Air Rescue Community Services (ARCS) have over 400 machines in 30 venues throughout the South Island.  They are a For Purpose Class Four gaming trust, meaning that, for 2015 calendar year, some 60% of  their giving goes through to the associated charity, Canterbury West Coast Air Rescue trust (CWCART).  The balance, goes largely to sport, with the remaining 7% through some select groups in various other sectors.  So the data is quite interesting, but not particularly surprising.

However, what is interesting is a wee look at the financials of the organisations involved in the chain (30 June 2015). 

Firstly, we have this gaming organisation, ARCS.   It’s a fully owned subsidiary of CWCART, with two of the same directors.  Last year they look to have given just under $4.3m from the gaming trust to CWCART – which is great, as that is what they were effectively established for.

CWCART’s additional funding state they received $748k from Westpac, $210k from NZ Coal and Carbon, $720k from direct mail, $273k from Westpac’s Awareness month, and “other donations” of $416k – raising a total of $6.9m.

CWCART itself seems to act as a simple pass through of funds to the service provider of the helicopters, a private business called Garden City Helicopters (GCH), which shares a shareholder with CWCART.  The costs taken out of the Trust are largely administration costs at $922k, and included some $245k for wages of what seems to be the fundraising team (from a Stuff article), and an intriguing $222k for a fundraising review.  You can check out their unaudited accounts on the Charities website.

The balance of the revenue – some $5.9m – seems to be distributed to GCH, who run the operation.  They will be the ones who own the assets, who receive government funding for operations, employ the staff, and who manage operations.  All very admirable.  Unfortunately, we have no insights into how well that money is used: the website has no data on missions and minimal on cost structure.

I googled and found some interesting comparisons in terms of transparency.  Otago’s charitable entity operating the helicopters there is Otago Rescue Helicopters Ltd, and Otago Rescue Helicopter Trust runs the fundraising side.  A private business, Helicopters Otago, seems to own the helicopters, and I assume from the accounts that front line staff are employed by the Trust. They show some fabulous disclosure on their website: indeed I could see when they flew my mate Pete off Cardrona.   Their annual report is a thing of beauty to a geek like me: we can use their numbers to benchmark. Otago’s accounts also have great notes about related party transactions – something also missing from CWCART’s accounts. 

So if we look at Otago, we can see that in 2016 the taxpayer put $7,158 in per mission, which was topped up by donations of $1,698 per mission.  Their costs / mission were $8931, which means they made a small loss in 2016.  I do suspect that Otago’s flight times may be fairly high given the geography they cover: it looks like each mission takes around 1hour 40.  So the costs per flying hour are around $5,113.

I had a look at other parts of the country to see what they do.  They all seem to have different operating models.  Now, the data is not always there to see what’s happening, but I have managed to pull something together.  Canterbury?  No data.  We have no insights into how much you and me as taxpayers or givers, put in, as those funds go straight through to the privately owned business.  So in terms of measuring how effective our tax, grant or sponsorship money is, then that takes some assumptions. 

CWCART states on its own website that each mission costs $8625.  Also on their website they state that they rescued over 800 people.  Now, not every mission is about people, and over 800 is a bit vague, so let’s go with 900 missions.  900 * 8625 = $7.7m. They also state that 30% of costs are covered by the taxpayer – 900*8625*.3 = $2.3m.  $7.7m less $2.3m means we can see a funding gap of $5.4m.  However, the Trust actually distributed some $5.9m through to GHC.  So why the excess $500,000 distributed to GHC?

The chart shows the workings: the operating costs look pretty similar.  Total costs take operating costs and add on admin costs like fundraising.  These costs of course are totally valid, as without spending the money, you can’t get the income.  The variance in government dollars is puzzling: I put this down to different rates paid for different things – for example hospital transfers can be scheduled, but accidents of course require stand by.

Now, I love that this service is here.  It’s most reassuring as I snow plough down Hutt that if I get wiped out by snowboarders I will be whisked to a hospital quickly.  However, the lack of disclosure makes me uncomfortable, and I believe that donors – and tax payers – deserve a bit more around the efficiency of the organisation.  All sorts of questions come to mind: is the operation subsidising other commercial elements?  Why does the IP sit within a private business?  Other structures have the human capital within the charity.  How can we ensure the service provider is competitive in what should be an open tender process?  I see GHC have had their contract reconfirmed by the CDHB (Star, October 20 2016).  How could another provider actually have a crack at that contract?  Legal billings for both ARCS and CWCART total $220k.  Really?  I have some mates who would like that client!

