Australia.

Thorp says his concept was based on the controversial Charity Navigator  – a US Not for Profit that posts charity evaluations and compiles top ten lists on controversial topics such as Highly Paid CEOs at Low-Rated Charities and Inefficient Fundraisers.

“The research by ChangePath looked at  650 charities across 25 sectors and were compared to see just how transparent they were about where their money had gone,” Thorp told Pro Bono Australia News.

“The US-based assessment engine had a big influence.”

Charity Navigator was also a model the Coalition Government once tipped to replace the Australian Charities and Not-for-profits Commission.

“By giving charities a transparency score and highlighting financial information, we aim to provide potential donors with honest information about their choice of charity,” Thorp said.

Thorp said he accepts that most of the information about charities is available on the ACNC website.

However, he said the ACNC does not provide the financial details of these charities found mostly via annual reports or those lodged with the Australian Securities and Investments Commission (ASIC), which he investigated.

“I am hoping to fill the gap on the transparency level – filling the gap on what the ASCNC can’t do; creating a user-friendly wrap of the ACNC data and rating charities for public scrutiny,” he said.

“This is the first time a broad range of Australian charities have been given a publicly available transparency rating. Potential donors can now have confidence about where their money is going.

However the ACNC Commissioner Susan Pascoe AM has cautioned against what she describes as “narrow interpretations of the data on the Register”.

“Generally, single metrics are a poor guide to a charity’s effectiveness and can lead to unfair assessments of charities,” Pascoe told Pro Bono Australia News.

“The sector has supported increased transparency and accountability but not comparison metrics. Indeed there was vocal opposition to the proposed introduction of league tables and tools similar to the United States Charity Navigator.  

“We would always urge the public to not to rely on a single factor when deciding to donate.”

The Star Ratings Findings

Sam Thorp said the ChangePath analysis found that charities in the ‘income support’ sector (helping those on low incomes or struggling with money) scored best, with transparency scores 25 per cent higher than the national average.

“Universities also scored well (19 per cent above average), as did charities that work internationally (19 per cent above average). Religious charities were the only sector that scored significantly below average for transparency (30 per cent below average),” he said.

Only 246 charities out of 650 investigated received a three-star rating.

Thorp said examples of high-transparency Not for Profits in each sector that received a three-star rating included:

Income support charities: Mission Australia, ChildFund Australia, St Vincent de Paul.

Higher education: University of Queensland, University of Melbourne, Monash University.

International: Amnesty International, World Vision, Humane Society International

Civic and advocacy: Oxfam Australia, Diabetes Australia, Adults Surviving Child Abuse

Research: Peter MacCallum Cancer Centre, Royal Women’s Hospital, Diabetes Australia

He said examples of large, low-transparency Not for Profits (those who don’t release any annual report or financial report) included Bowel Cancer Australia, Free the Bears Fund and Jericho Road.

“The ChangePath site allows you to see how much information charities provide about their finances and achievements over the last year, and what that data is. It’s important that giving is an informed decision. It also helps charities to promote themselves as open and honest,” Thorp said.

“We’re the only charity assessment website in Australia that doesn’t accept any money from the charities themselves.

“This allows us to be truly independent, and keeps our rankings transparent and honest.”

Top 5 most transparent Not for Profit types

*Charities based in Australia but which mainly work to assist people overseas.

Least transparent sector

The research notes that Religious charities, because they have different reporting requirements, would be expected to have less transparency.

All charities were assessed on a scale from 0-3, based on the availability of financial and annual reporting information on their website.

• 3 stars: Full annual report and financial report available and easily accessible from the website, or substantial financial information included in Annual Report (i.e. breakdown of revenue and expenses).
• 2 stars: Annual report available but missing key financial data. No financial report available.
• 1 star: Annual report available but doesn't list any financial data, or annual report available for previous years but not for current year.
• No stars: No annual report available.

“These scores were then aggregated, compared, and statistical tests were run to make sure that the category scores were above the average in a statistically significant way,” Thorp said.

“Each charity selected the sectors that they work in when they registered for the Australian Charities and Not-for-profits Commission (ACNC). The sectors used in this study were taken from the ACNC database.

“We deliberately selected larger and more established charities for the initial set of 650 charities that we examined, as we felt they were the ones that people would be most interested in at the start.

“We plan on revising scores on a yearly basis, giving charities time to put their financial reports online.”

Sam Thorp has a background in business strategy and studied entrepreneurship and science at UNSW.  He says he has worked in multiple Not for Profit organisations, as well as previously sitting on the board of the University of NSW.