There are a lot of ways to give to charity these days. You can buy cookies from a kid at your front door. You can drop some coins in the box at your local grocer. Perhaps you’ve just received a charitable gift to pass along to the charity of your choice.
Of course, we’d prefer that you use Chimp to donate but we’re not going to twist your arm. So how do you know that the money you give is going to be used effectively? How do you avoid giving to charities like this one? There are two ways to determine if your selected charity is holding up their end of the bargain:
- Do the research yourself
- Read someone else’s research
Now, you are absolutely welcome, or even encouraged, to research each of Canada’s more than 85,000 charities yourself. If you have that kind of time, knowledge of finance, access to CRA documentation, etc. But let’s assume you don’t.
Read Someone Else’s Research
Two recent studies were published that outline the factors that should be considered when gauging the effectiveness of a charity, plus their ratings of a given set of charities.
The first study is by Charity Intelligence, for which CBC has done a nice summary. Charity Intelligence defines charitable success as Social Return on Investment (SROI). That is, how much social good, in dollars, is created by your donation. Their explanation of how SROI is calculated is not exactly easy to read but some of the factors that indicate a likely high SROI include high economies of scale, sustained long-term improvements, use of data, improved incomes in a target population, etc. Indicators of low SROI include high fundraising cost, non-productive overhead, and unstable funding, among others.
The Charity Intelligence top ten produce $9 of social benefit for every $1 donated by hardworking folks like you. That’s a pretty solid investment. They also analyzed the financials for over 650 charities, so if the top ten doesn’t float your boat there ought to be one that works for you.
Money Sense has released their own take on charity ratings and mainly focuses on financial metrics such as:
Charity Efficiency: How much of your money actually goes to the cause you’re supporting, rather than overhead costs like staff, pencils, and paying for heat in the winter. Disclaimer: this one is a bit of a red herring; in many cases, more overhead is necessary to raise large quantities of money for very expensive charitable projects. For a deeper dive into charitable overhead, let expert Dan Pallotta tell you more about it.
Fundraising Costs: Throwing a big, fancy event to raise money for a cause is all well and good, but what if the event raises $1 million and cost $999,995 to host? The cost to raise money is a factor to consider in whether your money is being well-spent.
Cash Reserves: Does your selected charity have enough dough to float them to the end of the year? To the end of the month? A certain amount of money in the bank is necessary to conduct charitable operations reliably without going out of business.
Using these factors and more, Money Sense has created the 2016 Charity 100, a listing of the one hundred highest rated charities in Canada that is conveniently grouped by causal categories like Environment, Health, Social Services, etc.
Maximize Your Charitable Impact
If it were up to us, you’d use Chimp to donate to one or many of the highly rated charities recommended by Money Sense and Charity Intelligence. Then we’d also suggest that during the upcoming giving season you send your friends, family, customers and employees charitable gifts via the Chimp Gift Back program. But we feel good enough that you’ve made it this far in a blog post about charity ratings, so pat yourself on the back for that at least. We’re not going to push our luck.