4 important things to do before you donate to a charity
Before donating to a charity, inquire about how much is spent on fundraising and administration. In other words, for every dollar you donate, how much actually goes to the cause? (Shutterstock/Monster Ztudio)
The season of giving isn’t limited to the newest gadgets or toys. The holidays are a popular time to donate to charity, with 30 per cent of all donation dollars generated in December alone.
But along with identifying a cause important to you, donors need to ensure the charity is trustworthy and efficient.
“In 2019, donors are told to do their homework before they give,” said Kate Behan, managing director at Charity Intelligence (CI) Canada. CI has reports on more than 750 charities, assigning a rating based on a few important factors.
“It’s a different way of giving,” she says. “It’s engaging the rational mind rather than your emotions…It’s giving with intention.”
Looking into the organization and using good judgment will ensure your donation is going to a good cause. Here are a few factors to help you make the most impact with your hard-earned dollars.
1) ENSURE THE CHARITY IS REGISTERED
An important first step before donating to an organization is to ensure its status as a registered charity. There is a difference between simply being a non-profit and obtaining charitable status. Being a charitable organization means the group can issue receipts for income-tax purposes to donors. Donors can then receive both personal and corporate income tax credits for donations. The Government of Canada offers a searchable database to confirm whether a Canadian charity is registered, revoked, annulled, penalized, or suspended, which donors can use to guide donation decisions.
2) FIND THEIR FINANCIAL STATEMENTS
According to Behan, 98 per cent of Canadians expect charities to be financially transparent. The Canada Revenue Agency’s Charities Directorate recommends that for any charity with more than a quarter of a million dollars in donations, it make audited financial statements available. Good charities will post these statements on their website, Behan adds. While others might not respond when asked for this information or even deny your request altogether.
“What is that telling you about how it’s going to treat your donor dollars? To us, it speaks volumes about a charity’s culture of openness, its culture of seeing donors as partners,” she says. “If a charity does not have financial transparency, I would say move on.”
3) REVIEW THEIR ‘CENTS TO THE CAUSE’ PERCENTAGE
Behan says donors have always asked about overhead—how much a charity spends on fundraising and administration. For every dollar you donate, how much actually goes to the cause? CI Canada considers the reasonable range for overhead spending to be between five and 35 per cent. If that number is above 35 per cent, the concern is that the charity may not be operating efficiently.
“But donors have also moved off just judging a charity based on one single metric,” Behan says. “As long as that number is in a reasonable range…look at it in context and then move on and look at other things.”
4) EXPLORE THEIR RESULTS
The factor that CI Canada puts the most weight on is results reporting.
“Donors are encouraged to do their homework,” Behan says. “Some charities have a lot of information…some just have a bunch of pictures and stories without much meat for a donor to make an informed giving decision.”
Look for information such as how many clients it served last year; what was the trend year over year; what’s the problem the charity is trying to address and is it having success in addressing that problem; what are its programs and activities; and what are the results they’re achieving.
GIVE WITH YOUR HEART AND HEAD• If a charity says it gives 100 per cent to the cause, Kate Behan, managing director at Charity Intelligence (CI) Canada, says that “would raise a whole bunch of red flags.” Charities have administrative costs—so you may want to investigate further. “Sometimes it really is too good to be true,” she says.
• Donating by text can be done quickly and with minimal effort. But do your research to feel confident they are legitimately impacting the cause. Don’t let convenience govern where your dollars go.
• When in doubt, consider volunteering your time instead of giving money. Behan suggests CPAs volunteer their valuable skills, like helping a very small charity do financial statements or logistics. “Use your skills to the highest and best use,” she says. “The charity sector needs some really good accountants.”
GET IN THE FESTIVE SPIRITLooking for more ways to give this holiday season? See our tips for memorable and imaginative gift ideas for your clients, co-workers, bosses and mentors. And be aware of seasonal fraudsters with these four holiday shopping scams.