Fact check: how do charities spend your money?

With the holiday season upon us, many people will be digging deep to make a donation to their favourite charity.

But how much of your hard-earned cash actually goes directly towards good causes? The Week looks at the latest figures.

Which charities are most popular?

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More than £10bn was donated in the UK last year, according to an annual report from the Charities Aid Foundation (CAF).

Medical research was the most popular cause, with 26% of donors interviewed by the foundation saying they had given money to charities such cancer research in the previous four weeks. Animal welfare charities were another favourite, receiving donations from 24% of those surveyed.

Proving almost as popular were charities supporting children or young people; those that raise money for hospitals and hospices; and fundraisers for overseas aid and disaster relief. Each of these three causes received cash from 23% of respondents.

Meanwhile, polling by YouGov suggests the ten most popular individual charities in the UK are:

1. British Heart Foundation

2. St John Ambulance

3. Macmillan Cancer Support

4. Cancer Research UK

5. Great Ormond Street Hospital

6. Marie Curie

7. Keep Britain Tidy

8. Alzheimer’s Research UK

9. Guide Dogs

10. RNLI Lifeboats

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How do these groups spend donations?

Fundraising website and directory Charity Choice lists all registered charities in the UK and allows donors to see exactly how each pound they give is used.

“People are often sceptical about how charities spend their money and how much of the total donations are actually used for charitable work,” Charity Choice boss Polly Avgherinos told The Daily Telegraph. “But it’s a myth that most of the money is used internally or that much of it is wasted.”

The organisation uses charities’ own annual accounts to compile reports, and explains its full methodology on its website.

Here are the ten most popular charities, ranked in order of how much of each £1 they spend goes on charitable activities:

St. John Ambulance: for every £1 spent, 87.3p goes on charitable activities, 10p is spent on fundraising, and 2.7p is spent on generating income.

Macmillan Cancer Support: 73p charitable activities, 24.4p fundraising, and 2.6p generating income.

Alzheimer’s Research UK: 66.1p charitable activities, 33.9p fundraising, and 0p generating income.

Marie Curie: 63p charitable activities, 27.9p fundraising, and 9.1p generating income.

Cancer Research UK: 60.7p charitable activities, 24p on fundraising, and 15.3p generating income.

Guide Dogs: 56p charitable activities, 40.2p fundraising, and 3.8p generating income.

British Heart Foundation: 26.2p charitable activities, 40.6p fundraising, and 33.2p generating income.

Great Ormond Street Hospital: no report available.

Keep Britain Tidy: no report available.

RNLI Lifeboats: no report available.

Does this matter?

Although it is vital that charities are honest and transparent about their accounts, many industry experts argue that such organisations shouldn’t be judged on their admin or fundraising costs alone.

“Large or complex charities often need administrative support to ensure the charity is well run and spends money wisely,” Jane Hobson, head of policy at the Charity Commission, told This is Money.

“You would not expect to find zero fundraising or administration costs except where the charity is very small-scale and run exclusively by volunteers. Equally, it would need a very good reason for fundraising or administrative costs to take up more than half of the charity’s yearly income,” she says.

That view is shared by Helena Wilkinson, head of charities and not-for-profits at accountancy firm Price Bailey LLP.

“The myth that charities can operate with zero overheads is utterly misleading and creates the illusion in the public’s mind – and it damages the rest of the charity sector,” she writes in an article for The Guardian.

What’s the consensus?

The most popular charities in the UK spend anything between 26.2% and 87.3% of their yearly income on charitable causes, according to the best available data.

However, experts caution that larger charities should not be penalised for having significant running costs, as they cannot operate effectively without good management and fundraising efforts.

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