Thinking of making a charitable donation? Go with your heart—and your brain.
We Canadians are a notoriously giving bunch, always offering a thank-you or a polite smile, even a spare tissue to a sobbing Leafs fan. (That’s not to mention the $8 billion we donate to charity annually.) Having lived in Toronto for just over a year now, I’ve seen innumerable instances of generosity—folks coughing up a few dollars for an army cadet selling poppies, or giving a toonie to a Queen Street busker down on his luck.
While it’s the willingness to spare some change—not the specific amount—that really counts, the haphazard way we throw our money at larger charities can be a bit alarming, even if the intent is good. I’ve met people who spend more time reviewing cupcake shops on Yelp than researching the organizations to which they give hundreds of dollars a year.
Bank balances aside, your taxes can be significantly affected by what you give. Donating to organizations approved by the Canada Revenue Agency—registered charities, national arts organizations, amateur athletics clubs—can result in a non-refundable credit you can apply at tax time. Naturally, it makes sense to pay a bit more attention to our charitable cash flow.
Charity Intelligence Canada is a Toronto-based not-for-profit watchdog that rates Canadian charities on both the cost effectiveness and social impact of their operations, and then publishes its findings online for potential donors to check out. Founded in 2006, CIC was borne out of frustration with charities’ lack of transparency. “It’s great that Canadians are so generous and really give from the heart,” says Greg Thomson, CIC’s director of research. “But we don’t spend that much time thinking about where we give to. We just think, ‘Oh, I know Girl Guide cookies!’ or, ‘The Red Cross has been around forever—they must be doing a good job.’”
It’s true that just one per cent of Canada’s charities swallow 60 per cent of all donations—think biggies like the Canadian Cancer Society—but Thomson says donor skepticism has risen in the past decade, no matter the charity’s size. “Our comfort level with ‘just giving’ has eroded somewhat, thanks to various charity scams. In the past, we got a warm feeling that our hundreds of dollars were going to do hundreds of dollars worth of good. Now we want to see what it’s being spent on.”
Just because you donate $75 to an ostensibly reputable animal shelter doesn’t mean all of that money will be spent on vaccinations and fancy liver treats for its inhabitants. As with any business—and charities are businesses—there are staff members to pay, fundraising events to host, and office utilities to cover. Depending on the shelter’s fund allocation, that generous $75 donation might barely cover the cost of a leash.
Is your money having an impact where you want it to? “Performance-based giving” is a key measurement in the CIC’s annual “Top Picks” report. For each of the 45 charities listed in 2012—20 of which were based in Toronto, thank you very much—CIC examined the organization’s administrative and program costs, the transparency of its records, and its volunteer base. Most importantly, the report quantified how many people (or animals) the charity helped that year. (The Fort York Food Bank and Eva’s Initiatives—a shelter and programming centre for at-risk youth on Spadina—were a couple of the notable local entries.)
In order to discover the right charity for you, Thomson offers a few guidelines. First, be aware that non-profits, like the Canadian Youth Business Foundation, aren’t the same as registered charities and cannot issue tax receipts. Thomson also advises donors to look at how forthcoming a charity is with its financial records. “Donors get frustrated when they see a few pretty pictures in a pamphlet and don’t really know how their money is changing things for the better,” he says. Interested parties can request audited financial statements from the organization; keeners can sometimes find money records on their website. As a benchmark, administrative costs (like executive salaries) should eat up between five and 15 per cent of the total revenue, and money spent on fundraising initiatives, like flyers and events, about five to 20.
You can also learn about a charity’s finances by doing volunteer work for it. “Rather than donate to a bunch of different sectors, pick one or two at a time, get to know them, and find out how you can best help,” says Thomson. “Maybe even better than donating cash is using your passions or expertise.”
No one wants to be the jerk who asks an eight-year-old bake-sale host about her qualifications to run a non-profit. But if you’re pouring hundreds of dollars each year into various causes, you’re hardly black-hearted for wanting to know where that money ends up.
22%: Canadians who claim a charitable donation as part of their taxes.
$260: Median donation amount