On the other hand, spending too little on overhead can be worrisome, too. For example, if a charity devotes just 5% of its budget to fundraising and administration, it’s either not investing enough in its staff, or it’s using creative accounting methods. “More likely they’re playing the game and saying, ‘Our accountants say we spend only $0.05 on $1,’” says Thomson. “But if you dig in and see where all the money is actually being spent, we would probably categorize it differently.”
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What donors should look for
If you want to find a charity that’s going to make a difference, start by looking at Ci’s 2021 Top 10 Impact Charities, which deliver average returns of almost $7 for every $1 donated, compared with overall average returns at $1 to $2. You can also look up your favourite charities by name (or search by sector) on Ci’s website to see if they have been assessed for impact and, if so, what the impact rating is, including low, fair, average, good or high). Obviously, a better-than-average rating is what you’re after.
If an organization you want to support is not currently among those that Ci rates for impact, look for specific, clear and easy-to-find information about what your charity of choice does, what its own expected outcomes are, and how it met those expectations last year, says Thomson.
“I specifically say last year because there are examples all over the place where charities say, ‘Since we started, we’ve helped 200,000 kids.’ You may have no idea whether the charity started five years ago or 50 years ago, so you don’t know what that number means,” he says. “I get very wary of a charity that presents very old data or presents very aggregated and non-specific data.”
While he doesn’t expect charities to provide donors with a dollar value for the change they create—that’s where third-party organizations like Ci come in—Thomson does think it’s important for charities to collect and provide data as to what they accomplish so they can measure their own effectiveness and make it easier for donors to see where their money is going.
That means you should be able to spend five minutes on a charity’s website or read its annual report, and understand what its main programs are. And, ideally, you should know how much it spent on each program in the previous year. You should also be able to quickly identify what the charity’s expected outcomes were and what it accomplished in that period. An education charity, for example, might cite a specific percentage increase in graduation rates over the previous year—and it should be clear whether that’s for high school or university—to help you evaluate what kind of change they’ve made.
If a charity doesn’t offer that accountability and transparency, it may be best to keep looking to find one that does to place your trust in.