Selecting Great Charities – only tough if your eyes are open

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There are over 85,000 registered charities in Canada.  With the plethora of charities out there that each have their own missions and purposes, it can be difficult to decide which charities to support. In some cases, people choose to support charities because they received a request from friends or family and feel pressure to donate.  In these kinds of circumstances, the donation is less likely about the mission of the charity and its effectiveness and more about your familial ties and friendship or a feeling of social obligation.  In this article, I provide some ideas for giving strategically to charities when you are planning your primary gift(s), or possibly considering making major gifts or bequests.

Getting the Information Needed to Select Charities

There is nothing like volunteering with a charity or serving on its board to understand some of the realities, both good and bad, of the charity. The good news is that over 600,000 Canadians serve on boards of charities and over half of Canadians actually volunteer with charities.     However, some people don’t have the time or inclination to volunteer and some volunteers want additional information on the organizations with which they are involved.

Many charities have extensive information on their websites.  As well, a simple Google search can yield tremendous information on charities, their directors and their programs. Some of that information may be reliable and some not. To obtain further information, websites such as www.charityfocus.ca which contain extensive information from the T3010 filings can be very helpful in researching certain aspects of Canadian charities. Remember you can donate online to almost any Canadian charity at www.CanadaHelps.org.

Ten Things to Consider When Researching a Charity

  1. Have you volunteered with the charity? This is perhaps the best way to really understand a charity.
  2. Does a charity make good use of its volunteers, if appropriate? Or does the charity choose to only hire paid staff people when they could have a mix of staff and volunteers?
  3. Have you reviewed the publicly available material on the charity, typically located on the charity website? Does the website provide information on the goals, governance, programs, success and failures of the charity?
  4. What type of charitable work is done? What is the impact of the charity’s programs?
  5. Is the charity a registered charity under the Income Tax Act (Canada)?  Charitable registration does not necessarily give a charity the ‘stamp of approval’.  However, it does mean that the charity’s T3010 annual returns are publicly available and it can  issue tax receipts for appropriate donations.
  6. Will the charity spend your money now or will it be added to an endowment for the long term with only small amounts of income used annually?
  7. Does the charity have the necessary experience and capacity to carry out the activity that you are potentially funding, especially if it deals with complicated or dangerous charitable work?
  8. Is the charity well governed? Does the board of directors have credibility?  Is the board engaged or just rubber-stamping decisions?  Is the board of directors talented and diverse? Has one or more of the board members been involved in other charities that have been deregistered for cause by the Charities Directorate
  9. Has there been high volunteer or staff turnover? This could be a sign of trouble.
  10. Have you spoken to people who are very knowledgeable about a particular charitable sub-sector? Are you aware of which organizations have the greatest need and impact?

All charities are not equal. Some are effective, efficient, transparent, accountable, focused and successful.  The vast majority are good charities.  Unfortunately, some are not. If you choose certain charities it may be unlikely that your funds will be spent effectively. Forget about celebrity involvement.  Forget about hype and buzzwords.  Forget about tax schemes that promise you will make money on your “donation”.

The value of a charity should not be, but is often, based on unreliable financial data. It does not make sense to analyze charities based on a small amount of financial data made available to the public or to necessarily give credibility to charities that appear to have been vetted by CRA. Often this creates a false sense of security for potential donors and can even reward charities that happen to have certain financial characteristics or who are misleading in their disclosure.

Also, I would caution against using simple ratios such as “how much money is spent on the cause” or overhead as they can be easily manipulated and will vary anyway between different types of charities. Many charity scams have great ratios when it comes to total revenues and expenditures on charitable activities. If a charity is pushy or deceptive – run away. That sort of behaviour should not be rewarded.

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 very easy to be critical of charities but even more difficult to run a successful and effective charity. 

This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.

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