For the past eight years, MoneySense has been committed to producing the Charity 100 to raise the profile of the leading charities in Canada. Many of these charities are major names, with a large footprint and, sometimes, a large organization and budget. Many of them, however, are small; in fact, four out of every five charities in Canada collect less than $500,000 in revenue each year and 86% of those organizations have fewer than five staff.
At MoneySense, we recommend you consider the gift of charity and encourage you to use the Charity 100 in identifying which ones to donate your money, whether they are big or small. You may be most interested in the issue of efficiency, which measures how much of the money goes directly to the cause. Or you may see the value in tailoring your gift to a specific cause, or to a larger player who can have a greater impact in making change.
Are Canadians doing enough when it comes to charity? The Angus Reid Institute, in partnership with CHIMP: Charitable Impact Foundation, asked that question recently and roughly a third of Canadian respondents said they feel they should be doing more.
And it’s important to note that having that feeling generally isn’t enough to translate into action. A full 57 per cent of those who donated to a charity said they gave “in response to a prompt from an organization rather than on their own initiative.” That is a real barrier to success that charities need to scale, year after year.
MoneySense is committed to collecting and sharing more information on charities as a way to inform Canadians, who want to know more about where their money goes and how it is used. As the Angus Reid study revealed, when you look at those who would actually like to do more in donating to charities, more than of half say they “hold concerns about the charitable organizations themselves.” They may be concerned about actual legitimacy, or have more specific concerns about efficiency, governance or transparency.
Consider donating and before you make your next gift, here are a few key factors for consideration to help you evaluate whether your money will be put to good use.
Most donors would like to think charities are run by volunteers who work in donated spaces. The truth is it costs money to run these organizations. They have to pay for staff, buy equipment and secure office space before they can even try to deliver on their mandate. Some even manage millions of dollars, so paying for top talent to get the most out of your donation dollar is a no-brainer. But those costs still have to be reasonable and the lower these costs are, the better. That’s where charity efficiency comes in. This is a measure of how much of your money actually goes towards supporting the organization’s mission. For organizations that don’t run programs directly, such as hospital foundations, we award top marks to those that pass along 90% or more of donated money to the charity or institution being supported. But one important note: Some charities by their nature are just more expensive to run, so when you are researching a charity it’s important to compare it against an organization with a similar mandate.
It takes money to raise money; that’s the reality for most charities—and it’s seldom cheap. Fundraising can be a big expense. We calculate how much it costs each charity to raise $100. Ideally, we want to see charities spending less than $10 per $100 raised, while fundraising organizations that raise money for hospitals or other charities only get top marks if they spend $5 or less. We include the costs to produce special events and lotteries in this figure.
Governance & Transparency
When you are researching a charity, it helps if the organization is transparent. We start by looking to see whether each charity adheres to standard non-profit governance models and whether it lets donors know exactly how their money is being used. To measure this we send out a detailed questionnaire that asks a number of policy questions, including whether or not they have bylaws or multi-year strategic plans. Failing to set term limits on independent board members, using costly street canvassers and lacking policies that prevent charities from selling your information to other organizations are a few of the most common places where charities lose points on our list.
Cash reserves is the final component of our ranking. No charity wants to be in a position where it has to turn away people in need, but that could happen if donations suddenly dry up or if a crisis emerges that creates a sharp increase in people seeking help. A well-run organization will have a plan in place to ensure it has a reserve fund. But it’s a tricky balance: Save too little and it’ll have to shut the doors too quickly; save too much and the charity is sitting on cash that could be better spent. We give top marks to charities that hold three months’ to three years’ worth of reserves.
How to use the Charity 100
Giving is a personal decision and far be it from us to tell you where to donate your money. Follow causes you are passionate about, but do your due diligence. A low grade alone shouldn’t deter you from donating, but it should help you figure out which questions to ask before you give. Giving is much like investing except that the payoff is measured in social benefit rather than in financial terms. Think of the Charity 100 as an aid to your giving decisions; we do part of the work but you have to decide where your donations are going to have the greatest impact.