The fundraiser was perplexed. “We just got a donation from [name of national community group omitted]. They want the money to go to any of our programs, but it can’t be used for salaries. I want to honour the request, but they have to know that 80 per cent of our costs are salaries.”
What would a charity be like without salaries? I was the treasurer of a charity that ran a home for people with dementia—a charity that had no salary expenses. The frontline workers were paid through a staffing agency and all of the management, client acquisition and administrative functions were handled by board volunteers.
Without going into detail about how that situation came about, it took a heavy toll on the Board. It’s one thing to commit a certain number of hours per week to a charity. It’s quite another to be available any time a prospective client and their family wants to tour the facility. It’s one thing to have a regular shift each week. It’s another to be ready to respond to the sudden needs of equipment failure or client emergencies. In short, the situation kept getting worse. The facility was losing money because it wasn’t operating at capacity and the board was burning out.
A move in the right direction
The answer was to hire the first employee: an executive director. To my everlasting shame, I actually voted against the motion, not seeing how we could afford it. Thank goodness the other board members answered: “how can we NOT afford it.” A few months later the new executive director was in place and changes started to happen. The facility reached capacity and started operating with a small surplus. The board was able to pull back from operations and turn to longer term planning. The volunteers were happier. And the facility continues to flourish.
Volunteers allow a charity to leverage its resources and create value in the community. Volunteer time lets the charity stretch each donated dollar. But if a charity is going to operate on a full-time basis, there needs to be core staff in place who can provide professional skills (e.g. program delivery, emergency response, administration and fundraising).
What others are doing
But you knew this already. The question is, what to do about it? How do you address the concerns of donors who are overly focused on salaries? Tackle this issue head on, like in this excerpt from World Vision:
World Vision Canada’s overall policy is to match salaries for non-management positions to the average in our local market. For senior staff, we increasingly discount salaries below this market average. In recent years, salaries for director-level roles have been discounted by at least 10 per cent when compared to market average for similar roles, while Vice-President positions have been discounted by at least 15 per cent. Our president earns at least 25 per cent below.
The more detailed you can make it (without intruding on the staff members’ privacy), the better. Compare the World Vision statement with this more general one from a United Way website:
Executive salaries at United Way Centraide Canada and United Ways Centraides across Canada are established through a comparison of executive compensation at other charities, an assessment of roles and responsibilities, and a commitment to spending dollars wisely with the oversight of the organization’s board of directors.
Based on just these two statements, which organization would you be more likely to give to?
Bill Kennedy is a Toronto based Chartered Accountant with Energized Accounting, focusing on financial and reporting systems in the charitable sector. He blogs at www.EnergizedAccounting.ca/blog/. Find out more at www.EnergizedAccounting.ca; follow Bill @Energized
