How to Decide Which Charity to Support
On this page we suggest about many different considerations, some of which may be useful, and others not, in deciding on which charities are deserving of your support.
1. What charities are deserving of support is a value ladened decision – anyone who says you can crunch numbers and determine which charities are “A+” or “C-” are selling you a bill of goods. If you care about the opera you may want to support an opera. If you care about children starving that may be what interests you. If you live in Vancouver you may be concerned with Vancouver, not Toronto. What do you care about? How do you think that your money can have the greatest positive impact? Not everyone is going to have the same ideas, concerns or interests.
2. All charities are not equal. Some are effective, efficient, focused, reliable and successful. Others are not. If you pick a bad charity – little likelihood that your funds will be well spent effectively.
3. Some charities have huge endowments or reserves and frankly don’t need your money that badly and may not spend it for years, while others desperately need your funds and will spend them quickly. Other charities are living day to day and don’t even have a reserve at all which may be an indication of problems with financial management or long term sustainability.
4. Some are all volunteer and some have lots of staff – neither is better per se. The belief that all volunteer charities are best – often fails to take into account the complexity of some of the issues that charities today have to deal with. Would you like to be treated in a hospital that only has volunteers? Did you get your university education from a “volunteer” professor? Would you want your troubled child to be counseled and treated exclusively by volunteers? Volunteers can be great and can provide charities that use them with a competitive advantage in delivering services. Some volunteers do fantastic work but expecting that all charitable services will be delivered by volunteers is not helpful. Charities should endeavour to use volunteers as best they can but not everything can or should always be done by volunteers.
5. Look at financial information on the T3010 – it tells you a lot about a charity and it is an important document – but frankly it only gives you a small part of the picture – and it is often a very misleading picture. When you rely exclusively on financial numbers and ratios you get interesting results like some of the “best” charities are in fact charity scams. While financial statements in business give you a better idea of whether a business is “profitable” etc. unfortunately a financial statement of a charity does not tell you whether the charity is successful in its mission. Also they rarely take into account volunteers – the competitive advantage of the charitable sector. There was a comment that people should not donate to charities unless they have audited financial statements – that is a ridiculous statement – most Canadian charities have income under $100,000 per year. For a charity to spend $2,000-5,000 or more for audited financial statement when for example they have $10,000 in revenue is hardly a great way to spend charitable funds. Do you want charities spending 50% of their budget on accounting fees – an idea that most accountants don’t even want to suggest!
6. Gifts-in-kind Be cautious with charities whose revenue or receipted revenue is largely based on gifts-in-kind such as pharmaceuticals, courseware, etc. Often these gifts-in-kind are given inflated values which may make the charity look a lot better than it really is.
7. Volunteer with a charity – people want simple answers – they are busy, burdened with obligations etc – they want to know if this charity is “good” – but there is no substitute for volunteering. Spend some time at a charity and you will not only contribute to a good cause but you will get the true inside scoop.
8. People say if you have any questions just ask those questions of the charity – I disagree – in this day and age in most cases the best way to find out about a charity is to look at its website. They are usually quite easy to find using Google. If every donor asks lots of questions of a charity the charity would spend 90% of their time answering questions and not directly doing their mission. If a charity has its information on its website and is trying to be transparent about what it does, WITHOUT YOU HAVING TO ASK QUESTIONS, then that is a good sign. Only after you have reviewed their website and you don’t have the answer then ask questions. If a charity is not transparent about their operations then be careful - it might be because of lack of sophistication or it can be a sophisticated deception. If it is the former you might want to volunteer to help them improve their transparency. If it is the latter they are probably not interested in your assistance and you should avoid them.
9. If you want 90% of your funds to go to telemarketers then donate on the phone to a charity you have never heard of that has paid telemarketers compensated by commission. By the way I am not guaranteeing it will be 90% – it may be lower or higher! If you want a very high percentage of your funds to go to the charity there are a number of options 1) if you have a cheque book write a cheque and mail it. (cost depending on donation size could be 1% or less) 2) If you have a credit card you can find the charity's website and donate online. You can also call the charity directly and make a donation although it is cheaper to do it online. 3) If the charity does not have a website and it does not have ecommerce facilities on its website try http://www.canadahelps.org – a registered charity that has 85,000 charities listed – you can donate to anyone of them and they take only 3.9% to cover credit card fees and administration. It is more efficient for you to go to the charity and donate, rather than have the charity have to come to you.
