The MoneySense charity standards grade is based on how each charity performs in four categories, as described below.
Overall Charity Efficiency
This grade measures the percentage of charity expenditures that go toward program costs, rather than overhead and fundraising costs. The higher the percentage going to program costs, the better the grade. Maximum points are given to charities that spend 85% or more on programs.
This grade looks at how much the charity spends to raise each $100. The less the charity has to spend to raise $100, the better the grade. Maximum points are given to organizations that spend less than $10.
Governance and Transparency
This grade is mainly based on responses to a governance questionnaire we sent out. Points were also given to organizations that post their complete audited financial statements on their website.
Reserve Fund Size
Here we give top grades to charities that have between three months and three years worth of reserves on hand. We excluded community foundations from this category, as they hold reserves for other charities. Note that this category was weighted at 50%, versus 100% for the other three categories.
How to interpret the grades
As much as possible, we tried to grade the charities in relation to their peers. To do this, we grouped similar charities together and normalized the grades. As a result, two charities with similar raw data may receive quite different grades if they are in different categories. For instance, a charity in one category that devotes 90% of expenditures to program costs may get an ‘A+’ for Charity Efficiency, while another type of organization spending the same amount on programs may get an ‘A-’. That’s because the charities are rated in relation to the other charities in the same category.
It’s important to note that the final grade we award to each charity is not meant to measure how successful that charity has been at achieving its program goals. Rather, our grade is a measure of how the charity compares to other charities in its sector when it comes to meeting specific financial and governance benchmarks. There may be extenuating circumstances we are not aware of that explain why a charity has a low percentage of expenditures going to programs, high fundraising costs, or reserves that fall outside our target range. Thus, we recommend that you do not use our grades in isolation when deciding which charities to support. Instead, use our grades as a starting point for your own research.
The full methodology is available here.
Canada Revenue Agency 2007, 2008 and 2009 T3010 charity information filings (this data is collected by the CRA, and we are not responsible for any errors it may contain); MoneySense governance questionnaire; charity websites.
+ Compensation is not factored into the final grade.
* 2009 salary without benefits, as reported on MoneySense’s Charity Governance Survey. All other salaries include benefits.
** salary and benefits, as reported on the Ontario government salary disclosure for 2009.