Research from technology-enabled data consultancy Sagacity reveals UK charities are leaking £5.97 billion every year, including £139m in unclaimed Gift Aid caused by donations which cannot be matched to donors.
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. 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 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%) charity revenue leakage can be traced back to problems with data – presenting an opportunity for charities to close the gaps,” added 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.”
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