I also would hope that Westpac, who last year put $748k into CWCART, and CDHB, who together with other government agencies cover a stated 30% of the costs of this, are making their decisions on better information than what’s presented here.  I also believe that, given they actually operate a gaming trust which, in 2015 took some $20m[i] out of the community, there is an obligation back to the community to show us that those funds are used in the most effective manner. 

I could put in an OIA request and maybe get the information.  But I shouldn’t have to, and really, as an organisation looking for support it’s actually incumbent on them to let us know they are doing.  I would love to talk with you if you think this is vaguely interesting.


[i] Figure mentioned for maximum outrage.  Almost half of this goes to the pubs themselves, the DIA for problem gambling services, and running of the machines themselves.  It’s likely that the venue themselves would like machines regardless, so this dollar amount stays the same.  The entity itself has costs of $2.5m which must be within the DIA guidelines.  The balance went to the community.

I was actually using the database for a spot of work the other day, and noticed that I hadn’t looked at Lion Foundation for a wee while.  I’ve now cut in the data up till September 2016. 

Lion Foundation are really helpful in terms of disclosure.  Check their website out: they make it super easy to see who was funded by Territorial Authority, AND they also show who did not receive funding.  If I had a criticism, it’s the gap around the WHY (and that’s where Pub Charity’s disclosure is pretty good). 

And the other thing that separates Lion from many of the gaming trusts… they actually have women making decisions around where the funds go.  I know!  What a crazy idea.

In their financial year to 31 March 2016, they spent a total of $1.6m in grants, and in a wide range of places.  Of course, 40% to sport… and of course rugby union and cricket got the largest amounts.  Health and Wellbeing are a surprise, but looking at the data that’s driven by $200k to St Johns – probably for some capital spend.   Nice to see a complete balance of spend. 

One comment however: cost to serve.  They made 205 grants in Canterbury.  Some 117 of these totalled less than $5000.  My (admittedly wobbly) numbers on cost to serve from last year suggest they have costs of over $4k per grant.  So… it’s costing more to get the grant out than the grant actually being given.  And it’s is before the cost of applying for the grant by the not for profit is taken out.

Now, one concept I have been hearing a bit about lately is Middle Class Capture – which I guess means that the folks who actually don’t need stuff get stuff. A slightly uncomfortable concept in a so called egalitarian society.  This can be seen at universities, where scholarships are set up for post grad study – when actually the desire was for getting the poorer but able kids into higher education.  I can see this as well with grants. 

Using the Phil Twyford methodology to identify “middle class” groups, and looking at the Lion data, some 59% of money is going to those “middle class” organisations, 32% to the wider community (ie, anyone) and the balance to poorer communities.  Included in the Middle Class group are arts groups such as the Sweet Adelines, sports clubs such as Bowls and Marching (and of course rugby and cricket), some schools, such as Rangi Ruru.  Now, us middle class are perfectly entitled to ask for support, but this entitlement can sometimes mean that what is to all intents and purposes a hobby can become a leech on the philanthropic dollar.  If you want to get together as a group and sing then that’s great.  Just not quite sure why you expect that the community should subsidise you to do that.  And if the group is getting funds because it drinks at the local gaming venue… well, I do suspect that behaviour may be frowned upon by DIA.

Now, you can argue my categorisation and methodology: after all, I have no basis for the categorisation other than my own bias.  But regardless of the numbers: it’s an important conversation for us to have.  What is the public benefit of some of this stuff vs the private benefit?  How can we reduce the transaction costs? 

Would love to talk with you if you think this is just a little bit interesting.

At the risk of never picking up paid work again, I thought it would be quite interesting to have a wee gander to see how Rata’s funding decisions have changed over the time.  Last year Rata announced the new funding framework.

They have recently published their year end 31 March 2016 grants, and published their YTD grants to 31 July 2016.  Now, those eagle eyed readers will of course know that I’m developing up a mega database of grants, so I thought it might be interesting to look at some trends.

The chart below shows the Canterbury sector, and the percentage of their funding to go to each sector since 2013 (excluding earthquake funds).

