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Is spending money cheaper than getting something for free?

The lure of a freebie can be breathtakingly attractive when an organisation is struggling to find the necessary finance for its work. But is acceptance of donations of goods or services always the best way to go? This is the issue that today’s newsletter will address, based on some of the situations we have seen over the years.

Whilst many organisations can report success with freebies, for example, the receipt of suitable and well-functioning computer and office equipment, or the presence of a reliable and competent volunteer in the finance office, the experiences have not always been so positive. What can we learn from this?

Perhaps the key to success is recognising that there needs to be benefit to both parties even if, for the giver, the benefit is just knowing that they have “given back” and helped to support a worthwhile community initiative.

However, to maximise the benefit to the giver, the following factors should be taken into account:

  1. Acknowledgement of the donated goods or services by the receiving organisation would benefit the reputation of the giver in the eyes of potential clients or customers.
  2. If the receiving organisation is approved to issue one, the giver may receive a section 18A receipt that would support an income tax deduction. (But remember that a section 18A receipt cannot be issued for donated services!)
  3. The giver may be able to move goods no longer selling out of its storage space, helping to facilitate its business operations.
  4. When professional services are offered on a pro bono* basis, the givers may be developing skills in the non-profit sector in order to be able to extend their services to the sector. (*Pro bono refers to a professional service provided on a voluntary basis and comes from the Latin phrase “pro bono publico,” which means “for the public good”.)
  5. Individual volunteers may be looking for future employment opportunities, or wanting to add to their work experience and knowledge.

 

When looking to truly benefit the receiving organisation, the following steps are recommended:

  1. Make sure that the “ask” is always clear and, however hard it is to do, turn away unsuitable offers. There is a serious risk that, if the organisation’s request is not specific and clear, the donated goods or services could absorb more resources than they create. Examples that we have encountered include:
    1. donated computer equipment that has served its purpose elsewhere but now needs to be installed, set up with appropriate software and regularly maintained and supported at a high cost because of its age;
    2. pro bono audits that take forever to be completed and are then not satisfactory because the audit team is very inexperienced; and
    3. a volunteer who is heavily relied upon for accounting and bookkeeping work but who is only available intermittently, provides financial reports long after they are required and disappears when paid work is offered elsewhere.

 

We recommend that before accepting donated goods or services, the 2 parties should work together to create specifications for the required goods or terms of reference for services that are to be provided and clarify roles, responsibilities, deliverables and timeframes.

With particular regard to pro bono services, lasting benefit comes from an outcomes-based approach to sharing and learning that empowers those within the non-profit organisation to create change. If the service provider or volunteer does everything themselves, what is left within the organisation when their services come to an end? The end can arrive suddenly as lawyers, auditors, accountants and other professionals will prioritise paid work and as a result, pro bono services fall to the bottom of their to-do list. It is also always difficult to hold pro bono service providers to account, so it is useful to consider the urgency and importance of a task before going down this road.

  1. Ensure that, when services are being offered, both the giver and the recipient acknowledge the risks that can arise from power dynamics when “an expert” is seen as coming in to sort out a problem – the non-profit organisation’s executives must remain in the drivers’ seat. Conversely, the non-profit organisation should ensure that it does not exploit or over-extend the volunteer service provider.
  1. Finally, bear in mind that it can take a lot of a staff person’s time to manage a pro bono project as they need to get the volunteer service provider up to speed, monitor their work and provide feedback that makes the work they are offering valuable to the organisation.

 

We can sum up our message in the words of Ligia Peña, the senior development advisor at Canada World Youth, who worked as a volunteer consultant for some five years: “You really have to weigh the pros and cons [of offers of donated goods or services]; … sometimes spending money is cheaper than getting something for free. It comes down to good solid management.”

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