10. If you think that you can rate a charity on the ratio of charitable expenditures to overhead (fundraising/admin) as listed on the T3010 then read my article: http://www.globalphilanthropy.ca/images/uploads/How_Much_Should_A_Canadian_Charity_Spend_on_Overhead_in_The_Canadian_Donor_Guide.pdf
I felt I had to write an article because the myth that low overhead is good is so widespread and pernicious. When a charity does financial statements that is overhead? A website informing the public of information on the charity is overhead? A filing with CRA is overhead? Properly issuing receipts is overhead. Making sure that the charity's money is spent approrpriately is overhead.
11. If you are asked by your mom or boss to donate to a charity because they are running in a marathon it is ok to say yes. This is known as 'obligatory giving'. Yes it is a contradiction as giving is supposed to be voluntary and yes it may not be the best way strategically to spend your charitable dollars – good luck explaining that to your mom or your boss who just fired you. So give if you must – but realize that is not the best way to give but such is life. Another perspective could be that perhaps your mom or boss is very committed to the charity and perhaps they have done their due diligence. Woorry less about that which you cannot control and more about what you can control.
12. What types of programs does a charity do? Have you looked into whether they are effective? Be wary of unrealistic claims like 'for the donation of $1 you can save a life'.
13. Although charity begins at home it should not end there. For some people whether a charity is operating in their own community is important. Others place greater value on whether a charity is responding to the greatest need, ie. often not in Canada but internationally. There is no right answer – there are people requiring help in Canada and also abroad.
14. Are celebrities associated with a charity? – probably not a relevant consideration unless it is Angelina Jolie – who is so cool. There are so many examples of celebrities or sports figures running extremely poor charities and celebrities being associated with very suspicious charities.
15. Founders syndrome. Be wary of charities that are run by one or two 'indispensable' leaders. Often they are the "founders" of the charity. In some cases the charity may not be sustainable after the founder leaves or dies. As well, as someone once noted 'power corrupts'. Being powerful in an organization for a long period of time can in some cases result in poor choices, conflicts of interest, excessive compensation (or lack of transparency about compensation), undue private benefits, self aggrandizement and numerous other challenges.
16. Staff turnover While it is not helpful to have leaders who stay to long - having a revolving door of staff is also not helpful. Be cautious when there is high turnover.
17. Is a charity religious? This may be something that is your preference or not. I think charities should be upfront – if you are a religious charity you should let people know. Some of the best work is done by religious charities and some of the worst abuses are committed by religious charities. Remember residential schools. There are religious organizations that are advancing religion such as a church and unless you are an adherent you may not be interested in supporting that religion. On the other hand there are religious groups that are doing work in many different areas such as helping the homeless, international development and you may want to support that work.
18. Is the charity a registered charity under the Income Tax Act (Canada)? There are 86,000 charities and because it is a registered charity does not mean it is a “good” charity but it means that you can see the T3010 annual returns and they can issue tax receipts for appropriate donations. Here is the CRA link: http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html Also check out the website http://www.charityfocus.ca which is provided by Imagine Canada.
19. Give the same amount to fewer charities. Donations take time and cost money to process – instead of donating a total of $300 to 30 charities rather give the $300 to 3 charities that you are reasonably certain are effective charities.
20. Big vs. small – people have perceptions about charities and their size – there are big and small charities that are efficient and effective. There are other factors that will affect the character of a charity like amount of volunteer effort in a charity or how a charity is financed (those that get government funds tend to have more paid staff and are more “professional”) but just because it is “big” does not really mean that much.
21. Reward charities that are upfront about mistakes. How can a big charity operate without any mistakes? Not likely. But if you look at annual reports most of them never seem to indicate that there were any “operational difficulties” during the year.