What (I think) is interesting here: this year’s growth in the proportion of Youth sector grants, Health and Arts.  Now, with the latter two this could be driven by the “old” model in terms of timing of their sectors.  But the Youth in interesting: traditionally their sector closed in March, which means they pretty much got their funds from the 2015 year, and then turned around and applied again.  Something Sport, with their old February timeframe, didn’t quite think to do.

So, using the magic of Pivot Tables, let’s have another look.  In blue are the numbers of applications approved.  And in pink are the average grants given (in thousands) above.

 So what this is showing: fewer organisations are getting funded.  Those getting money are getting larger on average amounts.   Rata looks to be funding fewer groups in all areas, except for Education and Young People.   So it should be some good news if you are getting money from Rata as you are likely to be getting more.  The list of those who are declined is not provided, so it’s uncertain as to whether this is driven by groups not applying, or groups being declined.  And its early days yet on the new funding framework, so it remains to be seen if this results in a significant change in the sorts of organisations receiving money. 

Would love to talk with you if you think this is just a little bit interesting.

In 2014 the Canterbury funders gave around $600k in 97 grants to 58 early learning centres.  Not really a huge amount, but something I find interesting.  Almost $300k came in the form of rate payer rebates on rental income to 9 not for profit early learning centres.

Preschool decisions are a bit fraught.  I recall the decision making we used while trying to figure out where to send the kids: a private one, I thought, would require less from me in terms of selling things like chocolate bars, trike a thons and cake baking.  A private one would also provide me with some respite from my three under 4 as sessions not dictated by school holidays! 

We also recall the sigh of relief when our youngest started at school, ridding our monthly budget for the cost of the privately owned preschool of around $250 per month per child. 

I have had a wee look at five relatively simple preschools: single non profit entities.  I have used both their Charities office financial records, along with enrolment figures from ERO.  It’s quite interesting.

Wages, predictably, make up between 77% and 88% of total costs.  And it looks as if the ECE funding supplied by the tax payer pretty much covers wages.  The next biggest cost can be rent: but again, it depends.  Some own their land and buildings, a testimony to the work of previous generations. Of course, that then pushes more cost to insurance, especially in a post EQ Christchurch.  Others get subsidised rent through a relationship with a local school.  And still others pay commercial rents.

Parent contribution can range from 17% of total revenue, down to 4%.  Obviously this ratio will depend on the parents’ ability to pay, but its interesting (I think!) that for those with a lower parent contribution have a higher cost per child (almost $16k per child in one case) to the preschool with a higher parental contribution having total costs of $9k per child. 

So where is the extra money coming from?  Grantmakers.  There is an easy narrative around applying for funding “for the children”.  Sand pit covers, Red Cross courses, shade sails and theubiquitous and never ending bucket of ICT. 

So all very interesting, but to me, the bigger issue here is the relationship back to private enterprise.  According to the Education census, last published for 2014 data, there were 4299 licensed services.  This excludes playgroups, of which there are 857.  Now, sadly, the census does not take ownership model into account.  But what is interesting here is this chart, taken from the government’s education census.  It shows the number of enrolments  / attendances in licensed services by service type.  Now, this chart does not identify what is privately owned, BUT it’s fairly easy to see where the growth is.  And I would hazard a guess that many of these service providers in the education and care sector are privately owned.  These privately owned businesses are “making it work” with available resources, available funding, and providing a return to the owners for doing so.  IRD tells me that private enterprises of the size I have looked at will make a return on equity of (on average) 22%.  The organisations I looked at?  All except one made a loss last year.

Now, I know that choice is a marvellous thing, and I understand that people tend to be wedded to the decisions they have made for their kids.  But I also know that sometimes it’s difficult for a not for profit to make some hard calls around the commercial realities of doing what they do, and that a wider strategic analysis can be hard.  Going to grant makers for support is an easy option, but not necessarily the best.  It would be interesting to look at small private businesses, larger ones, and some of the larger not for profits (such as kindergartens who present consolidated accounts). 

And why is this important to grant makers: opportunity cost.  A dollar is a dollar, and if you do want to front up to your stakeholder to justify your role in the community, or justify the tax free status you receive, then there is an obligation to ensure that each dollar of spend delivers maximum bang for your community.

Would love to talk with you if you think this is just a little bit interesting.