Experts say other factors are important to consider when deciding where to donate this Christmas

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It’s December again and the season of giving is in full swing. With that in mind, Imagine Canada – a voice for charities across the country – issued a poll to gain insight into how Canadians give over the holidays.

What it found was some good and some concerning news. The good news is that 62 per cent of those polled are planning on donating this holiday season. What is concerning is that 65 per cent of those surveyed think that charities spend too much on administration.

It is a heartening message to know that Canadians want as much of their donated dollars to be put towards the cause as possible, but in actuality administrative costs only represent part of the picture. Charity Intelligence, a non-profit charity watchdog, rates charities on five different categories. In their ratings only five per cent of a charity’s total score comes from their administrative costs, the lowest of any category.

Imagine Canada’s president and CEO Bruce MacDonald says, “The idea that overhead is bad is a popular misconception. The true measure of a charity’s effectiveness is its impact on the cause it serves.”

Charities are internally run much like companies and can be looked at in a similar way. If your bank was poorly run and management were underpaid, would you trust them with your money? The same goes for schools or daycares, if they were poorly run any responsible parent wouldn’t send their children there. So why is it any different for a charity?

A charity needs to have proper organization and direction in order to make as much of an impact as possible, and this requires highly trained and skilled people, who usually don’t work for free.

And that could be the sticking point for Canadians; how much is an acceptable rate to pay charity leadership before it’s too much? For the 10 largest charities in Canada the average administration costs were 7.6 per cent of their yearly revenues in 2013 according to Charity Intelligence.

But if private sector companies were held to the same standard it would hardly be sustainable. The Business Development Bank of Canada estimates that the retail industry had an average overhead of around 30 per cent.

“Wise spending and financial accountability are important, but overhead is not a measure of how efficiently the cause is being served,” says MacDonald.

In fact, the Canada Revenue Agency doesn’t even begin to ask questions until a charity surpasses the 35 per cent mark.

To get a more true sense of if a charity is successful or not, looking at categories such as overall financial transparency, or how the charity reports on it’s goals and achievements are better indicators. And combined they make up 60 per cent of Charity Intelligence’s total score for charity accountability.

Ultimately if you think the high cost of administration is deterring, look at the charities results, it might just be the high cost of progress.

Charitiesgraph WebCharity Intelligence ranks charities based on how they perform in five categories. Administrative costs make up the lowest percentage of the total score.

Graph courtesy of Charity Intelligence 

Editor’s Note: Thumbnail photo courtesy of Creative Commons. 

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