The 2010 Charity 100

Check out MoneySense’s updated Charity 100 for 2011.

Ever wonder how much of the money you donate to a charity actually helps the charity achieve its goals? How much goes to programs which cure disease, preserve the environment and alleviate suffering, as opposed to being gobbled up by administrative and fundraising costs? To help you find out, MoneySense magazine has created Canada’s first grading system for the country’s top 100 charities.

The good news is that many of Canada’s charities are doing are a great job of responsibly managing the money they receive from Canadians. Some of our best-known charities, the War Amps, the Terry Fox Foundation and the United Way of Greater Toronto, all received glowing grades of at least a “B+”.

Overall, four of the charities rated received the top “A+” grade: the Mennonite Foundation of Canada, the Tides Canada Foundation, the IWK Health Centre Foundation, and the Jewish General Hospital Foundation.

Some charities received lower grades because they spent a lot on administration, and less than other charities in their sector on the causes they are dedicated to. Others were docked marks for high fundraising costs, or for being overly secretive.

Charities which received a “C” grade or lower included the Hospital for Sick Children Foundation, the BC Cancer Foundation, the London Health Sciences Foundation, the Alberta Shock Trauma Air Rescue Service Foundation, Canadian National Institute for the Blind, the United Israel Appeal of Canada, and the VGH & UBC Hospital Foundation.

The MoneySense Charity 100 is meant to be a tool for potential donors researching which charities to give money to, but it’s not meant to directly measure how successful a charity has been at achieving its program goals. Instead, it measures how each charity compares to others in its sector when it comes to meeting specific financial and governance benchmarks. Thus, the grades should not be used in isolation when deciding which charities to support, but as a starting point for a donor’s own research.

To calculate the grades, the magazine used 2008 Canada Revenue Agency filings and other sources to evaluate how each charity performed in four categories. The first category, Overall Charity Efficiency, looked at the percentage of charity expenditures that go to program costs, rather than overhead and fundraising costs. The second, Fundraising Efficiency, looked at how much money is spent on fundraising to raise each $100. The third, Governance and Transparency, looked at whether the charity has proper governance policies and how openly it shares financial information with the public. The last category, Reserve Fund Size, looked at how much money the organization keeps on hand. If a charity had less than three months in reserve funds, it lost points for having too little. If it had more than three years’ worth of reserves on hand, it lost points because it is likely not in urgent need of new donations.

The magazine grouped the different types of charities and normalized their scores in order to compare those operating in a similar sector. In this way, hospital foundations were ranked against other hospital foundations and environmental charities were ranked against other environmental charities.

One interesting finding was that using lotteries to raise funds had a surprisingly large impact on fundraising efficiency. Many big-name organizations spent large amounts to raise each $100 because of the high cost of holding and marketing a lottery. For instance, the Heart and Stroke Foundation of Ontario spent $61 to raise $100, and the Canadian Cancer Society Ontario Division spent $43. Using lotteries to raise cash is a controversial subject in the non-profit sector, but Heart and Stroke Foundation of Canada chair Irfhan Rawji defends the practice, arguing that the Ontario lottery generates $10 million in profits—money the charity couldn’t raise otherwise. “Calculating a fundraising efficiency ratio from the information from the CRA (Canada Revenue Agency) doesn’t tell the whole story for an organization like the Heart and Stroke Foundation, which raises money in many different ways,” he says.