And this all leads us to becoming less trusting of NGOs, as this survey reported by Stuff suggests.
I have written about Ronald McDonald House South Island (RMHSI) a couple of times, but thought it might be interesting to put this charity through the GiveWell criteria – or rather, a more concise and desk top version thereof. It’s a tricky one: our hearts tell us to do what we can, but what should our heads say? I believe all information should be easily accessible, transparent and publicly available.
What does the charity do?
I have grabbed the below from the RMHSI website. “Supporting families while their child receives hospital care; more than just a House.
Families stay with us completely free of charge while their children are hospitalised so they can concentrate on what matters most – their child.
- Focusing on the critical needs of children
- Keeping families close™
- Celebrating diversity
- Operating with accountability and transparency
We rely on the generous support of the public, businesses and volunteers to operate our facilities and we undertake our own internal fundraising to meet costs. We receive no direct Government funding, although we can receive some support from the Ministry of Health’s Travel and Accommodation Scheme for eligible families.
That is marvellous. I can imagine how hard it is for a family to have a child in hospital, and being far away from community support must make that so much harder. I also imagine the community that it forms: having others who are going through similar situations and emotions to yourselves can be most supportive. However, do they need my hard earned dollars?
The RMHSI accounts are interesting. Firstly, I have looked at their latest 2015 accounts on the Charities Services website to see where their costs lie to get an understanding of what they actually do. The 2016 accounts on the RMHSI website do not have much detail – curiously enough there is a comment in the notes section (note 3 page 12) of their 2016 report that for detailed accounts we should contact the Trust office. I raised an eyebrow as this seems to contradict their core value number four of being open and transparent.
Not surprisingly, RMHSI is really about two things: operating the facility, and generating funds. However, I have had to resort to the 2014 accounts for real numbers around their service provision, as the 2015 and 2016 ones from their website are a bit less helpful for what I want to do.
Revenues come in two forms: one from operations, and one from fundraising. Let’s look first at operations.
In 2015 they earned some $676,606 from Accommodation. I believe this is the money referred to above as coming from the Ministry of Health’s Travel and Accommodation Scheme. This makes sense as it’s cheaper to centralise services, and it’s proper that the taxpayer covers this cost.
It also looks like they make money from subleasing their premise ($67k), but more interestingly generated almost $144k in interest.
Total operating revenue for 2015 was $905k, up from 2014’s $762k.
Operating costs (which include operating staff expenses, trust expenses, utilities and repairs and maintenance) for 2015 come in at just shy of $600k, up from 2014’s $528k. Depreciation is on top of this, coming in at $238k.
So the Christchurch operation made an operating surplus in 2015 of $68k, which compares to an operating deficit the previous year of $52k.
However, on top of this there is fundraising revenues. Both years generated around $1.2m in fundraising income. This came from donations, grants, fundraising initiatives and direct marketing. There was a cost to this of $443k in 2015 ($431k in 2014). This created a fundraising surplus of $840k.
I should also mention here (as I think it’s a fabulous feature of the organisation) that volunteer hours and donated items are enormous. In 2014 volunteers gave 16,600 hours of time. If we use $24 / hour as a surrogate for the cost of that time (for yes, volunteer hours are costed) then that’s an additional $398,400 of cost (offset of course… but it is important). Donated items are identified, but not included in the financial statements. Donated items (page 33 of the accounts) is listed which is helpful: for Christchurch the total came to $591k. If we take out things donated for events, we get $255,286.
How cost effective is each programme area?
There are no figures provided for the actual numbers of families helped in 2015, nor in 2016 (over 1000). I will use the 2014 figures: the annual report states that in 2014 they helped 763 families over 1162 visits, over 30,084 nights. So if we look at simple division, that equals 30,084 / (598,570+238,605) = $28 / night. That looks pretty cheap to me! If we add in volunteer hours and donated items then the cost per night per person increases to $49.55. Still pretty good!
How robust is the evidence behind the programme?
No evidence provided. I make the (fairly safe) assumption that they are part of the Ronald McDonald international programme. I also assume that, as the commercial McDonald’s business has fairly tied down commercial franchise agreements, that they have brought that philosophy to this element. Efficacy of the programme is probably not that important: just that families feel supported. Nothing is published about this in the annual report.
How well is each programme implemented?
No evidence provided. It is very hard to find anyone who has had the experience to say anything negative about the service. I expect it’s marvellous.
Does the charity need additional funds?
Here’s where it gets interesting. No. If we look at their Charities Office profile, they have not made a single deficit in the past ten years.
They have a solid war chest, with assets of $17m in 2016. Of course, we have to go back to 2015 to see how this is made up: there are fixed assets of $12.3m, and cash of $4.1m, $2.6m earmarked for building projects. They have a fund “Operation Provision Funds”, which I believe is there to support the operating costs. Direct operating costs are around $600k.
This means that, should they not make ANY money, they should be able to cover operations for two years. This is prudent to have provisions of course, and two years seems fine.
And there is this. The name of the organisation.
Now, one would expect McDonald’s to be a significant contributor to the organisation given they have their name on the door.
The graph shows the past nine years of accounts for RMHSI. The last significant contribution from the stakeholder was in 2013 totalling $150,000. This makes sense: the organisation has a great capability to generate funds for its operations, for growth, and looks well placed for the future, and I guess that the overarching global organisation is focussed on other markets.
Now, this seems limited to the South Island operation of RMHSI. The two North Island operations have been gathered under one umbrella, Ronald McDonald House charities. Here it looks like McDonald’s (as Mission Partner) gave the North Island organisations $1.6m in 2016, up from 477k in 2015.
The challenge with critiquing such loved organisations is thinking with the head. I see that they seem to do a wonderful job of supporting families in times of need. RMHSI has huge brand equity, and McDonald’s certainly gets considerable brand value from this. But as such, as a community I think we have to ask whether this brand love is deserved. And whether we should take what these organisations say at face value.
It’s not surprising that people don’t actually trust Not for Profits. Sorry, I won’t be attending the fashion show. And if I was the Minister of Health, I’d probably be a bit snippy that the government contribution is effectively sidelined. After all, there are plenty of other NGOs who could do with a tidy $676k.
Love to talk with you if you think this is at all interesting. Check out my website www.delfi.co.nz.