SOCIAL IMPACT

Calculation of Profits

Calculations

How Does the 80% Calculation Work?

80% of post-tax profits means that in any one year, up to 30% of the income generated by Reality Tours is used for Reality Gives’ activities. The amount that we can donate of course depends on the profitability of the company – in the initial years, for example, we ran at a loss. In 2014, we set up a UK branch (Reality Tours Consulting) and the same policy applies. 80% of post-tax profits are donated to Reality Gives.

The money that is actually given for Reality Gives’ activities doesn’t necessarily match the amount calculated above. This can be for several reasons:

The accounting profit is more than our cash flow because money has been spent on amounts not reflected in the profit and loss account, like fixed assets and lease agreements
Reality Gives does not need the money immediately. Why not transfer the money you might say? According to Indian regulations, an NGO is encouraged to spend donations soon after they have been received.

Calculation of Profits

We understand that it’s all well and good saying that we are going to put back 80% of profits into the Community but if the owners are drawing a big salary, then this rule has little value! Hence we pledge that 80% of all profits from Reality Tours will be paid to Reality Gives or other NGOs after the payment of the following:

Tour company expenses
Tax payable on profits
A reasonable salary to the two owners – Krishna Pujari and Chris Way. This has increased steadily over the years and is disclosed in our accounts, which are uploaded online. For many years Chris Way did not draw a salary even though he has always been heavily involved with the organisation. Their current salary is still a lot less than what an owner of a tour and travel company would normally earn.

The profits are then adjusted because there are some payments which have been paid for Reality Gives by Reality Tours. This includes an apportionment of some salaries as some staff work for both Reality Tours (who pay them) and Reality Gives.

We want to show how much the tour company would earn without any contribution to Reality Gives. We then calculate 80% of this adjusted post-tax profit which is what needs to be spent on Reality Gives activities or donated to them.

We then calculate how much money was actually spent that year on Reality Gives’ activities or donated to Reality Gives (or other NGOs), and then the balance – what was due less what was spent/donated.