Reviving donor confidence: 62% of experts believe that donations could be doubled if charities could better prove where donations are spent
4th March 2024, London, UK – Research from technology-enabled data consultancy Sagacity reveals UK charities are leaking £5.97 billion[i] every year, including £139m in unclaimed Gift Aid[ii] caused by donations which cannot be matched to donors. The research also found 18% of charities cannot accurately state how and where individual donations are spent:
• 58% worry this could put people off donating, worsening the current donation crisis
• 46% are concerned they could be in breach of Charities Act reporting rules
However, the research suggest charities could increase donations if they get a better handle on data, with 62% of respondents agreeing they could double donations if they could better prove where money is spent.
For its Missing Billions: Charity Edition report, Sagacity surveyed 50 finance and revenue professionals in UK charities and not-for-profits. The research included small charities with revenue of less than £5m up to large charities with revenue more than £1bn.
“The amount of money being left on the table by charities is alarming – especially regarding Gift Aid. HMRC paid charities £1.6 billion last tax year, but our research indicates charities could have collected at least £139m more if they could more effectively match donors to donations,” comments Scott Logie, Chief Commercial Officer at Sagacity. “Amid the cost-of-living crisis every penny counts. Demand is soaring for charitable services like food banks, care assistance, and mental health support. Not fixing the leaky bucket is a wasted opportunity that’s preventing charities from providing more help to those in need.”
Lack of oversight, poor processes, governance and controls was one of the mains causes of revenue leakage with £835 million each year lost to it[iii]. 68% of representatives admitted their team is too focused on the cause and not the numbers, leading to charities deprioritising returns. The research also showed charities imparted some blame on third-party fundraising partners.
The most cited or costly causes of leakage included:
• Charities having incorrect payment details for donors (86%)
• Mistakes or issues caused by third-party fundraising partners:
o Fundraising partners passing new donors with missing data (66%)
o Money wasted paying fundraising agencies for donors who only donate once, rather than long-term givers (96%)
• £776m lost to human error[iv] (e.g. decimal points in the wrong place leading to undercharging)
• £597m[v] lost to billing issues caused by inaccurate or incomplete data
“The charity sector spends a huge amount of time and resources on fundraising and advocacy, but a lot of money raised is heading right back out the door. But it doesn’t need to be that way. Almost half (47%)[vi] charity revenue leakage can be traced back to problems with data – presenting an opportunity for charities to close the gaps,” adds Scott. “To operate more efficiently and make the most of donations, charities must take a holistic approach. Look across the organisation at all levels to understand where issues might be occurring and how to fix them. From onboarding donors to working with partners. Long term, fixing leakage isn’t all about money either. It will also enable more accurate targeting, financial reporting and governance, improve the donor experience, and even attract more donors as they see where their valuable donations are spent.”
About Sagacity
Sagacity works with some of the country’s leading enterprises to support them in making informed decisions powered by the intelligent use of data. Sagacity believes that responsible use of data should be at the heart of every organisation and helps its clients to transform their customer data into a structure they can use, enabling them to improve it, make sense of it and drive value from it.
Founded in 2005, Sagacity is a customer-centric business with a World Class +82 Net Promoter Score. While it is sector agnostic, it primarily works with clients across the Utilities, Telecoms, Financial Services, Not for Profit and Retail sectors to improve customer prospecting and marketing, customer management, collections, and retention over the lifetime of the customer.
Sagacity has delivered consistent success and return on investment for its clients through new customer acquisitions and existing customer retention, customer management, onboarding, and ongoing relationship development to ensure that every end-customer is treated like an individual.
Data can reveal the full picture and Sagacity joins the dots.
_______________________________________
[i] £5.97 billion figure calculated as 6.84% of total revenue of UK charities (£87,246,649,802, correct February 2024 https://register-of-charities.charitycommission.gov.uk/sector-data/charities-by-income-category)
[ii] GiftAid figure calculated as 8.71% of £1.6bn HMRC paid out in Gift Aid during tax year 2023 = £139,360,000 https://www.gov.uk/government/statistics/uk-charity-tax-relief-statistics/uk-charity-tax-relief-statistics-commentary
[iii] 14% of revenue loss attributed to lack of oversight, poor processes, governance & controls – 14% of £5.97bn leakage= £835m
[iv] 13% of revenue loss is attributed to human error – 13% of £5.97bn leakage = £776m
[v] 10% of revenue loss is attributed to billing issues resulting from poor data – 10% of £5.97bn leakage = £597m
[vi] Total 47%:
• Lack of oversight, poor processes, governance and controls 14%
• Inaccurate or incomplete data impacting billing 10%
• Human error 13%
• Poor reconciliation creating ‘multiple versions of the truth’ 10%
