10 pence in every pound

UPDATED:
- letter to Oxfam

Oxfam has the following claim up on its website - under the rubric 'Bin the myth'.

Oxfam spends all its money on admin

This one's definitely not for recycling! The fact is we spend just 10p in every £1 donated to Oxfam on support and running costs – money vital to keeping an effective, professional organisation going. Everything we do depends on it – running efficient projects, getting people, equipment, supplies and funds to where they're needed. The whole life-saving shebang.

Bin the Myth: 'Myth' no 2

I wonder how most potential donors interpret that claim. They probably assume that 90 pence out of every pound donated goes towards direct assistance to those who need it most - perhaps on famine relief, medicines, building wells, buying tools or machinery. Some of them may also realise that part of the money will be used to train and build up the skills of local groups and individuals, and may therefore go towards the salaries of Western consultants or 'experts'. But most will probably assume that Western salaries are counted as 'support' and therefore come out of the 10 pence, rather than the 90. And most will probably assume that 'running costs' include those run-up in the local offices, as well as those incurred by staff employed at central office in the UK.

They would be wrong. The claim does indeed imply that all 'support and running costs' are covered by the 10 pence, not the 90. But support and running costs within each country in fact come out of the 90 pence, not the 10 - as we will see if we look at the small print, hidden away at the bottom of page 60 of Oxfam's 2009 Annual Report and Account, long, long after the pretty picture (on page 42) informing readers how the funds were used:

iv. Costs of activities

Oxfam’s own overseas staff are involved in the delivery of the programme through the provision of specialist services (eg. to address the water and sanitation needs of refugees) and through training and networking for local organisations. Included in ‘Charitable activities’ are all the in-country costs associated with programme delivery and monitoring of grants made to partner organisations, eg. direct programme costs, logistics, finance, human resources and programme management. This provides an accurate reflection of the true costs of our activities and support to those activities.

(my emphasis)

In other words, that 90p in every pound also covers fat consultant fees, hotels, expense accounts, travel and other costs of all staff working overseas; and it has to cover what most people would surely understand by 'support and running costs'.

Does it make a huge difference to a potential donor whether the support and running costs are run-up in Mumbai, Karachi, or in Oxford? It probably won't occur to most people who read the paragraph from 'Bin the Myth' that running costs can only, arbitrarily, be those incurred within the confines of the UK. The claim is thoroughly misleading, at best, and a lie at worst.

I strongly suspect - based on my experience of other similar organisations- that at least some Oxford costs 'associated with' running the programmes overseas are also included in 'charitable expenditure' - and therefore also come out of the 90 pence. But we can't know this, because the audited accounts do not tell us how the figure for 'charitable expenditure' is calculated. They simply tell us that it is everything that is not support and running costs, and that support and running costs cannot, by definition, be incurred outside the UK.

My guess is that Oxfam is unlikely to do a great deal better than any of the other international organisations working to deliver humanitarian aid or technical assistance to people overseas. About 3 years ago, Action Aid put out a report as a result of a lengthy investigation into the way international aid was spent. They estimated that:

In total, at least 61% of all donor assistance is phantom aid.

Most international organisations engaged in humanitarian aid did worse than this 61% figure; none did better. Maybe Oxfam is a noble exception, but it would be way ahead of the competition if the 90% figure they imply in the quote above were really true.

to be continued

Letter to Oxfam:

Dear Oxfam

On this page - http://www.oxfam.org.uk/oxfam_in_action/what_we_do/binmyth_slideshow.html - you make the claim that:

'The fact is we spend just 10p in every £1 donated to Oxfam on support and running costs – money vital to keeping an effective, professional organisation going. Everything we do depends on it – running efficient projects, getting people, equipment, supplies and funds to where they're needed. The whole life-saving shebang.'

Please could you clarify the following points:

1. Is your 10p in every £ figure derived from the following figures?

27.6 million - support costs
1.2 million - governance
235.8 million - charitable expenditure

('How they were used', p42 of the annual report and accounts)

If it does not, can you tell me where it derives from. In fact, that adds up to 12p in every pound on support and running costs, but perhaps that is not hugely significant.

2. I've had a look at your annual accounts, and on page 53, you say the following:

'Charitable expenditure is reported as a functional analysis of the work undertaken by the charity, being humanitarian, development and campaigning and advocacy. Under these headings are included grants payable and costs of activities performed directly by the charity together with associated support costs.' (my emphasis)

You also clarify, on page 60, what is understood by the 'cost of activities':

'iv. Costs of activities Oxfam’s own overseas staff are involved in the delivery of the programme through the provision of specialist services (eg. to address the water and sanitation needs of refugees) and through training and networking for local organisations. Included in ‘Charitable activities’ are all the in-country costs associated with programme delivery and monitoring of grants made to partner organisations, eg. direct programme costs, logistics, finance, human resources and programme management. This provides an accurate reflection of the true costs of our activities and support to those activities.' (my emphasis)

In other words, it appears that you yourselves acknowledge that support costs, at least those incurred overseas, are included within the 235.8 million figure - in other words, support costs amount to more than the 10% which you claim on the 'Bin the Myth' page (let alone the 12% which would be more accurate).

Can you confirm whether this is the case, please. Does your '10 pence' figure quoted as going towards 'support and running costs' on the 'Bin the Myth' page include support costs incurred outside the UK, or does it only apply to supporting the programmes from your international headquarters?

3. I would also be interested to know whether any costs from Oxford associated with running particular activities overseas - programme management, HR, finance etc - are also included within the 235.8 million figure which you give for 'charitable expenditure'. If they are, and you were able to give me a breakdown of figures - or at least, a ballpark figure - that would be much appreciated.

Thank you for your attention

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