Know where to give with the Charity 100

This article was originally published by MoneySense.

Five years ago Marina Glogovac’s son Luka was a member of the Toronto Lynx Juniors, a team in the professional United Soccer League, which acts as a feeder to the top pro league in North America. But at the age of 17 he started to suffer extreme thirst, extreme weight loss and other symptoms. A visit to the doctor threw his future in sports into question: Luka had type-1 diabetes. “He was crushed,” says Glogovac. Luka thought his diagnosis would prevent him from being able to play sports at a high level again. If he could, would he excel or even be allowed to push himself?

In Canada there are at least 20 charities that focus on diabetes, but none seemed particularly well suited to help Glogovac’s son get back into sports until they found one run by a former Olympian who also helps people cope with the disease. “It was life saving for us,” she says. Luka just graduated from Ryerson University where he was an Ontario all-star on the Ryerson Rams soccer team. It was life changing for Marina, as well. Shortly after Luka’s diagnosis, Glogovac went from consulting with venture capitalists and start-ups to head up CanadaHelps, a not-for-profit social enterprise that facilitates donations for any Canadian charity.

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In Canada there are more than 86,000 charitable organizations. Many are like the one Glogovac’s son turned to—small, niche operations run by passionate people doing admirable work on a shoestring budget. But when it comes to donating to a cause, most Canadians focus on the largest and most recognizable charities. For the past seven years raising the profile for successful charities across the board has been the inspiration for our annual ranking of the largest charities in the country—the MoneySense Charity 100.

There are so many great and inspiring organizations worthy of attention, so this year we’re expanding our ranking to include all organizations that raise a minimum of $1 million a year to our report. Even at this modest sum only a little over 400 organizations meet the threshold. In fact, four out of every five charities in Canada collect less than $500,000 in revenue each year and 86% of those organizations have less than five staff. (We graded the largest 100 organizations, but you can find a full searchable list that includes approximately 300 additional charities online.)

Thanks to CanadaHelps, smaller organizations are now able to draw on some of the same fundraising tools that large organizations employ to make it as easy as possible for people to donate to their cause, such as accepting donations of stocks, hosting events and setting up regular payments so you can better manage your giving throughout the year. CanadaHelps is a not-for-profit social enterprise that operates as a sort of one-stop shop for Canadians to discover, donate and fund-raise for any charity in Canada.“We’re like Shopify for small charities,” says Glogovac. This year it will process $140 million in donations.

Before you make your next gift, here are a few key factors for consideration to help you evaluate whether your money will be put to good use.

Charity Efficiency

Most donors would like to think charities are run by volunteers who work in donated spaces. The truth is it costs money to run these organizations. They have to pay for staff, buy equipment and secure office space before they can even try to deliver on their mandate. Some even manage millions of dollars, so paying for top talent to get the most out of your donation dollar is a no-brainer. But those costs still have to be reasonable and the lower these costs are, the better. That’s where charity efficiency comes in. This is a measure of how much of your money actually goes towards supporting the organization’s mission. For organizations that don’t run programs directly, such as hospital foundations, we award top marks to those that pass along 90% or more of donated money to the charity or institution being supported. But one important note: Some charities by their nature are just more expensive to run, so when you are researching a charity it’s important to compare it against an organization with a similar mandate.

Fundraising Costs

It takes money to raise money; that’s the reality for most charities—and it’s seldom cheap. Fundraising can be a big expense. We calculate how much it costs each charity to raise $100. Ideally, we want to see charities spending less than $10 per $100 raised, while fundraising organizations that raise money for hospitals or other charities only get top marks if they spend $5 or less. We include the costs to produce special events and lotteries in this figure.

Governance & Transparency

When you are researching a charity, it helps if the organization is transparent. We start by looking to see whether each charity adheres to standard non-profit governance models and whether it lets donors know exactly how their money is being used. To measure this we send out a detailed questionnaire that asks a number of policy questions, including whether or not they have bylaws or multi-year strategic plans. Failing to set term limits on independent board members, using costly street canvassers and lacking policies that prevent charities from selling your information to other organizations are a few of the most common places where charities lose points on our list.

Cash Reserves

Cash reserves is the final component of our ranking. No charity wants to be in a position where it has to turn away people in need, but that could happen if donations suddenly dry up or if a crisis emerges that creates a sharp increase in people seeking help. A well-run organization will have a plan in place to ensure it has a reserve fund. But it’s a tricky balance: Save too little and it’ll have to shut the doors too quickly; save too much and the charity is sitting on cash that could be better spent. We give top marks to charities that hold three months’ to three years’ worth of reserves.

How to use the Charity 100

Giving is a personal decision and far be it from us to tell you where to donate your money. Follow causes you are passionate about, but do your due diligence. A low grade alone shouldn’t deter you from donating, but it should help you figure out which questions to ask before you give. Giving is much like investing except that the payoff is measured in social benefit rather than in financial terms. Think of the Charity 100 as an aid to your giving decisions; we do part of the work but you have to decide where your donations are going to have the greatest impact.

Read more at MoneySense.

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