22. Talk to experts. If you want to change your community may be your community foundation knows a lot. If you are interested in international development talk to people who know about international development. People who do the work daily may be able to cut through the hype and marketing a lot better than the average person.
23. Lots of money is donated in disasters. Pick experienced charities, preferably who have capacity on the ground. Disaster donations is a particular topic and you might find this article helpful: http://www.canadiancharitylaw.ca/index.php/blog/comments/donating_to_a_canadian_charity_in_a_disaster_-_suggestions_to_ensure_funds_/
24. Does the charity have a clear, well thought out mission? Or is it just bobbing around doing a million things responding to every donor whim?
25. Do all board members give? Generally if board members give personally significant amounts to the organization then they see the value of the organization and tend to be more focussed on the value of the organization – after all they are now donors.
26. If you see a charity that shows some promise but it is lacking in some way – consider volunteering or helping the charity improve. It is easy to criticize, but more difficult to run an actual charity.
27. If you are comparing organizations then be careful to compare like organizations. It is easier for children’s hospitals to raise money than those who work with former convicts.
28. If a charity is pushy or deceptive – run away. That sort of behaviour should not be rewarded. CRA has a guidance on rules for charities who fundraise. Is the charity you want to support following those rules? http://tinyurl.com/8×99n2j
29. Google search charities to see what people are saying about the charity. Social media also gives you lots of ideas about particular charities. Although don’t believe everything you read on the internet.
30. How well governed is the charity? Is there a real board that that has credibility, is actively engaged and is not rubber stamping everything? Is the board talented and diverse? Are any of the board members or senior staff "ineligible individuals" or have been involved in abusing charities.
31. Stay away from abusive charity tax shelter schemes – they don’t work and only about 1% of the money actually makes it to real charitable work. 190,000 Canadians have been stung by that. About $6.3 billion have been invested in these schemes over the last 8 years. For more information on these schemes see: www.globalphilanthropy.ca
Don’t believe anyone who says you can grade a charity based on limited financial information. If you are wondering about good charities you might also find the thoughts of the UK Charity Commission helpful on “The Hallmarks of an Effective Charity” http://www.charity-commission.gov.uk/Publications/cc10.aspx
If you are a major donor or a corporation thinking about corporate social responsibility there are many other factors that you may wish to consider including:
- What are motives of each side in working together?
- What is each expecting from the other?
- “If you don't know where you are going, any road will take you there.“
- What type of corporate culture do you have?
- Is your corporate culture compatible with the charity’s theory of change and culture?
- Reputation of charity and company
- Size of each organization?
- Amount of resources/funds to devote?
- Amount of time to devote?
- Corporate gift acceptance limitations of the charity
- Does charity have geographic focus you are looking for?
- Does charity have sectoral focus you are looking for?
- How much time to complete project?
- Are you looking for short term or long term relationship?
- Is it partnership or subcontract?
- Are you interested in learning from one another?
- Financial management abilities of the charity
- Are they are registered charity?
- Have they done this work before?
- Do they have ability to communicate with you– language, technology etc.
- Does charity have infrastructure, capacity to do work in the field?
- Does charity have infrastructure and experience in Canada to handle project and monitor, evaluate?
- Does charity have real connection with beneficiaries?
- Is this donation to charity, contractor, sponsorship arrangement or combination?
- Do they have goodwill in Canada?
- Do they have goodwill in other countries?
- Do they have communications staff in Canada?
- Do they have a strong base of support in Canada and outside?
- Do they receive government funding?
- Are you looking for matching funds/CIDA/other governments
- Do they receive other corporate funding?
- Do they receive foundation funding?
- Do they receive funding from sources outside of Canada?
- Political involvement?
- Will project be sustainable after end of your corporate funding?
- Exit strategy?
- Due Diligence
- Do you really know your charity partner?
- Have you seen their work?
- Informal or formal advisory committee on selection
- Background/internet searches
- T3010 information and financial statements (both from CRA and private providers such as CharityFocus.ca)
- Basic legal review of charity (objects, notification of registration, direction and control of foreign activities).